<PAGE>
As filed with the Securities and Exchange Commission on January 11, 2000
Registration No. 333-90905.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Pre-Effective Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TOTAL SPORTS INC.
(Exact name of registrant as specified in its charter)
Delaware 7375 56-2088015
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
234 Fayetteville Street
Raleigh, North Carolina 27601
(919) 573-8020
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Frank A. Daniels, III
Chairman and Chief Executive Officer
Total Sports Inc.
234 Fayetteville Street
Raleigh, North Carolina 27601
(919) 573-8020
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Please send copies to:
Larry E. Robbins, Esq. Gerald S. Tanenbaum, Esq.
Donald R. Reynolds, Esq. Cahill Gordon & Reindel
Wyrick Robbins Yates & Ponton LLP 80 Pine Street
4101 Lake Boone Trail, Suite 300 New York, New York 10005
Raleigh, North Carolina 27607 (212) 701-3000
(919) 781-4000 Fax (212) 269-5420
Fax (919) 781-4865
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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, 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(d)
under the Securities Act, 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,
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 Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
Part II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than the under-
writing discount, payable by the registrant in connection with the sale of com-
mon stock being registered. All amounts are estimates except the SEC registra-
tion fee, the NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
--------
<S> <C>
SEC Registration Fees................................................. $ 15,985
NASD Fees............................................................. 6,250
Nasdaq National Market Listing Fees...................................
Printing and Engraving Expenses.......................................
Legal Fees and Expenses...............................................
Accounting Fees and Expenses..........................................
Blue Sky Fees and Expenses............................................
Transfer Agent Fees...................................................
Miscellaneous and Registrant's Costs..................................
--------
Total............................................................... $
========
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides, in
effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of Total Sports may and, in
certain cases, must be indemnified by Total Sports against, in the case of a
non-derivative action, judgments, fines, amounts paid in settlement and reason-
able expenses (including attorneys' fees) incurred by him as a result of such
action, and in the case of a derivative action, against expenses (including at-
torneys' fees), if in either type of action he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Total Sports. This indemnification does not apply, in a derivative action, to
matters as to which it is adjudged that the director, officer, employee or
agent is liable to Total Sports, unless upon court order it is determined that,
despite such adjudication of liability, but in view of all the circumstances of
the case, he is fairly and reasonably entitled to indemnity for expenses, and,
in a non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was unlawful.
Total Sports' certificate of incorporation, as amended, provides that no direc-
tor of Total Sports shall be liable to Total Sports or its stockholders for
monetary damages for breach of fiduciary duty as a director to the fullest ex-
tent permitted by the DGCL.
Total Sports' certificate of incorporation, as amended, also provides that To-
tal Sports shall indemnify to the fullest extent permitted by Delaware law any
and all of its directors and officers, or former directors and officers, or any
person who may have served at Total Sports' request as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise.
Reference is made to Section 7 of the underwriting agreement to be filed as Ex-
hibit 1.1 hereto, pursuant to which the Underwriters have agreed to indemnify
officers and directors of Total Sports against certain liabilities under the
Securities Act.
Total Sports has entered into Indemnification Agreements with each director of
Total Sports with each director of Total Sports, a form of which is filed an
Exhibit to this Registration Statement. Pursuant to such agreements, Total
Sports will be obligated, to the extent permitted by applicable law, to indem-
nify such directors against all expenses, judgments, fines and penalties in-
curred in connection with the defense or settlement of any actions
II-1
<PAGE>
brought against them by reason of the fact that they were directors of Total
Sports or assumed certain responsibilities at the director of Total Sports.
Total Sports also intends to purchase directors and officers liability for in-
demnification of directors and officers.
Item 15. Recent Sales of Unregistered Securities.
In connection with the formation of Total Ltd., the predecessor of Total
Sports, Total Ltd. issued an aggregate of 961,291 shares of its common stock
to eleven individuals for an aggregate consideration of $961.30. These shares
were issued by Total Ltd. in reliance on the exemption from registration under
Section 4(2) of the Securities Act.
In March 1997, Total Ltd. issued 290,323 shares of its common stock in ex-
change for the outstanding common stock of Sports Extra, Inc., a Connecticut
corporation, pursuant to an agreement of merger and plan of reorganization.
These shares of common stock were issued in reliance on the exemption from
registration under Section 4(2) of the Securities Act.
In May 1997, Total Ltd. issued stock purchase warrants to Frank A. Daniels
III, and Frank A. Daniels, Jr. exercisable for an aggregate of 16,200 shares
of common stock of Total Ltd., at an exercise price of $3.42 per share. These
warrants terminate on the earliest to occur of May 15, 2007, an acquisition of
the Registrant or the closing of the Registrant's initial public offering.
These warrants were issued by Total Ltd. in reliance on the exemption from
registration under Section 4(2) of the Securities Act.
Pursuant to an investment agreement dated as of June 2, 1997, Piedmont Venture
Partners Limited Partnership and Mr. Daniels, Jr. purchased, for an aggregate
purchase price of $1,250,000, an aggregate of 125,000 shares of Total Ltd.'s
Series A preferred stock and warrants exercisable for 365,218 shares of its
common stock, at an exercise price of $0.01 per share. These shares of Series
A preferred stock and the warrants were issued by Total Ltd. in reliance on
the exemptions from registration under the Securities Act provided by Regula-
tion D thereunder.
In June 1997, Total Ltd. issued a stock purchase warrant to Carolina Financial
Securities, LLC exercisable for 6,598 shares of common stock of Total Ltd. at
an exercise price of $3.44 per share. This warrant terminates on the earliest
to occur of June 2, 2002, the acquisition of the Registrant, or the closing of
the Registrant's initial public offering. This issuance was made by Total Ltd.
in reliance upon the exemption from registration under Section 4(2) of the Se-
curities Act.
Pursuant to a Series B investment agreement, dated as of November 4, 1997,
Nurray Telluride Properties Limited Partnership, Piedmont Venture Partners,
Mr. Daniels, Jr., Mr. Daniels, III and Julie Nowell purchased an aggregate of
445,263 shares of Series B preferred stock of Total Ltd. for an aggregate pur-
chase price of approximately $2,000,000. The shares of Series B preferred
stock were issued by Total Ltd. in reliance upon the exemptions from registra-
tion under the Securities Act provided by regulation D thereunder.
In November 1997, Total Ltd. issued stock purchase warrants to Carolina Finan-
cial Securities and 4 of its then current principals exercisable for an aggre-
gate of 8,285 shares of common stock of Total Ltd. at an exercise price of
$4.94 per share. These warrants terminate on the earliest to occur of the date
5 years from the date of issuance, the acquisition of the Registrant, or the
closing of the Registrant's initial public offering. These issuances were made
by Total Ltd. in each case, in reliance upon the exemption from registration
under Section 4(2) of the Securities Act.
Pursuant to an asset purchase agreement and plan of reorganization dated as of
December 22, 1997, Total Ltd. issued an aggregate of 33,142 shares of its com-
mon stock to three individuals in exchange for the assets of Designet, Inc., a
North Carolina corporation. These shares of common stock were issued by Total
Ltd. in reliance on the exemption from registration under Section 4(2) of the
Securities Act.
Pursuant to note and warrant purchase agreements dated January 14, 1998, March
2, 1998 and April 7, 1998 Total Ltd. issued an aggregate of $2,500,000 of 10%
convertible promissory notes and issued stock purchase
II-2
<PAGE>
warrants exercisable for an aggregate of 83,482 shares of Series B preferred
stock, at an exercise price of $4.492 per share, each expiring on January 31,
2008. On June 16, 1998, the warrants were amended to become exercisable for an
aggregate 50,805 shares of Series B preferred stock at an exercise price of
$4.492 per share. These notes and warrants were sold for an aggregate consid-
eration of $2,500,000 to two institutional investors, Piedmont Venture Part-
ners and Nuray Telluride Properties, and one individual investor, Mr. Daniels,
III. These issuances were made by Total Ltd., in each case, in reliance upon
the exemptions from registration under Section 4(2) of the Securities Act.
On January 20, 1998, Total Ltd. issued a stock purchase warrant to Mr. Dan-
iels, III exercisable for 7,268 shares of common stock of the Registrant at an
exercise price of $4.492 per share, dated effective September 4, 1997. This
warrant terminates on the earliest to occur of September 4, 2002, the acquisi-
tion of the Registrant, or the closing of the Registrant's initial public of-
fering. This warrant was issued by Total Ltd. on reliance of the exemption
from registration under Section 4(2) of the Securities Act.
In June 1998, pursuant to a reorganization and plan of merger, each outstand-
ing share of Total Ltd.'s common stock was converted into one share of Regis-
trant's common stock, each outstanding share of Total Ltd.'s Series A pre-
ferred stock was converted into one share of Registrant's Series A redeemable
preferred stock, each outstanding share of Total Ltd.'s Series B preferred
stock was converted into one share of Registrant's Series B preferred stock,
each outstanding option to purchase shares of Total Ltd.'s common stock auto-
matically converted into an option to purchase the same number of shares of
Registrant's common stock and each outstanding warrant to purchase shares of
Total Ltd.'s common stock or Series B preferred stock automatically converted
into a warrant exercisable for the same number of shares of Registrant's com-
mon stock or Series B preferred stock. These issuances were made in reliance
upon the exemptions from registration under Section 4(2) of the Securities
Act.
Pursuant to a subscription agreement dated as of June 2, 1998, the Registrant
issued 837,942 shares of its common stock to Total College Communications Com-
pany, L.L.C. which distributed such shares of common stock to its members, To-
tal Ltd. and Host Communications, Inc. These shares of common stock were is-
sued in reliance upon the exemptions from registration under Section 4(2) of
the Securities Act.
Pursuant to a note and warrant purchase agreement, dated as of June 16, 1998,
the Registrant sold to Piedmont Venture Partners and one unaffiliated individ-
ual investor an aggregate of $1,100,000 10% convertible promissory notes and
stock purchase warrants exercisable for an aggregate of 22,773 shares of Se-
ries B preferred stock at an exercise price of $4.492 per share, expiring on
June 30, 2008. The issuance of these notes and warrants were made by the Reg-
istrant, in each case, in reliance upon the exemptions from registration under
Section 4(2) of the Securities Act.
Pursuant to a Series C investment agreement, dated as of August 6, 1998, twen-
ty-three individual and six institutional investors purchased an aggregate of
1,418,200 shares of Series C preferred stock for an aggregate purchase price
of $10,077,729.20 which included approximately $3,726,885 for the cancellation
of 10% convertible promissory notes. In addition, four of those investors, in-
cluding WinStar Interactive Ventures I, Inc., Piedmont Venture Partners, Nuray
Telluride Properties and Mr. Daniels, III also received an option to purchase
an aggregate of up to 632,244 shares of Series C1 preferred stock, for an ag-
gregate purchase price of up to $5,999,995.59. These shares of Series C pre-
ferred stock were issued in reliance on the exemptions from registration under
the Securities Act provided by Regulation D thereunder.
In August 1998, the Registrant issued stock purchase warrants to Carolina Fi-
nancial Securities and 5 of its then current principals exercisable for an ag-
gregate of 31,458 shares of common stock of the Registrant at an exercise
price of $7.82 per share. These warrants terminate on the earliest to occur of
the date 5 years from the date of issuance, the acquisition of the Registrant,
or the closing of the Registrant's initial public offering. These issuances
were made by the Registrant, in each case, in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.
II-3
<PAGE>
The Registrant issued a stock purchase warrant dated as of August 7, 1998, to
an individual exercisable for 20,000 shares of the common stock of the Regis-
trant at an exercise price of $7.106 per share. This warrant terminates on the
earliest to occur of August 7, 2003, the acquisition of the Registrant, or the
closing of the Registrant's initial public offering. This warrant was issued by
the Registrant upon reliance upon the exemption from registration under Section
4(2) of the Securities Act.
Pursuant to a subscription agreement dated September 15, 1998, the Registrant
issued 37,100 shares of its common stock to Mr. Daniels, III in exchange for
his personal guaranty of the Registrant's line of credit with First Union Na-
tional Bank. These shares of common stock were issued by the Registrant in re-
liance upon the exemption from registration under Section 4(2) of the Securi-
ties Act.
Pursuant to a subscription agreement approved by the board of directors on Au-
gust 6, 1998, the Registrant issued to a director 14,073 shares of its common
stock valued at $1.25 per share in exchange for services provided and to be
provided. These shares of common stock were issued by the Registrant in reli-
ance on the exemption from registration under Section 4(2) of the Securities
Act.
On September 22, 1998, the Registrant issued a stock purchase warrant to Allen
& Company Incorporated, exercisable for 318,500 shares of common stock of the
Registrant at an exercise price of $7.106 per share. This warrant is exercis-
able on or before the earliest to occur of June 30, 2005 or the acquisition of
the Registrant as a result of which stockholders of the Registrant immediately
prior to such acquisition dispose of at least 90% of their voting power of the
Registrant as a part of such acquisition. This issuance was made by the Regis-
trant in reliance upon the exemption from registration under Section 4(2) of
the Securities Act.
Pursuant to a stock purchase agreement, dated as of January 1999, fifty indi-
vidual and seven institutional investors purchased an aggregate of 630,756
shares of Series C1 preferred stock for an aggregate purchase price of
$5,985,874.44. These shares of Series C1 preferred stock were issued by the
Registrant in reliance upon the exemptions from registration under the Securi-
ties Act provided by Regulation D thereunder.
In January 1999 and April 1999, the Registrant issued stock purchase warrants
to Carolina Financial Securities and 7 of its principals exercisable for an ag-
gregate of 12,907 shares of the common stock of the Registrant at an exercise
price of $10.44 per share. These warrants terminate on the earliest to occur of
the date 5 years from the date of issuance of such warrant, the acquisition of
the Registrant, or the closing of the Registrant's initial public offering.
These warrants were issued by the Registrant in reliance upon the exemption
from registration under Section 4(2) of the Securities Act.
Pursuant to a subscription agreement as of March 1999, the Registrant issued
18,550 shares of its common stock to Mr. Daniels, III in exchange for his con-
tinuing personal guaranty of the Registrant's line of credit with First Union
from January 15, 1999 to July 15, 1999. These shares of common stock were is-
sued by the Registrant in reliance on the exemptions from registration under
Section 4(2) of the Securities Act.
Pursuant to a note and warrant purchase agreement dated as of June 1999, the
Registrant issued to Labatt Brewing Company Limited a $4,000,000 10% convert-
ible promissory note, due and payable on May 31, 2000 and convertible into the
same type of securities issued during the next round of financing, and a stock
purchase warrant exercisable for 39,888 shares of common stock at an exercise
price of $25.07 per share, terminating on May 31, 2009. These notes and war-
rants were sold for an aggregate consideration of $4,000,000. The warrants were
subsequently adjusted to be exercisable for 60,277 shares of common stock at an
exercise price of $16.59 per share upon the sale of Series D preferred stock by
the Registrant. The issuance of this note and warrant was made by the Regis-
trant in reliance upon the exemptions from registration under the Securities
Act provided by Section 4(2) thereunder.
Pursuant to an agreement and plan of merger, dated as of May 3, 1999 and effec-
tive on June 18, 1999, the Registrant issued an aggregate 284,401 shares of its
common stock to 7 institutional investors and forty individual investors in ex-
change for all of the outstanding capital stock of Long Distance Technologies,
Inc. d/b/a/ Motortrax. The issuance of such common stock was made by Registrant
in reliance upon the exemptions from registration provided by Regulation D
thereunder.
II-4
<PAGE>
Pursuant to a note and warrant purchase agreement, dated as of September 14,
1999, the Registrant sold to 3 institutional investors and 3 individual invest-
ors an aggregate of $2,500,000 convertible promissory notes and stock purchase
warrants exercisable for an aggregate 15,067 shares of common stock, at an ex-
ercise price of $16.59 per share, expiring on the earliest to occur of Septem-
ber 14, 2009, the acquisition of the Registrant, or the closing of the Regis-
trant's initial public offering. These issuances were made by the Registrant,
in each case, in reliance upon the exemptions from registration under the Secu-
rities Act provided by Regulation D thereunder.
Pursuant to a Series D preferred stock and warrant purchase agreement, dated
November 12, 1999, 18 individual and 32 institutional investors purchased an
aggregate of 2,140,955 shares of Series D preferred stock and warrants exercis-
able for 963,407 shares of Series D preferred stock, at an exercise price of
$16.59 per share, for an aggregate purchase price of approximately $35,500,000.
These shares of Series D preferred stock and warrants were issued by the Regis-
trant in reliance upon the exemptions from registration under the Securities
Act provided by Regulation D thereunder.
Pursuant to a stock purchase agreement, dated November 12, 1999, the Registrant
issued 811,423 shares of common stock and 811,423 shares of Series E preferred
stock to NBC Sports, Inc. in exchange for $17.4 million certain on-air promo-
tion and marketing of Registrant's real-time live sporting event coverage.
These shares of common stock were issued by the Registrant in reliance upon the
exemptions from registration under the Securities Act provided by Regulation D
thereunder.
As of November 12, 1999, the Registrant had issued options to purchase an ag-
gregate of 425,106 shares of Common Stock pursuant to the Registrant's 1997
Stock Plan at an average exercise price of $07.75 per share. The Registrant has
also issued an aggregate of shares of common stock to various employees upon
the exercise of options granted pursuant to the Registrant's 1997 Stock Incen-
tive Plan for an aggregate consideration of $10,339.05, at an average exercise
price of $0.90 per share. These grants of options, and the sales of common
stock upon the exercise of these options, were made in reliance on the exemp-
tions from registration under the Securities Act provided by Rule 701 thereun-
der.
The following table sets forth information regarding these grants.
<TABLE>
<CAPTION>
-------------------
Securities
Underlying Exercise
Dates of Grant Option Price
- -------------- ---------- --------
<S> <C> <C>
November 10, 1997........................................... 20,538 $ .50
January 20, 1998............................................ 7,120 $ .50
January 20, 1998............................................ 11,131 $ .55
June 1, 1998................................................ 46,126 $ .75
September 28, 1998.......................................... 8,267 $ 1.25
September 28, 1998.......................................... 4,800 $ .01
January 20, 1999............................................ 2,424 $ 1.50
January 20, 1999............................................ 4,800 $ .01
June 23, 1999............................................... 290,000 $10.20
October 1, 1999............................................. 17,300 $16.59
October 1, 1999............................................. 8,100 $ .01
</TABLE>
II-5
<PAGE>
Item 16. Exhibits and Financial Statements Schedules.
(a)Exhibits.
<TABLE>
- -------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Registrant.
3.2* Form of Restated Certificate of Incorporation of Registrant.
3.3 Bylaws of Registrant.
3.4* Form of Amended and Restated Bylaws of Registrant.
4.1* Specimen certificate for shares of common stock.
4.2 See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining rights of holders
of common stock of Registrant.
5.1* Opinion of Wyrick Robbins Yates & Ponton LLP.
10.1** Total Sports Inc. 1997 Stock Plan.
10.2** Employment and Noncompetition Agreement between the Registrant and John
Thorn, dated March 31, 1997.
10.3** Noncompetition, Nondisclosure and Inventions Agreement between the
Registrant and Frank A. Daniels, III, dated June 2, 1997.
10.4** Noncompetition, Nondisclosure and Inventions Agreement between the
Registrant and George Schlukbier, dated June 2, 1997.
10.5* Revolving Loan Agreement between the Registrant and First Union
National Bank, N.A.
10.6+ Letter Agreement between Registrant and NBC Sports, dated November 11,
1999.
10.7+ Web site and Cybercasting Agreement between the Registrant and Host
Communications, Inc., dated February 15, 1998, as amended February 1,
1999.
10.8+ TotalCast Agreement between the Registrant and Major League Baseball
Enterprises, Inc., dated April 1, 1999.
10.9+ Advertising Sales Representation Agreement between Registrant and
Golf.com L.L.C., dated January 1, 1999.
10.10+ Marketing and Distribution Agreement between Registrant and Publishers
Group West Incorporated, dated January 1, 1999.
10.11+ Agreement between the Registrant and Sports Illustrated, dated November
10, 1999.
10.12 Lease Agreement between the Registrant and First Raleigh Telex, LLC,
dated December 1, 1998, as amended July 16, 1999.
10.13 Investor Rights Agreement, among Registrant and certain of its
stockholders, dated November 12, 1999.
10.14 Form of Common Stock Purchase Warrant, dated June 2, 1997.
10.15 Form of Series B Preferred Stock Purchase Warrant, dated January 14,
1998, March 2, 1998, April 7, 1998 and June 16, 1998.
10.16 Form of Common Stock Purchase Warrant, dated September 22, 1998.
10.17 Form of Common Stock Purchase Warrant, dated June 4, 1999.
10.18 Form of Series D1 Preferred Stock Purchase Warrant, dated November 12,
1999.
10.19 Form of Director Indemnification Agreement.
23.1** Consents of Deloitte & Touche LLP.
23.2* Consent of Wyrick Robbins Yates & Ponton LLP.
24.1** Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
* To be filed in amendment.
** Previously Filed
+ Confidential treatment requested.
II-6
<PAGE>
(b) Financial Statement Schedules.
No schedules are listed because the information required to be set forth
therein is not applicable or is shown in the Financial Statements or the re-
lated Notes.
Item 17. Undertakings.
The undersigned hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreements, certificates in such denominations
and registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise the registrant has been ad-
vised that in the opinion of the Securities and Exchange Commission such indem-
nification is against public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such lia-
bilities (other than the payment by the registrant of expenses incurred or paid
by a director, officer, or controlling person of the registrant in the success-
ful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person will unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appro-
priate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act, 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) of
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act, 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 this offering of such securities at this time shall be deemed
to be the initial bona fide offering thereof.
II-7
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in The City of
Raleigh, State of North Carolina, on this 11th day of January, 2000.
Total Sports Inc.
By: *
---------------------------------
Name: Frank A. Daniels, III
Title:Chief Executive Officer
Power of Attorney
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the capaci-
ties indicated on the dates set forth below:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer January 11, 2000
______________________________________ and Chairman of the Board
Frank A. Daniels, III of Directors (Principal
Executive Officer)
/s/ Petra Weishaupt Controller (Principal January 11, 2000
______________________________________ Financial and Accounting
Petra Weishaupt Officer)
Director January 11, 2000
______________________________________
Frank A. Daniels, Jr.
Director January 11, 2000
______________________________________
Charles L. Jarvie
* Director January 11, 2000
______________________________________
William W. Neal
* Director January 11, 2000
______________________________________
Robert S. Prather, Jr.
* Director January 11, 2000
______________________________________
William E. Ray
* Director January 11, 2000
______________________________________
Stuart B. Rekant
* Director January 11, 2000
______________________________________
Gary R. Stevenson
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director January 11, 2000
______________________________________
C. Toms Newby, III
Director January 11, 2000
______________________________________
John Rigas
Director January 11, 2000
______________________________________
Ken Shanzer
*By: _________________________________
/s/ Petra Weishaupt
Petra Weishaupt
Attorney-in-Fact
</TABLE>
II-9
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
TOTAL SPORTS INC.
TOTAL SPORTS INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation of Total Sports Inc.
was filed with the Secretary of State of Delaware on March 29, 1998.
SECOND: The Restated Certificate of Incorporation in the form attached
hereto as Exhibit A has been duly adopted in accordance with the provisions of
---------
Sections 245 and 242 of the General Corporation Law of the State of Delaware by
the directors and stockholders of Total Sports Inc.
THIRD: The Restated Certificate of Incorporation so adopted reads in
full as set forth in Exhibit A attached hereto and is incorporated herein by
---------
this reference.
IN WITNESS WHEREOF, TOTAL SPORTS INC. has caused this Certificate to be
signed by the Chief Executive Officer and the Assistant Secretary this 12th day
of November 1999.
TOTAL SPORTS INC.
By: /s/ Frank Daniels III
---------------------
Frank A. Daniels, III
Chief Executive Officer
ATTEST:
By: /s/ Petra Weishaupt
------------------------
Petra Weishaupt
Assistant Secretary
<PAGE>
EXHIBIT A
---------
RESTATED CERTIFICATE OF INCORPORATION
OF
TOTAL SPORTS INC.
1. Name. The name of the Corporation is Total Sports Inc. (the
----
"Corporation").
2. Address. The address of the Corporation's registered office in the State
-------
of Delaware is Corporation Trust Center, 1209 Orange Street, County of New
Castle, Wilmington, DE 19801, The name of its registered agent at such address
is The Corporation Trust Company.
3. Purpose. The purpose for which the Corporation is organized is to engage
-------
in any lawful act or activity for which corporations may be organized under the
General Corporate Law of Delaware.
4. Authorization and Designation of Capital Stock. The total number of shares
----------------------------------------------
of Capital Stock (as defined below) which the Corporation shall have authority
to issue is Twenty-seven Million Five Hundred Thousand (27,500,000), which shall
consist of: (i) Seven Hundred Sixty-one Thousand Nine Hundred Three (761,903)
shares of undesignated Preferred Stock, par value $.001 per share, (ii) One
Hundred Twenty-five Thousand (125,000) shares of Series A Redeemable Preferred
Stock, par value $10.00 per share (the "Series A Preferred Stock"), (iii) Five
Hundred Eighteen Thousand Eight Hundred Forty-one (518,841) shares of Series B
Convertible Preferred Stock, par value $4.492 per share (the "Series B Preferred
Stock"); (iv) One Million Four Hundred Eighteen Thousand Two Hundred (1,418,200)
shares of Series C Convertible Preferred Stock, par value $.001 per share (the
"Series C Preferred Stock); (v) Six Hundred Thirty Thousand Seven Hundred Fifty-
six (630,756) shares of Series C1 Convertible Preferred Stock, par value $.001
per share (the "Series C1 Preferred Stock," collectively with the Series C
Preferred Stock, the "Combined Series C Stock"); (vi) Two Million Two Hundred
Thirty Thousand Two Hundred Sixty (2,230,260) shares of Series D Convertible
Preferred Stock, par value $.001 per share (the "Series D Preferred Stock");
(vii) One Million Three Thousand Six Hundred Seventeen (1,003,617) shares of
Series D1 Convertible Preferred Stock, par value $.001 per share (the "Series D1
Preferred Stock," collectively with the Series D Preferred Stock, the "Combined
Series D Stock"); (viii) Eight Hundred Eleven Thousand Four Hundred Twenty-three
(811,423) shares of Series E Convertible Preferred Stock, par value $.001 per
share (the "Series E Preferred Stock") and (ix) Twenty Million (20,000,000)
shares of Common Stock, par value $.001 per share (the "Common Stock," together
with the undesignated Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series C1 Preferred Stock, Series D
Preferred Stock and Series D1 Preferred Stock, the "Capital Stock"). Subject to
Article 4(B) below, the undesignated Preferred Stock may be issued from time to
time in one or more series pursuant to a resolution or resolutions providing for
such issue duly adopted by the Board of Directors (authority to do so being
hereby expressly vested in the Board). The Board of Directors is further
authorized to determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and to fix the number of shares of any series of Preferred Stock and the
designation of any such series of Preferred Stock. The Board of Directors,
within the limits and restrictions stated
<PAGE>
in any resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, may increase or decrease (but not
below the number of shares in any such series then outstanding) the number of
shares of any series subsequent to the issue of shares of that series. A
statement of the respective powers, dividends, preferences, rights,
qualifications, limitations and restrictions of the Preferred Stock and the
Common Stock is as follows.
A. Dividends.
---------
(1) Series A Preferred Stock. The holders of the Series A Preferred
------------------------
Stock shall be entitled to receive, out of funds legally available for the
declaration of dividends, cumulative dividends in cash, when, as and if
declared by the board of directors of the Corporation (the "Board of
Directors"), at the rate of $1.20 per share per annum (the "Series A
Dividend"), payable quarterly on January 1, April 1, July 1 and October 1
of each year, beginning April 1, 1997, except if such date is a Saturday,
Sunday or legal holiday then such dividend shall be payable on the next
succeeding day which is not a Saturday, Sunday or legal holiday (the date
such dividends are payable hereunder is referred to as a "Series A
Preferred Dividend Payment Date"). Such dividends shall commence to accrue
on the shares of the Series A Preferred Stock and be cumulative from and
after the date of issuance of such shares of the Series A Preferred Stock
(whether or not dividends are declared by the Board of Directors). The
date on which the Corporation initially issues any share of Series A
Preferred Stock shall be deemed to be its "date of issuance" regardless of
the number of times transfer of such shares is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share. To the extent not
paid on the Series A Preferred Dividend Payment Date, all dividends which
have accrued on each share of Series A Preferred Stock outstanding during
the three month period (or other period in the case of the initial Series A
Preferred Dividend Payment Date) ending upon each such Series A Preferred
Dividend Payment Date shall be accumulated and shall remain accumulated
dividends with respect to such share until paid to the holder thereof. So
long as any share of Series A Preferred Stock remains outstanding, no
dividends shall be paid upon, or declared or set apart for, the Series B
Preferred Stock, the Series C Preferred Stock, the Series C1 Preferred
Stock, the Series D Preferred Stock, the Series D1 Preferred Stock, the
Common Stock or any other class of capital stock of the Corporation ranking
junior to the Series A Preferred Stock with respect to payment of dividends
or rights on liquidation (the Series B Preferred Stock, the Series C
Preferred Stock, the Series C1 Preferred Stock, the Series D Preferred
Stock, the Series D1 Preferred Stock, the Common Stock and any other class
of capital stock of the Corporation ranking junior to the Series A
Preferred Stock being collectively referred to as "Junior Securities"),
unless and until all cumulative dividends on the then outstanding shares of
the Series A Preferred Stock for all past dividends periods shall have been
or concurrently shall be paid.
(2) Series B Preferred Stock; Series C Preferred Stock; Series C1
-------------------------------------------------------------
Preferred Stock, Series D Preferred Stock and Series D1 Preferred Stock.
-----------------------------------------------------------------------
The Series B Preferred Stock, Series C Preferred Stock, Series C1 Preferred
Stock, Series D Preferred Stock and
2
<PAGE>
Series D1 Preferred Stock (hereinafter collectively referred to as the
"Senior Preferred Stock") shall rank pari passu with respect to dividend
rights. The holders of the Senior Preferred Stock shall be entitled to
receive, out of funds legally available for the declaration of dividends,
cumulative dividends in cash, when, as and if declared by the Board of
Directors, at the rate of (i) $.54 per share per annum for Series B
Preferred Stock, (ii) $0.85 per share per annum for Series C Preferred
Stock, (iii) $1.14 per share per annum for Series C1 Preferred Stock, and
(iv) $1.99 per share per annum for Combined Series D Stock, each dividend
amount subject to adjustment for stock splits, combinations, dividends,
recapitalizations and the like, and payable quarterly beginning June 1,
1997, for Series B Preferred Stock, September 1, 1998 for Series C
Preferred Stock, December 1, 1998 for Series C1 Preferred Stock and
December 1, 1999 for Combined Series D Stock, except if such dates are a
Saturday, Sunday or legal holiday then such dividend shall be payable on
the next succeeding day which is not a Saturday, Sunday or legal holiday.
Such dividends shall commence to accrue on the shares of the Senior
Preferred Stock and be cumulative from and after the date of issuance of
such shares (whether or not such dividends are declared by the Board of
Directors); provided, however, that if any shares of Senior Preferred Stock
remain outstanding on September 30, 2004, then all accumulated and unpaid
dividends on such Senior Preferred Stock shall be paid in cash to the
holders thereof. The date on which the Corporation initially issues any
share of Senior Preferred Stock shall be deemed to be its "date of
issuance" regardless of the number of times transfers of such share are
made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence
such share. To the extent not paid on the quarterly dates, all dividends
which have accrued on each share of Senior Preferred Stock outstanding
during the three month period (or other period in the case of the initial
quarter following the date of issuance of such share of Senior Preferred
Stock) ending upon each quarter shall be accumulated and shall remain
accumulated dividends with respect to such share until (i) paid to the
holder thereof, (ii) the conversion of the Senior Preferred Stock pursuant
to Article 4(E) hereof, whereby any outstanding accumulated dividends shall
be forfeited upon such conversion or (iii) as otherwise provided in this
Article 4(A)(2). So long as any share of Senior Preferred Stock remains
outstanding, no dividends shall be paid upon, or declared or set apart for
the Common Stock unless and until all cumulative dividends on the then
outstanding shares of the Series B, Series C, Series C1, Series D and
Series D1 Preferred Stock for all past dividends periods shall have been,
or concurrently shall be, paid.
With respect to the declaration, payment and setting apart of
dividends, other than in Common Stock, whether of cash, securities of other
persons, evidences of indebtedness, assets, Convertible Securities (as
defined herein) or rights to acquire any of the above, the holders of
Combined Series D Stock shall be entitled to participate with the Common
Stock and receive, before any dividends shall be declared and paid upon or
set aside for the Common Stock, the same dividends or distributions, on an
as-converted basis, as are proposed to be distributed to the holders of
Common Stock. Each share of Combined Series D Stock shall be treated for
purposes of such participation as being
3
<PAGE>
equal to the number of shares of Common Stock (which may be a fraction)
into which such share could then be converted.
(3) Series E Preferred Stock. The Series E Preferred Stock shall not
------------------------
be entitled to dividends.
(4) Common Stock. The holders of the shares of Common Stock shall be
------------
entitled to dividends when, as, and if declared by the Board of Directors,
subject to the dividend preferences set forth above for the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series C1 Preferred Stock, the Series D Preferred Stock and the
Series D1 Preferred Stock.
B. Voting.
------
(1) Series A Preferred Stock. Except as required by law and as
------------------------
expressly provided in the following sentence, the holders of the Series A
Preferred Stock shall not be entitled to vote on any matters with respect
to such Series A Preferred Stock on which holders of Common Stock are
entitled to vote, either together with the holders of any class of shares
of the Corporation as a class, as a separate class or as a separate series.
The holders of the Series A Preferred Stock shall be entitled to vote
(including a vote by written consent) separately as a class on any: (i)
proposed amendment to this Certificate of Incorporation which would
increase or decrease the aggregate number of authorized shares of Series A
Preferred Stock or increase or decrease the par value of the shares of
Series A Preferred Stock, (ii) proposal to create a new class of shares
having rights and preferences equal, prior or superior to the Series A
Preferred Stock and (iii) proposed amendments of this Certificate of
Incorporation that would adversely affect the powers, preferences,
participations, rights, qualifications or restrictions of the Series A
Preferred Stock. Any matter on which the holders of the Series A Preferred
Stock are entitled to vote as a class requires the affirmative vote of
holders holding a majority of the issued and outstanding Series A Preferred
Stock.
(2) Series B Preferred Stock. The holders of the Series B Preferred
------------------------
Stock shall be entitled to vote (including a vote by written consent) the
number of votes equal to the number of shares of Common Stock into which
such shares of Series B Preferred Stock could then be converted (as of the
record date for such vote) on any matters with respect to such Series B
Preferred Stock on which holders of Common Stock are entitled to vote.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Series B Preferred Stock held by each
holder could be converted) shall be adjusted to the nearest whole number.
The holders of the Series B Preferred Stock shall also be entitled to vote
(including a vote by written consent) separately as a class as required by
law and on any: (i) proposed amendment to this Certificate of Incorporation
which would increase or decrease the aggregate number of authorized shares
of Series B Preferred Stock or increase or decrease the par value of the
shares of Series B Preferred Stock, (ii) proposal to create a new class of
shares having rights and preferences equal, prior or superior to the Series
B Preferred Stock and (iii) proposed amendments of this
4
<PAGE>
Certificate of Incorporation that would adversely affect the powers,
preferences, participations, rights, qualifications or restrictions of the
Series B Preferred Stock. Any matter on which the holders of the Series B
Preferred Stock are entitled to vote as a class requires the affirmative
vote of holders holding more than 80% of the issued and outstanding Series
B Preferred Stock.
(3) Combined Series C Stock. The holders of the Combined Series C
-----------------------
Stock shall be entitled to vote (including a vote by written consent) the
number of votes equal to the number of shares of Common Stock into which
such shares of Combined Series C Stock could then be converted (as of the
record date for such vote) on any matters on which holders of Common Stock
are entitled to vote. Fractional votes shall not, however, be permitted and
any fractional voting rights resulting from the above formula (after
aggregating all shares of Common Stock into which shares of Combined Series
C Stock held by each holder could be converted) shall be adjusted to the
nearest whole number. The holders of the Combined Series C Stock shall also
be entitled to vote (including a vote by written consent) separately as a
class as required by law and on any: (i) proposed amendment to this
Certificate of Incorporation which would increase or decrease the aggregate
number of authorized shares of Combined Series C Stock or increase or
decrease the par value of the shares of Combined Series C Stock, (ii)
proposal to create a new class of shares having rights and preferences
equal, prior or superior to the Combined Series C Stock and (iii) proposed
amendments of this Certificate of Incorporation that would adversely affect
the powers, preferences, participations, rights, qualifications or
restrictions of the Combined Series C Stock. Any matter on which the
holders of the Combined Series C Stock are entitled to vote as a class
requires the affirmative vote of holders holding more than 80% of the
issued and outstanding Combined Series C Stock.
(4) Combined Series D Stock. The holders of the Combined Series D
-----------------------
Stock shall be entitled to vote (including a vote by written consent) the
number of votes equal to the number of shares of Common Stock into which
such shares of Combined Series D Stock could then be converted (as of the
record date for such vote) on any matters with respect to such Combined
Series D Stock on which holders of Common Stock are entitled to vote.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Combined Series D Stock held by each
holder could be converted) shall be adjusted to the nearest whole number.
The holders of the Combined Series D Stock shall also be entitled to vote
(including a vote by written consent) separately as a class as required by
law and on any: (i) proposed amendment to this Certificate of Incorporation
which would increase or decrease the aggregate number of authorized shares
of Series D Preferred Stock or Series D1 Preferred Stock or increase or
decrease the par value of the shares of Series D Preferred Stock or Series
D1 Preferred Stock; (ii) proposal to create a new class of shares having
rights and preferences equal, prior or superior to the Series D Preferred
Stock or Series D1 Preferred Stock; (iii) proposed amendments of this
Certificate of Incorporation or the Bylaws of the Corporation that would
adversely affect the powers, preferences, participations, rights,
qualifications or restrictions of the Series
5
<PAGE>
D Preferred Stock or Series D1 Preferred Stock; (iv) payment or declaration
of any dividend or distribution on any shares of its Common Stock, Series B
Preferred Stock, Series C Preferred Stock or Series C1 Preferred Stock
(except the mandatory payment of dividends on such series of Preferred
Stock pursuant to Article 4(A)(2) and except stock dividends payable in
Common Stock), or application of any of its assets to the redemption,
retirement, purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any shares of its capital stock (except the
redemption of Series A Preferred Stock other than pursuant to Article
4D(2)), except for repurchases of shares from former employees or
consultants upon termination of their service to the Corporation pursuant
to the terms of stock purchase agreements providing for such repurchases at
the original issuance prices for such shares; (v) authorization for the
sale or grant of options to purchase greater than 1,172,943 shares of the
Corporation's Common Stock to officers, directors or employees of or
consultants to the Corporation; and (vi) change in the authorized number of
directors on the Board of Directors. Any matter on which the holders of the
Combined Series D Stock are entitled to vote as a class requires the
affirmative vote of holders holding more than a majority of the issued and
outstanding Combined Series D Stock.
(5) Series E Preferred Stock. Except as required by law and expressly
------------------------
provided in the following sentence, the holders of Series E Preferred Stock
shall not be entitled to vote on any matters with respect to such Series E
Preferred Stock on which holders of Common Stock are entitled to vote,
either together with the holders of any class of shares of the Corporation
as a class, as a separate class or as a separate series. The holders of
Series E Preferred Stock shall be entitled to vote (including a vote by
written consent) separately as a class on any proposed amendments of this
Certificate of Incorporation that would adversely affect the powers,
preferences, participations, rights, qualifications or restrictions of the
Series E Preferred Stock. Any matter on which the holders of the Series E
Preferred Stock are entitled to vote as a class requires the affirmative
vote of holders holding a majority of the issued and outstanding Series E
Preferred Stock
(6) Common Stock. Each holder of Common Stock on the record date for
------------
the determination of stockholders entitled to vote on such matters or, if
no record date is established, at the date such vote is taken or any
written consent of stockholders is solicited (the "Record Date") shall be
entitled to one (1) vote per share of Common Stock held of record on the
Record Date at each meeting of the stockholders and at each written action
of stockholders in lieu of meetings with respect to any and all matters
presented to the stockholders of the Corporation for their action or
consideration.
C. Liquidation Preference.
----------------------
(1) Series A Preferred Stock. Upon the occurrence of any Liquidating
------------------------
Event (as defined below), the holders of the Series A Preferred Stock shall
be entitled to receive $10.00 for each share of Series A Preferred Stock
(together with all accrued and unpaid dividends thereon on each such share
of the Series A Preferred Stock) (the "Series A
6
<PAGE>
Liquidation Preference"), before any distribution of the assets of the
Corporation shall be made in respect of the Common Stock or Preferred
Stock. If, upon such Liquidating Event, the assets distributable to the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment of the Series A Liquidation Preference, the assets of the
Corporation shall be distributed to the holders of the Series A Preferred
Stock ratably until the holders shall have received the full amount to
which they would otherwise be entitled. After payments to the holders of
the Series A Preferred Stock of the Series A Liquidation Preference
provided for in this Article 4(C)(1), the holders of the Series A Preferred
Stock shall be entitled to no further participation to any distribution of
assets by the Corporation with respect to such Series A Preferred Stock. If
the assets of the Corporation are sufficient to permit the payment of the
Series A Liquidation Preference to the holders of the Series A Preferred
Stock, the remainder of the assets of the Corporation, if any, after the
distributions as aforesaid shall be distributed and divided as provided for
below in this Section 4.
(2) Series B Preferred Stock, Series C Preferred Stock, Series C1
-------------------------------------------------------------
Preferred Stock, Series D Preferred Stock and Series D1 Preferred Stock.
-----------------------------------------------------------------------
Upon the occurrence of any Liquidating Event, and after the payment in full
of the Series A Liquidation Preference to the holders of Series A Preferred
Stock but before any distribution of the assets of the Corporation shall be
made in respect of the Common Stock, the holders of the Senior Preferred
Stock shall be entitled to receive an amount in cash or other consideration
distributed in connection with such Liquidating Event equal to the greater
of (i) $4.492 for each share of Series B Preferred Stock (together with all
accrued and unpaid dividends thereon on each such share of the Series B
Preferred Stock) (the "Series B Liquidation Preference"), $7.106 for each
share of Series C Preferred Stock (together with all accrued and unpaid
dividends thereon on each such share of the Series C Preferred Stock) (the
"Series C Liquidation Preference"), $9.490 for each share of Series C1
Preferred Stock (together with all accrued and unpaid dividends thereon on
each such share of the Series C1 Preferred Stock) (the "Series C1
Liquidation Preference"), $33.18 for each share of Series D Preferred Stock
(together with accrued and unpaid dividends thereon on each such share of
the Series D Preferred Stock) (the "Series D Liquidation Preference") and
$16.59 for each share of Series D1 Preferred Stock (together with accrued
and unpaid dividends thereon on each such share of the Series D1 Preferred
Stock) (the "Series D1 Liquidation Preference"), each such per share price
subject to adjustments for stock splits, stock dividends, stock
combinations and the like affecting such series of Preferred Stock, or (ii)
the consideration which would have been paid with respect to the Common
Stock issuable upon conversion of the Senior Preferred Stock held by such
holder upon any such Liquidating Event had all of the outstanding Senior
Preferred Stock been converted into shares of Common Stock immediately
prior to such Liquidating Event. Upon the payment of the Series B
Liquidation Preference, the Series C Liquidation Preference, the Series C1
Liquidation Preference, the Series D Liquidation Preference, the Series D1
Liquidation Preference or the amount described in (ii) above, if greater,
the holders of Senior Preferred Stock shall not be entitled to any further
payment. If, upon any such Liquidating Event, the amount payable pursuant
to clause (i) above is greater than the amount payable pursuant to clause
(ii) above and the Corporation's assets
7
<PAGE>
to be distributed among the holders of the Senior Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount
which they are entitled to be paid pursuant to clause (i) above, then the
entire assets available to be distributed to the holders of Senior
Preferred Stock (after payment to the holders of the Series A Preferred
Stock of the Series A Liquidation Preference) shall be distributed ratably
among such holders of Senior Preferred Stock in proportion to the full
aggregate Series B Liquidation Preference, Series C Liquidation Preference,
Series C1 Liquidation Preference, Series D Liquidation Preference and
Series D1 Liquidation Preference each such holder is otherwise entitled to
receive under this Article 4(c)(2). Not less than 20 days prior to the
payment date stated therein, the Corporation shall mail written notice of
any such Liquidating Event to each record holder of Senior Preferred Stock
setting forth in reasonable detail the amount of proceeds payable under
each of clause (i) and clause (ii) above with respect to each share of each
series of Senior Preferred Stock and each share of Common Stock in
connection with such Liquidating Event.
(3) Series E Preferred Stock. Upon the occurrence of any Liquidating
------------------------
Event, and after the payment in full of the Series A Liquidation
Preference, Series B Liquidation Preference, Series C Liquidation
Preference, Series C1 Liquidation Preference, Series D Liquidation
Preference and Series D1 Liquidation Preference or other preferential
amount to the holders of Senior Preferred Stock pursuant to Article 4(C)(2)
above, but before any distribution of the assets of the Corporation shall
be made in respect of the Common Stock, the holders of the Series E
Preferred Stock shall be entitled to receive an amount in cash or other
consideration distributed in connection with such Liquidating Event equal
to the amount (if any) by which $32.11, subject to adjustments for stock
splits, stock dividends, stock combinations and the like on the Series E
Preferred Stock, exceeds the per share amount, if any, distributable on
each share of Common Stock in accordance with Section C(4) below (after
giving effect to the payment of the Series E Liquidation Preference
pursuant to this Section C(3)) for each share of Series E Preferred Stock
(the "Series E Liquidation Preference"). Each holder of a share of Series
E Preferred Stock who is also a holder of a share of Common Stock (such
shares of Series E Preferred Stock and Common Stock collectively referred
to as a "Unit") shall receive an aggregate of no less than $32.11 per Unit,
subject to adjustment for stock splits, stock dividends, stock combinations
and the like, pursuant to this Section C(3) and Section C(4) below. If,
upon such Liquidating Event, the assets distributable to the holders of the
Series E Preferred Stock shall be insufficient to permit the full payment
of the Series E Liquidation Preference, then the entire assets available to
be distributed to the holders of Series E Preferred Stock shall be
distributed ratably among such holders of Series E Preferred Stock. After
payments to the holders of Series E Preferred Stock of the Series E
Liquidation Preference provided for in this Article 4(C)(3), the holders of
the Series E Preferred Stock shall be entitled to no further participation
in any distribution of assets by the Corporation with respect to such
Series E Preferred Stock.
(4) Common Stock. Any assets of the Corporation remaining after the
------------
payments specified in Articles 4(C)(1), 4(C)(2) and 4(C)(3) above shall be
distributed with respect to the outstanding shares of Common Stock pro
rata.
8
<PAGE>
(5) Liquidating Event. A "Liquidating Event" shall mean (i) any
-----------------
liquidation, dissolution or winding up of the Corporation, either voluntary
of involuntary, or (ii) a sale, transfer or other disposition of all or
substantially all the assets of the Corporation to, or a merger or
consolidation into, an entity that is not controlled, directly or
indirectly, by the stockholders holding a majority of the voting power of
the Corporation immediately before such transaction; for purposes of this
definition, "control" shall mean ownership of more than 50% of the voting
power of an entity; provided, however, if the holders of a majority of the
-------- -------
shares of Series A, Series B, Series C, Series C1, Series D and Series D1
Preferred Stock, each voting separately as a class, so elect by giving
written notice to the Corporation before the effective date of a merger or
consolidation that would otherwise be a Liquidating Event as defined
herein, such merger or consolidation shall not be deemed a Liquidating
Event and the provisions of Article 4(E)(5) shall apply. For purposes of
this Article 4(C), if any assets distributed to stockholders upon the
occurrence of any Liquidating Event consist of property other than cash or
securities, the amount of such distribution shall be deemed to be the fair
market value thereof at the time of such distribution, as determined in
good faith by the Board of Directors of the Corporation. If the
consideration distributed upon occurrence of a Liquidating Event is in the
form of securities, then the amount of such distribution shall be equal to
the "Market Price" of such securities as determined under Section E(3)(e)
of this Article 4.
D. Series A Preferred Stock Redemption. The Corporation may redeem, and
-----------------------------------
shall be required to redeem, shares of Series A Preferred Stock as provided in
this Article 4(D).
(1) Mandatory Redemption of Series A Preferred Stock. Unless all
------------------------------------------------
shares of Series A Preferred Stock have been previously redeemed, the
Corporation shall, at the option of the holders of a majority of the issued
and outstanding shares of Series A Preferred Stock, redeem all shares of
Series A Preferred Stock outstanding at a price per share equal to the
Series A Liquidation Preference (the "Series A Redemption Price") upon the
earliest to occur of any of the following: (i) June 2, 2002; (ii) the
occurrence of an Extraordinary Event (as defined below); or (iii) the
occurrence of a Liquidating Event; provided, however, that any redemption
-------- -------
of the Series A Preferred Stock pursuant to this Article 4(D)(1) shall also
be subject to Article 4(D)(3).
(a) Notice of Redemption. At least five (5) but not more than
--------------------
twenty (20) days prior to the redemption of any shares of Series A
Preferred Stock pursuant to this Article 4(D), the Corporation shall
transmit notice via first class mail postage prepaid to each holder of
record of all shares of Series A Preferred Stock to be redeemed at the
holder's address set forth in the records of the Corporation. Such
notice shall state the date fixed for redemption (the "Redemption
Date") and the Series A Redemption Price and shall call upon the
holder to surrender to the Corporation on the Redemption Date at the
place designated in the notice such holder's certificate or
certificates representing shares of the Series A Preferred Stock to be
redeemed. In case of redemption of only a portion of the outstanding
Series A Preferred Stock, the redemption shall be made
9
<PAGE>
pro rata among all holders of Series A Preferred Stock. On or after
the Redemption Date, each holder of shares of Series A Preferred Stock
called for redemption shall surrender the certificate or certificates
evidencing such shares to the Corporation at the place designated in
such notice in exchange for payment of the Series A Redemption Price.
Such certificates, if required, shall be properly stamped for transfer
and duly endorsed in blank or accompanied by proper instruments of
assignment and transfer thereof duly executed in blank. If any holder
of Series A Preferred Stock shall fail to tender its shares of Series
A Preferred Stock as provided above, the Corporation shall have the
right to cancel said shares upon its books and pay to such holder the
Series A Redemption Price for such shares. Any such cancelled shares
shall for all purposes be considered to have been redeemed as provided
herein. If funds legally available for such purposes are not
sufficient for the redemption, then the certificates representing
shares of Series A Preferred Stock surrendered for redemption shall be
deemed not to be surrendered, and such shares shall remain
outstanding.
(b) Series A Redemption Price. If the funds of the Corporation
-------------------------
legally available for redemption of Series A Preferred Stock on any
Redemption Date are insufficient to redeem the total number of shares
of Series A Preferred Stock to be redeemed on such date or if any such
funds are restricted pursuant to covenants or default provisions
contained in the Company's financing documents, those funds which are
legally available or unrestricted will be used to redeem the maximum
possible number of shares of Series A Preferred Stock ratably among
the holders of such shares to be redeemed based upon each holder's
aggregate Series A Liquidation Preference. The Company shall pay the
remainder of the Series A Redemption Price in the form of a promissory
note (the "Note") of the Company payable in the principal amount of
the remainder of the Series A Redemption Price plus fourteen percent
(14%) interest per annum payable in six (6) equal semi-annual
installments over three (3) years. The Note shall be on terms
satisfactory to the holders of Series A Preferred Stock, be
subordinate in right of payment to conventional bank financing and
rank equal to all other existing unsecured indebtedness of the
Corporation.
(2) Optional Redemption of Series A Preferred Stock. Subject to
-----------------------------------------------
Article 4(D)(3) below, the Corporation may, at any time and from time to
time, call for a redemption and repurchase any and all shares of Series A
Preferred Stock for a purchase price per share equal to the Series A
Redemption Price. Any such redemption and repurchase shall be made from
funds legally available for such purpose and which are otherwise not
restricted.
(3) Extraordinary Event. Upon the occurrence of an Extraordinary
-------------------
Event (as defined below), the holders of shares of Series A Preferred Stock
will calculate the annual internal rate of return on the Common Stock
exercisable under warrants of the Corporation held by them (the
"Warrantholders") (taking into account the aggregate purchase price paid
for the Series A Preferred Stock and related warrants and any
10
<PAGE>
dividends paid on the Series A Preferred Stock) in accordance with Venture
Economics Investor Services standards attached as Exhibit 8.14 to the
Investment Agreement dated June 2, 1997 among Total Ltd., a North Carolina
corporation and predecessor in interest to the Company, and certain
securityholders (the "Internal Rate of Return") that the Warrantholders
would be entitled to receive upon consummation of an Extraordinary Event.
If the Internal Rate of Return which the Warrantholders are entitled to
receive is less than forty-five percent (45%) pursuant to the Extraordinary
Event, (including in such calculation any incremental amounts which the
holders of Common Stock have elected to pay to the Warrantholders), then
the holders of Series A Preferred Stock shall have the right to require a
redemption of the Series A Preferred Stock in accordance with Article
4(D)(1). If the Internal Rate of Return (including in such calculation any
incremental amounts which the holders of Common Stock have elected to pay
to the Warrantholders), is forty-five percent (45%) or greater pursuant to
an Extraordinary Event, then the holders of Series A Preferred Stock shall
not have the right to require a redemption of the Series A Preferred Stock
in accordance with Article 4(D)(1), and the Corporation may redeem the
Series A Preferred Stock (and all accrued and unpaid dividends thereon)
upon payment of the Extraordinary Event Redemption Price (as defined
below). For purposes of this Article 4, "Extraordinary Event" means the
-------------------
occurrence or consummation of a transaction or series of related
transactions resulting in: (i) the Corporation's sale of all or
substantially all of its assets or the acquisition of the Corporation by
another entity by means of a merger, consolidation, or other transaction as
a result of which stockholders of the Corporation immediately prior to such
acquisition possess a minority of the voting power of the acquiring entity
immediately following such acquisition and in which the Warrantholders will
receive cash or securities; or (ii) the consummation of a registered public
offering of Common Stock or other equity interests of the Corporation.
"Extraordinary Event Redemption Price" means an amount per share of issued
-------------------------------------
and outstanding Series A Preferred Stock equal to $.01.
E. Conversion of Series B, Series C, Series C1, Series D, Series D1 and
--------------------------------------------------------------------
Series E Preferred Stock. Each holder of shares of Series B, Series C, Series
- ------------------------
C1, Series D, Series D1 and Series E Preferred Stock shall have the right to
convert all or any portion of such shares as such holder desires to convert, at
any time and from time to time, into shares of the Common Stock of the
Corporation as follows:
(1) Optional Conversion.
-------------------
(a) Series B, Series C, Series C1, Series D and Series D1
-----------------------------------------------------
Preferred Stock. Subject to and in compliance with the provisions of
---------------
this Article 4(E), any or all shares of the Series B Preferred Stock,
at the option of the holder, may be converted at any time or from time
to time into fully-paid and nonassessable shares (calculated as to
each conversion to the largest whole share) of Common Stock by
multiplying the number of shares of Series B Preferred Stock to be
converted by $4.492 and dividing the result by the Series B Conversion
Price (as defined below) then in effect. Subject to and in compliance
with the provisions of this Article 4(E), any or all shares of the
Series C Preferred Stock, at the option of
11
<PAGE>
the holder, may be converted at any time or from time to time into fully-
paid and nonassessable shares (calculated as to each conversion to the
largest whole share) of Common Stock by multiplying the number of shares of
Series B Preferred Stock to be converted by $4.492 and dividing the result
by the Series B Conversion Price (as defined below) then in effect. Subject
to and in compliance with the provisions of this Article 4(E), any or all
shares of the Series C Preferred Stock, at the option of the holder, may be
converted at any time or from time to time into fully-paid and
nonassessable shares (calculated as to each conversion to the largest whole
share) of Common Stock by multiplying the number of shares of Series C
Preferred Stock to be converted by $7.106 and dividing the result by the
Series C Conversion Price (as defined below) then in effect. Subject to and
in compliance with the provisions of this Article 4(E), any or all shares
of the Series C1 Preferred Stock, at the option of the holder, may be
converted at any time or from time to time into fully-paid and
nonassessable shares (calculated as to each conversion to the largest whole
share) of Common Stock by multiplying the number of shares of Series C1
Preferred Stock to be converted by $9.490 and dividing the result by the
Series C1 Conversion Price (as defined below) then in effect. Subject to
and in compliance with the provisions of this Article 4(E), any or all
shares of the Series D Preferred Stock, at the option of the holder, may be
converted at any time or from time to time into fully-paid and
nonassessable shares (calculated as to each conversion to the largest whole
share) of Common Stock by multiplying the number of shares of Series D
Preferred Stock to be converted by $16.59 and dividing the result by the
Series D Conversion Price (as defined below) then in effect. Subject to and
in compliance with the provisions of this Article 4(E), any or all shares
of the Series D1 Preferred Stock, at the option of the holder, may be
converted at any time or from time to time into fully-paid and
nonassessable shares (calculated as to each conversion to the largest whole
share) of Common Stock by multiplying the number of shares of Series D1
Preferred Stock to be converted by $16.59 and dividing the result by the
Series D1 Conversion Price (as defined below) then in effect.
(b) Series E Preferred Stock. Subject to and in compliance with
------------------------
the provisions of this Article 4(E), any or all shares of the Series E
Preferred Stock, at the option of the holder, may be converted at any time
or from time to time into shares of Common Stock by multiplying the number
of shares of Series E Preferred Stock to be converted by 1/100,000/th/ of
one share, subject to adjustment for stock splits, combinations, dividends,
recapitalizations and the like, of fully-paid and nonassessable shares
(calculated to the largest whole share) of Common Stock (the "Series E
Conversion Rate").
(2) Conversion Price. The initial conversion price per share of
----------------
Series B Preferred Stock (the "Series B Conversion Price") shall be equal to
$4.492, subject to adjustment as hereinafter provided. The initial conversion
price per share of Series C Preferred Stock (the "Series C Conversion Price")
shall be equal to $7.106, subject to adjustment as hereinafter provided. The
initial conversion price per share of Series C1 Preferred Stock (the "Series C1
Conversion Price") shall be equal to $9.490, subject to adjustment as
hereinafter provided. The initial conversion price per share of Series D
Preferred Stock (the "Series D Conversion Price") shall be equal to $16.59,
subject to adjustment as hereinafter provided. The initial conversion price per
share of Series D1 Preferred Stock (the "Series D1 Conversion Price") shall be
equal to $16.59, subject to adjustment as hereinafter provided.
12
<PAGE>
(a) At any time prior to November 12, 2000, and with respect to only
the Series D Preferred Stock and Series D1 Preferred Stock, if the
Corporation issues or sells, or in accordance with Article 4(E)(3) below is
deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the Series D Conversion Price or Series
D1 Conversion Price in effect immediately prior to the time of such issue
or sale, then immediately upon such issue or sale, or deemed issue or sale,
such Series D Conversion Price or Series D1 Conversion Price shall be
reduced to the new issue price or deemed issue price for such Common Stock.
(b) At any time with respect to the Series B, Series C and Series C1
Preferred Stock, and on or after November 12, 2000 with respect to the
Combined Series D Stock, if and whenever the Corporation issues or sells,
or in accordance with Article 4(E)(3) below is deemed to have issued or
sold, any shares of Common Stock for a consideration per share less than
any Conversion Price in effect immediately prior to the time of such issue
or sale, then immediately upon such issue or sale or deemed issue or sale
the applicable Conversion Price shall be reduced to a Conversion Price
determined by dividing (a) the sum of (1) the product derived by
multiplying the applicable Conversion Price in effect immediately prior to
such issue or sale by the number of shares of Common Stock Deemed
Outstanding (as defined below) immediately prior to such issue or sale,
plus (2) the consideration, if any, received by the Corporation upon such
issue or sale, by (b) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale. "Common Stock Deemed
-------------------
Outstanding" means, at any given time, the number of shares of Common Stock
-----------
actually outstanding at such time, plus the number of shares of Common
Stock deemed to be outstanding assuming exercise and/or conversion of the
Corporation's Options and Convertible Securities (as defined below),
whether or not such Options or Convertible Securities are actually
exercisable at such time.
(c) Notwithstanding the foregoing and only with respect to the Series
D Preferred Stock, immediately prior to the consummation of an initial
Public Offering (as defined below) of the Common Stock of the Corporation
in which the price per share at which such shares of Common Stock are
initially sold to the public (the "IPO Price") is less than the product of
---------
the Series D Conversion Price in effect immediately prior to such
transaction multiplied by two (2) (the "Adjusted Series D Price"), then the
-----------------------
Series D Conversion Price in effect immediately prior to the closing of
such transaction shall be reduced to a new Series D Conversion Price
determined by dividing the current Series D Conversion Price by the
quotient of: (A) the Adjusted Series D Price, divided by (B) the IPO Price.
A "Public Offering" means any offering by the Corporation of its equity or
---------------
debt securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect, or any
comparable statement under any similar federal statute then in force. In no
event shall any
13
<PAGE>
adjustment pursuant to this Section E(2)(c) of Article 4 increase the
Series D Conversion Price calculated pursuant this Article 4(E).
(d) Notwithstanding any provision in this Article 4(E), upon
automatic conversion of the Combined Series C Stock in accordance with this
Article 4(E) pursuant to the closing of a Qualified Public Offering (as
defined in Article 4(E)(8) below) in which the price per share at which
shares of the Corporation's Common Stock are initially sold to the public
is less than the Series C and/or Series C1 Conversion Price, then, upon the
written consent of the holders of at least 80% of the Combined Series Stock
then outstanding, the Series C and/or Series C1 Conversion Price in effect
immediately prior to the closing of the Qualified Public Offering shall be
reduced to such price per share at which shares of the Corporation's Common
Stock are initially sold to the public in such Qualified Public Offering.
(e) Notwithstanding any provision in this Article 4(E), there shall
be no adjustment to any Conversion Price hereunder with respect to (i) the
issuance or sale of up to 1,072,796 shares or options to purchase shares of
the Corporation's Capital Stock (subject to adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization)
at a price per share less than such Conversion Price, to officers,
directors or employees of or consultants to the Company pursuant to plans
or arrangements approved by the Company's Board of Directors; provided that
such number of shares shall be increased by the number of shares that are
subject to options outstanding on August 31, 1999, or granted thereafter,
that expire unexercised; (ii) the exercise of the Company's Options
outstanding as of the date of filing of this Restated Certificate of
Incorporation; (iii) the issuance of securities in connection with
strategic or collaborative relationships, acquisitions and lending
transactions approved by the Board of Directors of the Corporation; and
(iv) the issuance of Common Stock upon conversion of the Preferred Stock.
(3) Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under Article 4(E)(2) above, the
following shall be applicable:
(a) Issuance of Rights or Options. If the Corporation in any manner
-----------------------------
grants or sells any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities (as defined below)
("Options") and the price per share for which Common Stock is issuable
-------
upon the exercise of such Options, or upon conversion or exchange of
any stock or securities directly or indirectly convertible into or
exchangeable for Common Stock ("Convertible Securities") issuable upon
----------------------
exercise of such Options, is less than any Conversion Price in effect
immediately prior to the time of the granting or sale of such Options,
then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the
total
14
<PAGE>
maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options
for such price per share. For purposes of this paragraph, the "price per
---------
share for which Common Stock is issuable" shall be determined by dividing
----------------------------------------
(A) the total amount, if any, received or receivable by the Corporation as
consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon exercise of all such Options, plus in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of
such Options. No further adjustment of such applicable Conversion Price
shall be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(b) Issuance of Convertible Securities. If the Corporation in any
----------------------------------
manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is
less than any Conversion Price in effect immediately prior to the time of
such issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities shall
be deemed to be outstanding and to have been issued and sold by the
Corporation at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this paragraph,
the "price per share for which Common Stock is issuable" shall be
--------------------------------------------------
determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Corporation upon the conversion or exchange thereof,
by (B) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No further
adjustment of such applicable Conversion Price shall be made when Common
Stock is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of
the Conversion Price had been or are to be made pursuant to other
provisions of this Article 4(E), no further adjustment of such applicable
Conversion Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. If the purchase
-----------------------------------------
price provided for in any Options, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities or
the rate at which any
15
<PAGE>
Convertible Securities are convertible into or exchangeable for Common
Stock is reduced at any time, the applicable Conversion Prices in effect at
the time of such change shall be immediately adjusted to the applicable
Conversion Prices which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. Notwithstanding
the foregoing, no change in the Series D Conversion Price shall trigger
adjustment to any other Conversion Price pursuant to this Article 4(E).
(d) Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. Upon the expiration of any Option or the termination of any
----------
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Prices then in effect hereunder
shall be adjusted immediately to the Conversion Prices which would have
been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately prior
to such expiration or termination, never been issued.
(e) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option
or Convertible Security is issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Corporation shall be the Market Price (as
defined below) thereof as of the date of receipt. If any Common Stock,
Option or Convertible Security is issued to the owners of the non-surviving
entity in connection with any merger in which the Corporation is the
surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any
consideration other than cash and securities shall be determined in good
faith by the Corporation's Board of Directors. "Market Price" of any
------------
security means the average of the closing prices of such security's sales
on the principal securities exchanges on which such security may at the
time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the last sale prices quoted in the NASDAQ System, or
if on any day such security is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor
16
<PAGE>
organization, in each such case averaged over a period of five days
consisting of the day prior to the day as of which "Market Price" is being
determined and the five consecutive business days prior to such day. If at
any time such security is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the "Market Price"
shall be the fair value thereof determined in good faith by the
Corporation's Board of Directors.
(f) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for such consideration as shall
be determined in good faith by the Corporation's Board of Directors.
(g) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any subsidiary, and the disposition
of any shares so owned or held shall be considered an issue or sale of
Common Stock.
(h) Record Date. If the Corporation takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or upon the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(i) Waiver of Adjustment. Notwithstanding anything to the
--------------------
contrary contained herein, there shall be no adjustment pursuant to this
Article 4(E)(3):
(i) if prior to the issuance of Common Stock, Options or
Convertible Securities, the Corporation receives written notice from
the holders of at least a majority of the then outstanding shares of
such series of Preferred Stock affected by the adjustment, agreeing
that no adjustment to such series of Preferred Stock shall be made as
the result of such issuance; or
(ii) with respect to shares of Common Stock issued or issuable
(1) as a dividend or distribution on the Preferred Stock or (2) by
reason of a dividend, stock split, split-up or other distribution on
shares of Common Stock issued pursuant to this clause (ii).
(4) Subdivision or Combination of Common Stock. If the Corporation at
------------------------------------------
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares,
17
<PAGE>
the applicable Conversion Prices in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Corporation at any time combines
(by reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the applicable
Conversion Prices in effect immediately prior to such combination shall be
proportionately increased.
(5) Extraordinary Event. Prior to the consummation of any Extraordinary
-------------------
Event (other than an Extraordinary Event treated as a Liquidating Event pursuant
to Article 4(C) above), the Corporation shall make appropriate provisions (in
form and substance satisfactory to the holders of at least a majority of the
Preferred Stock then outstanding) to ensure that each of the holders of
Preferred Stock shall thereafter have the right to acquire and receive, in lieu
of or in addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Preferred Stock, such shares of stock, securities or assets as such holder would
have received in connection with such Extraordinary Event if such holder had
converted its Preferred Stock immediately prior to such Extraordinary Event. In
each such case, the Corporation shall also make appropriate provisions (in form
and substance satisfactory to the holders of at least a majority of the
Preferred Stock then outstanding) to ensure that the provisions of this Article
4(E) shall thereafter be applicable to the Preferred Stock (including, in the
case of any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Corporation, an immediate adjustment of the
applicable Conversion Prices to the value for the Common Stock reflected by the
terms of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and receivable
upon conversion of the Preferred Stock, if the value so reflected is less than
any Conversion Price in effect immediately prior to such consolidation, merger
or sale). The Corporation shall not effect any such consolidation merger or
sale, unless prior to the consummation thereof, the successor entity (if other
than the Corporation) resulting from such consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and substance
satisfactory to the holders of at least a majority of the Preferred Stock then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire. Each holder of Preferred Stock shall
have the right to elect the benefits of this Article 4(E) or, to the extent
applicable, the benefits in connection with any such Extraordinary Event.
(6) Certain Events. If any event occurs of the type contemplated by the
--------------
provisions of this Article 4(E) but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in all the
Conversion Prices so as to protect the rights of the holders of Preferred Stock;
provided that no such adjustment shall increase the Conversion Prices as
otherwise determined pursuant to this Article 4(E) or decrease the number of
shares of Conversion Stock issuable upon conversion of each share of Preferred
Stock.
18
<PAGE>
(7) Notice of Adjustment. Upon the occurrence of each adjustment or
--------------------
readjustment of any Conversion Price pursuant to this Section E, the Corporation
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms thereof, and prepare and furnish to each holder of
Preferred Stock affected thereby a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written notice at any time
issue a like certificate setting forth (a) such adjustment or readjustment, (b)
the applicable Conversion Price at the time in effect and (c) the number of
shares of Common Stock and the amount, if any, of other property that at the
time would be received upon the conversion of such holder's shares.
(8) Automatic Conversion.
--------------------
(a) All of the outstanding shares of Series B, Series C and Series C1
Preferred Stock shall automatically convert into Common Stock upon the
closing of a Qualified Public Offering (as defined below). The Corporation
shall deliver notice of such mandatory conversion to all holders of such
series of Preferred Stock at least three (3) business days prior to such
closing. A "Qualified Public Offering" means a firm commitment underwritten
-------------------------
Public Offering (as defined in Article 4(E)(2)(c) above) of shares of the
Corporation's Common Stock in which the aggregate price paid by the public
for the shares shall be at least $20 million and the price to the public is
greater than $7.106 per share, subject to adjustment in the event of a
recapitalization, stock dividend, stock split or the like.
(b) All of the outstanding shares of Combined Series D Stock shall
automatically convert into Common Stock upon the closing of a Series D
Qualified Public Offering (as defined below). The Corporation shall deliver
notice of such mandatory conversion to all holders of Combined Series D
Stock at least three (3) business days prior to such closing. A "Series D
--------
Qualified Public Offering" means a firm commitment underwritten Public
------------------------
Offering of shares of the Corporation's Common Stock in which the aggregate
price paid by the public for the shares shall be at least $30 million and
the price to the public is greater than $20.737 per share, subject to
adjustment in the event of a recapitalization, stock dividend, stock
combination, stock split or the like.
(c) All of the outstanding shares of Series E Preferred Stock shall
automatically convert into Common Stock at the Series E Conversion Rate (as
defined in Section E(1)(b) of Article 4) upon the closing of the initial
Public Offering of the Common Stock of the Corporation.
(d) In addition to the foregoing paragraphs 8(a), 8(b) and 8(c), all
of the outstanding shares of Series B Preferred Stock shall automatically
convert into Common Stock upon the written consent of the holders of at
least 80% of the Series B Preferred Stock then outstanding, all of the
outstanding shares of Combined Series C Stock shall automatically convert
into Common Stock upon the written consent of the holders of at least 80%
of the Combined Series C Stock
19
<PAGE>
then outstanding, all of the outstanding shares of Combined Series D Stock
shall automatically convert into Common Stock upon the written consent of
the holders of at least a majority of the Combined Series D Stock then
outstanding and all of the outstanding shares of Series E Preferred Stock
shall automatically convert into Common Stock upon the written consent of
the holders of at least a majority of the Series E Preferred Stock then
outstanding. The Corporation shall provide written notice of such automatic
conversion to all holders of the applicable series of Preferred Stock at
least three (3) business days prior to such conversion.
(9) Conversion Procedure.
--------------------
(a) Except as otherwise provided herein, each conversion of Preferred
Stock shall be deemed to have been effected as of the close of business on
the date on which the certificate or certificates representing the
Preferred Stock to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such conversion has
been effected, the rights of the holder of the shares converted as a holder
of Preferred Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock are to be
issued upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(b) Notwithstanding any other provision hereof, if a conversion of
Preferred Stock is to be made in connection with the Corporation's initial
Public Offering, a Qualified Public Offering, a Series D Qualified Public
Offering, an Extraordinary Event or any other transaction affecting the
Corporation or any holder of Preferred Stock, the conversion of any shares
of Preferred Stock may, at the election of the holder thereof, be
conditioned upon the consummation of such transaction, in which case such
conversion shall be deemed to be effective immediately prior to the
consummation of such transaction.
(c) Promptly (and in any event within five (5) business days in the
case of subparagraph (i) below) after a conversion has been effected, the
Corporation shall deliver to the converting holder:
(i) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting
holder has specified;
(ii) payment in an amount equal to the amount payable under
Article 4(E)(9) with respect to such conversion; and
(iii) a certificate representing any shares of Preferred Stock
which were represented by the certificate or certificates delivered to
the
20
<PAGE>
Corporation in connection with such conversion but which were not
converted.
(d) The issuance of certificates for shares of Common Stock upon
conversion of Preferred Stock shall be made without charge to the holders
of such Preferred Stock for any issuance tax in respect thereof (so long as
such certificates are issued in the name of the record holder of such
Preferred Stock) or other cost incurred by the Corporation in connection
with such conversion and the related issuance of shares of Common Stock.
Upon conversion of each share of Preferred Stock, the Corporation shall
take all such actions as are necessary in order to ensure that the Common
Stock issuable with respect to such conversion shall be validly issued,
fully paid and nonassessable, free and clear of all taxes (other than any
taxes relating to any dividends paid with respect thereto), liens, charges
and encumbrances with respect to the issuance thereof.
(e) The Corporation shall not close its books against the transfer of
Preferred Stock or of Common Stock issued or issuable upon conversion of
Preferred Stock in any manner which interferes with the timely conversion
of Preferred Stock. The Corporation shall assist and cooperate with any
holder of such shares required to make any governmental filings or obtain
any governmental approval prior to or in connection with any conversion of
such shares hereunder (including, without limitation, making any filings
required to be made by the Corporation).
(10) No Fractional Shares. No fractional shares of Common Stock shall
--------------------
be issued upon conversion of the Preferred Stock and any portion of the purchase
price thereof which would otherwise be convertible into a fractional share of
Common Stock shall be paid in cash at a per share price equal to the applicable
Conversion Price.
(11) No Impairment. The Corporation will not, by amendment of this
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action (other than actions taken in good faith), avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in carrying out all the
provisions of this Article 4(E) and in taking all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Preferred Stock against impairment.
(12) Reservation of Common Stock. The Corporation shall, at all times
---------------------------
when the Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the Preferred Stock, such number of its duly authorized shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock. Before taking any action which would
cause the effective purchase price for any series of Preferred Stock to be less
than the respective par value of the shares of such series of Preferred Stock,
the Corporation shall take any corporate action which may, in the
21
<PAGE>
opinion of its counsel, be necessary in order that the Corporation may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such effective purchase price.
5. Board of Directors. Elections of directors need not be written ballot
------------------
unless a stockholder demands election by written ballot at the meeting and
before voting commences. The number of directors, which constitute the whole
Board of Directors of the Corporation, shall be designated in the Bylaws of the
Corporation.
6. Duration of Existence. The Corporation is to have perpetual existence.
---------------------
7. Amendment of Bylaws. In furtherance and not in limitation of the powers
-------------------
conferred by statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
8. Meetings of Stockholders; Corporate Records. Meetings of stockholders may
-------------------------------------------
be held within or without the State of Delaware, as the Bylaws my provide. The
books of the Corporation may be kept (subject to any provision contained in the
statutes) outside of the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the
Corporation.
9. Director Liability. No director of the corporation shall have personal
------------------
liability arising out of an action whether by or in the right of the corporation
or otherwise for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing shall not limit or eliminate the liability
of a director: (a) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, or (c) under
Section 174 of the General Corporation Law of Delaware or any successor
provision.
Furthermore, notwithstanding the foregoing provision, in the event that the
General Corporation Law of Delaware is amended or enacted to permit further
limitation or elimination of the personal liability of the director, the
personal liability of the corporation's directors shall be limited or eliminated
to the fullest extent permitted by the applicable law.
This provision shall not affect any provision permitted under the General
Corporation Law of Delaware in the certificate of incorporation, bylaws or
contract or resolution of the corporation indemnifying or agreeing to indemnify
a director against personal liability. Any repeal or modification of this
provision shall not adversely affect any limitation hereunder on the personal
liability of the director with respect to acts or omissions occurring prior to
such repeal or modification.
10. Indemnification of Directors. The Corporation shall indemnify any person
----------------------------
made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that
such person is or was a director of the Corporation or any predecessor of the
Corporation, or serves or served at any other enterprise as a director at the
request of the Corporation or any predecessor to the Corporation, against
expenses (including
22
<PAGE>
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action or proceeding
to the full extent permitted by law. The Corporation may adopt bylaws or enter
into agreements with any such person for the purpose of providing for such
indemnification. Neither any amendment nor repeal of this Article 10, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article 10, shall eliminate or reduce the effect of this Article 10 in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this Article 10, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
11. Indemnification of Officers, Employees and Agents. The Corporation shall
-------------------------------------------------
have the power to indemnify any person made or threatened to be made a party to
an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person is or was an officer,
employee or agent of the Corporation or any predecessor of the Corporation, or
serves or served at any other enterprise as an officer, employee or agent at the
request of the Corporation or any predecessor to the Corporation, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action or proceeding to the full extent permitted by law. The Corporation
may adopt bylaws or enter into agreements with any such person for the purpose
of providing for such indemnification. Neither any amendment nor repeal of this
Article 11, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article 11, shall eliminate or reduce the
effect of this Article 11 in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article 11, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
12. Amendment. The Corporation reserves the right to amend, alter, change or
---------
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
13. Exchange, Reclassification or Cancellation. All provisions relating to any
------------------------------------------
exchange, reclassification or cancellation of issued shares are set forth in
this Certificate of Incorporation.
14. Retirement of Shares. Any shares of Series A Preferred Stock, Series B
--------------------
Preferred Stock, Series C Preferred Stock, Series C1 Preferred Stock, Series D
Preferred Stock, Series D1 Preferred Stock or Series E Preferred Stock redeemed,
purchased or otherwise acquired by the Corporation shall be deemed retired and
shall be cancelled and may not under any circumstances thereafter be reissued or
otherwise disposed of by the Corporation.
23
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
TOTAL SPORTS INC.
I. CORPORATE OFFICES
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of Dover,
County of Kent, State of Delaware. The name of the registered agent of the
corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
II. MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Monday in April in each year at 1:00 p.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected and
any other proper business may be transacted.
2.3 SPECIAL MEETING
---------------
Special meetings of the stockholders may be called, at any time for any
purpose or purposes, by the board of directors or by such person or persons as
may be authorized by the Certificate of Incorporation or these Bylaws, or by
such person or persons duly designated by the board of directors whose powers
and authority, as expressly provided in a resolution of the board of directors,
include the power to call such meetings, but such special meetings may not be
called by any other person or persons.
<PAGE>
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of
<PAGE>
fiduciaries, pledgors and joint owners of stock and to voting trusts and other
voting agreements).
Except as otherwise provided in the certificate of incorporation or these
bylaws, each stockholder shall be entitled to one vote for each share of capital
stock held by such stockholder.
2.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Notwithstanding the foregoing, following the effectiveness
of the registration of any class of securities of the corporation pursuant to
the requirements of the Securities Exchange Act of 1934, as amended, no action
shall be taken by the stockholders of the corporation except at an annual or
special meeting of stockholders called in accordance with these bylaws and no
action shall be taken by the stockholders by written consent.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action that is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
<PAGE>
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date that shall not
be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(c) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
<PAGE>
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.14 STOCKHOLDER PROPOSALS
---------------------
Any stockholder wishing to bring any other business before a meeting of
stockholders must provide notice to the corporation not more than ninety (90)
and not less than fifty (50) days before the meeting in writing by registered
mail, return receipt requested, of the business to be presented by the
stockholders at the stockholders' meeting. Any such notice shall set forth the
following as to each matter the stockholder proposes to bring before the
meeting: (a) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting and, if
such business includes a proposal to amend the bylaws of the corporation, the
language of the proposed amendment; (b) the name and address, as they appear on
the corporation's books, of the stockholder proposing such business; (c) the
class and number of shares of the corporation which are beneficially owned by
such stockholder; (d) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to propose such business; and (e)
any material interest of the stockholder in such business. Notwithstanding the
foregoing provisions of this Section 2.14, a stockholder shall also comply with
all applicable requirements of all applicable laws, rules and regulations,
including, but not limited to, the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, with respect to the
matters set forth in this section 2.14. In the absence of such notice to the
corporation meeting the above requirements, a stockholder shall not be entitled
to present any business at any meeting of stockholders.
III. DIRECTORS
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
<PAGE>
3.2 NUMBER OF DIRECTORS
-------------------
The Board of Directors shall consist of one or more members, the number
thereof to be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator,
<PAGE>
trustee or guardian of a stockholder, or other fiduciary entrusted with like
responsibility for the person or estate of a stockholder, may call a special
meeting of stockholders in accordance with the provisions of the certificate of
incorporation or these bylaws, or may apply to the Court of Chancery for a
decree summarily ordering an election as provided in Section 211 of the General
Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
<PAGE>
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any director.
Notice of the time and place of special meetings shall be delivered either
personally or by mail, telex, facsimile or telephone to each director, addressed
to each director at such director's address and/or phone number as it is shown
on the records of the corporation. If the notice is mailed, it shall be
deposited in the United States mail at least four (4) days before the time of
the holding of the meeting. If the notice is delivered personally or by telex,
facsimile or telephone, it shall be delivered by telephone or transmitted at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
<PAGE>
3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
<PAGE>
3.16 CHAIRMAN OF THE BOARD OF DIRECTORS
----------------------------------
The corporation may also have, at the discretion of the Board of Directors,
a chairman of the Board of Directors who shall not be considered an officer of
the corporation. The Chairman of the Board shall, if such a person is elected,
preside at the meetings of the Board of Directors and exercise and perform such
other powers and duties as may from time to time be assigned to him or her by
the Board of Directors, or as may be prescribed by these bylaws.
IV. COMMITTEES
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (a) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (b) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (c) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
<PAGE>
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
V. OFFICERS
5.1 OFFICERS
--------
The officers of the corporation shall be a chief executive officer, a
president, one or more vice presidents, a secretary, and a treasurer. The
corporation may also have, at the discretion of the board of directors, a
chairman of the board, one or more assistant vice presidents, assistant
secretaries, assistant treasurers, and any such other officers as may be
appointed in accordance with the provisions of Section 5.3 of these bylaws. Any
number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an
<PAGE>
officer chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 CHIEF EXECUTIVE OFFICER
-----------------------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, the chief executive officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the corporation. The chief executive officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the Board of Directors. The chief executive officer shall
have the general powers and duties of management usually vested in the office of
chief executive officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Directors or these bylaws.
5.8 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board or the chief executive officer, if there
be such officers, the president shall, subject to the control of the board of
directors, have general supervision, direction, and control of the business and
the officers of the corporation. In the absence or nonexistence of the chief
executive officer, he shall preside at all meetings of the stockholders and, in
the absence or nonexistence of a chairman of the board and chief executive
officer, at all meetings of the board of directors. He shall have the general
powers and duties of management usually
<PAGE>
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.9 VICE PRESIDENTS
---------------
In the absence or disability of the chief executive officer and president,
the vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these bylaws, the president or the chairman of the board.
5.10 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.11 TREASURER
---------
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
<PAGE>
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. The treasurer shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or these bylaws.
5.12 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the chief executive officer, the president, any
vice president, the treasurer, the secretary or assistant secretary of this
corporation, or any other person authorized by the board of directors or the
chief executive officer, president or a vice president, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
VI. INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (a) who is or was a director or
<PAGE>
officer of the corporation, (b) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was a director or officer of a
corporation that was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation. Such indemnification
shall be a contract right and shall include the right to receive payment of any
expenses incurred by the indemnitee in connection with any proceeding in advance
of its final disposition, consistent with the provisions of applicable law as
then in effect. The right of indemnification provided in this Section 6.1 shall
not be exclusive of any other rights to which those seeking indemnification may
otherwise be entitled, and the provisions of this Section 6.1 shall inure to the
benefit of the heirs and legal representatives of any person entitled to
indemnity under this Section 6.1 and shall be applicable to proceedings
commenced or continuing after the adoption of this Section 6.1, whether arising
from acts or omissions occurring before or after such adoption. In furtherance,
but not in limitation of the foregoing provisions, the following procedures,
presumptions and remedies shall apply with respect to advancement of expenses
and the right to indemnification under this Section 6.1.
(a) Advancement of Expenses. All reasonable expenses incurred by or
-----------------------
on behalf of the indemnitee in connection with any proceeding shall be advanced
to the indemnitee by the corporation within 20 days after the receipt by the
corporation of a statement or statements from the indemnitee requesting such
advance or advances from time to time, whether prior to or after final
disposition of such proceeding, unless, prior to the expiration of such 20-day
period, the Board of Directors shall unanimously (except for the vote, if
applicable, of the indemnitee) determined that the indemnitee has no reasonable
likelihood of being entitled to indemnification pursuant to this Section 6.1.
Such statement or statements shall reasonably evidence the expenses incurred by
the indemnitee and, if required by law at the time of such advance, shall
include or be accompanied by an undertaking by or on behalf of the indemnitee to
repay the amounts advanced if it should ultimately be determined that the
indemnitee is not entitled to be indemnified against such expenses pursuant to
this Section 6.1.
(b) Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(i) To obtain indemnification under this Section 6.1, an
indemnitee shall submit to the Secretary of the corporation a written request,
including such documentation and information as is reasonably available to the
indemnitee and reasonably necessary to determine whether and to what extent the
indemnitee is entitled to indemnification (the "Supporting Documentation"). The
determination of the indemnitee's entitlement to indemnification shall be made
not later than 60 days after receipt by the corporation of the written request
for indemnification together with the Supporting Documentation. The Secretary of
the corporation shall, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that the indemnitee
has requested indemnification, whereupon the corporation shall provide such
indemnification, including without limitation advancement of expenses, so long
as the indemnitee is legally entitled thereto in accordance with applicable law.
(ii) The indemnitee's entitlement to indemnification under this
Section 6.1 shall be determined in one of the following ways: (A) by a majority
vote of the Disinterested
<PAGE>
Directors (as hereinafter defined), if they constitute a quorum of the Board of
Directors; (B) by a written opinion of Independent Counsel (as hereinafter
defined) if (x) a Change of Control (as hereinafter defined) shall have occurred
and the indemnitee so requests or (y) a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
a majority of such Disinterested Directors so directs; (C) by the stockholders
of the corporation (but only if a majority of the Disinterested Directors, if
they constitute a quorum of the Board of Directors, presents the issue of
entitlement to indemnification to the stockholders for their determination); or
(D) as provided in Paragraph (c) below.
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Paragraph
(b)(ii) above, a majority of the Disinterested Directors shall select the
Independent Counsel, but only an Independent Counsel to which the indemnitee
does not reasonably object; provided, however, that if a Change of Control shall
have occurred, the indemnitee shall select such Independent Counsel, but only an
Independent Counsel to which the Board of Directors does not reasonably object.
(iv) The only basis upon which a finding that indemnification
may not be made is that such indemnification is prohibited by law.
(c) Presumptions and Effect of Certain Proceedings. Except as
----------------------------------------------
otherwise expressly provided in this Section 6.1, if a Change of Control shall
have occurred, the indemnitee shall be presumed to be entitled to
indemnification under this Section 6.1 upon submission of a request for
Indemnification together with the Supporting Documentation in accordance with
Paragraph (b)(i), and thereafter the corporation shall have the burden of proof
to overcome that presumption in reaching a contrary determination. In any
event, if the person or persons empowered under Paragraph (b)(ii) above to
determine entitlement to indemnification shall not have been appointed or shall
not have made a determination within 60 days after receipt by the corporation of
the request therefor together with the Supporting Documentation, the indemnitee
shall be deemed to be entitled to indemnification and the indemnitee shall be
entitled to such indemnification unless (A) the indemnitee misrepresented or
failed to disclose a material fact in making the request for indemnification or
in the Supporting Documentation or (B) such indemnification is prohibited by
law. The termination of any proceeding described in this Section 6.1, or of any
claim, issue or matter therein, by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
adversely affect the right of the indemnitee to indemnification or create a
presumption that the indemnitee did not act in good faith and in a manner which
the indemnitee reasonably believed to be in or not opposed to the best interests
of the corporation or, with respect to any criminal proceeding, that the
indemnitee had reasonable cause to believe that the indemnitee's conduct was
unlawful.
(d) Remedies of Indemnitee.
----------------------
(i) In the event that a determination is made pursuant to
Paragraph (b)(ii) that the indemnitee is not entitled to indemnification under
this Section 6.1: (A) the indemnitee shall be entitled to seek an adjudication
of his entitlement to such indemnification either, at the indemnitee's sole
option, in (x) an appropriate court of the State of Delaware or any
<PAGE>
other court of competent jurisdiction or (y) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration Association;
(B) any such judicial proceeding or arbitration shall be de novo and the
indemnitee shall not be prejudiced by reason of such adverse determination; and
(C) in any such judicial proceeding or arbitration the corporation shall have
the burden of proving that the indemnitee is not entitled to indemnification
under this Section 6.1.
(ii) If a determination shall have been made or deemed to have
been made, pursuant to Paragraph (b)(ii) or (iii), that the indemnitee is
entitled to indemnification, the corporation shall be obligated to pay the
amounts constituting such indemnification within five days after such
determination has been made or deemed to have been made and shall be
conclusively bound by such determination unless (A) the indemnitee
misrepresented or failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (B) such indemnification
is prohibited by law. In the event that: (C) advancement of expenses is not
timely made pursuant to Paragraph (a); or (D) payment of indemnification is not
made within five days after a determination of entitlement to indemnification
has been made or deemed to have been made pursuant to Paragraph (b)(ii) or
(iii), the indemnitee shall be entitled to seek judicial enforcement of the
corporation's obligation to pay to the indemnitee such advancement of expenses
or indemnification. Notwithstanding the foregoing, the corporation may bring an
action, in an appropriate court in the State of Delaware or any other court of
competent jurisdiction, contesting the right of the indemnitee to receive
indemnification hereunder due to the occurrence of an event described in
subclause (A) or (B) of this clause (ii) (a "Disqualifying Event"); provided,
however, that in any such action the corporation shall have the burden of
proving the occurrence of such Disqualifying Event.
(iii) The corporation shall be precluded from asserting in any
judicial proceedings or arbitration commenced pursuant to this Paragraph (d)
that the procedures and presumptions of this Section 6.1 are not valid, binding
and enforceable and shall stipulate in any such court or before any such
arbitrator that the corporation is bound by all the provisions of this Section
6.1.
(iv) In the event that the indemnitee, pursuant to this
Paragraph (d), seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this Section 6.1,
the indemnitee shall be entitled to recover from the corporation, and shall be
indemnified by the corporation against, any expenses actually and reasonably
incurred by the indemnitee if the indemnitee prevails in such judicial
adjudication or arbitration. If it shall be determined in such judicial
adjudication or arbitration that the indemnitee is entitled to receive part but
not all of the indemnification or advancement of expenses sought, the expenses
incurred by the indemnitee in connection with such judicial adjudication shall
be prorated accordingly.
<PAGE>
(e) Definitions. For purposes of this Section 6.1:
-----------
(i) "Change in Control" means a change in control of the
corporation of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the corporation is then subject
to such reporting requirement; provided that, without limitation, such a change
in control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the corporation representing 25% or more of the combined voting
power of the corporation's then outstanding securities without the prior
approval of at least a majority of the members of the Board of Directors in
office immediately prior to such acquisition; (ii) the corporation is a party to
a merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new director whose
election or nomination for election by the corporation's stockholders was
approved by a vote of at least a majority of the directors then still in office
who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the
corporation who is not a party to the proceeding in respect of which
indemnification is sought by the indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five years has been, retained to
represent: (A) the corporation or the indemnitee in any matter material to
either such party or (B) any other party to the proceeding giving rise to a
claim for indemnification under this Section 6.1. Notwithstanding the foregoing,
the term "Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing under the law of
the State of Delaware, would have a conflict of interest in representing either
the corporation or the indemnitee in an action to determine the indemnitee's
rights under this Section 6.1.
(f) Invalidity; Severability; Interpretation. If any provision or
----------------------------------------
provisions of this Section 6.1 shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Section 6.1 (including,
without limitation, all portions of any Paragraph of this Section 6.1 containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall not in any way be affected
or impaired thereby; and (b) to the fullest extent possible, the provisions of
this Section 6.1 (including, without limitation, all portions of any Paragraph
of this Section 6.1 containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid; illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable. Reference herein to laws, regulations or
agencies shall be deemed to include all amendments thereof, substitutions
therefor and successors thereto.
<PAGE>
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (a) who is or was an employee or
agent of the corporation, (b) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an employee or agent of a
corporation that was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
VII. RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
<PAGE>
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
VIII. GENERAL MATTERS
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to
<PAGE>
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
<PAGE>
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
----
The corporation may adopt a corporate seal which may be altered as desired,
and may use the same by causing it or a facsimile thereof, to be impressed or
affixed or in any other manner reproduced.
<PAGE>
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS AND RESTRICTIONS
------------------------------------------
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware. The Corporation shall be entitled to
impose such restrictions on the transfer of shares as may be necessary for the
purpose of electing or maintaining Subchapter S status under the Internal
Revenue Code or for the purpose of securing or maintaining any other tax
advantage to the Corporation.
IX. AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
X. DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
<PAGE>
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
XI. CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(a) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(b) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(c) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
<PAGE>
EXHIBIT 10.6
November 11, 1999
Frank Daniels III
Chief Executive Officer
Total Sports Inc.
234 Fayetteville Street, 2nd Floor
Raleigh, North Carolina 27601
Re: NBC Sports/Total Sports Joint Venture
Dear Mr. Daniels:
This letter sets forth the agreement between NBC Sports, a division of
National Broadcasting Company, Inc., a Delaware corporation ("NBC Sports"), and
Total Sports Inc., a Delaware corporation ("Total Sports"), with respect to a
transaction whereby NBC Sports will receive certain equity in Total Sports in
exchange for a package of on-air promotion and marketing of Total Sports' real-
time live graphic representations of sporting events conducted in the U.S., with
such representations delivered via the Internet (specifically excluding
streaming video, audio and interactive television) ("Representational Events
Coverage"), as described in greater detail in Section 1 below. The terms and
conditions shall be as follows.
1. Promotional Commitments.
-----------------------
(a) Commencing on the Closing Date (as such term is defined in
the Stock Purchase Agreement entered into by and between NBC Sports
and Total Sports on even date herewith, and attached hereto as Exhibit
A (hereinafter the "Stock Purchase Agreement")), NBC Sports will
provide $17.4 million of on-air promotion and marketing, which will
consist of any one, or any combination, of the following elements
(collectively, the "Promotion"), as chosen by NBC in its sole
discretion: in-broadcast, announcer-read promotional mentions ("Audio
Mentions"); in-broadcast graphics, including tickers; and NBC Sports
commercial inventory. Subject to Section 1(c), it is agreed that all
Promotion will be for Total Sports' Representational Events Coverage
using Total Sports' brands, including without limitation the Totalcast
brand, in each case directing users to web sites owned, co-owned or
controlled by NBC from which the Total Sports
Portions of this exhibit marked by [*] have been omitted
pursuant to a request for confidential treatment.
<PAGE>
Letter Agreement
November 11,1999
Page 2
Representational Events Coverage will be accessible. All such Promotion
shall be subject to NBC Sports' standard terms and conditions for such
promotion, which are described in Exhibit B hereto (the "Standard Terms")
---------
and which are made a part of this letter agreement in their entirety;
provided, however, that in the case of a conflict between the terms of this
-------- -------
letter agreement and the Standard Terms, the terms of this letter agreement
shall govern. NBC Sports will deliver the following amounts of
undiscounted Promotion during the respective calendar years:
1999 $[*] (subject to contract start date)
2000 [*]
2001 [*]
2002 [*]
2003 [*]
----
Total $ 17.4 million
(b) The value of all Promotion delivered under this letter agreement
shall be calculated at [*]. Each quarter, NBC shall deliver Promotion
representing at least a minimum number of gross ratings points, as set
forth in the following table:
[Table to follow]
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
Letter Agreement
November 11,1999
Page 3
Household
1999 Gross Rating Points
- ---- -------------------
3Q
4Q (Assume 10/1/99 Start Date) [*]
- ------------------------------------------------------------------------------
Total 1999 [*]
- ------------------------------------------------------------------------------
2000
- ----
1Q [*]
2Q [*]
3Q [*]
4Q [*]
- ------------------------------------------------------------------------------
Total 2000 [*]
- ------------------------------------------------------------------------------
2001 [*]
- ----
1Q [*]
2Q [*]
3Q [*]
4Q [*]
- ------------------------------------------------------------------------------
Total 2001 [*]
- ------------------------------------------------------------------------------
2002 [*]
- ----
1Q [*]
2Q [*]
3Q [*]
4Q [*]
- ------------------------------------------------------------------------------
Total 2002 [*]
- ------------------------------------------------------------------------------
2003 [*]
- ----
1Q [*]
2Q [*]
3Q [*]
4Q [*]
- ------------------------------------------------------------------------------
Total 2003 [*]
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Maximum Total [*]
- ------------------------------------------------------------------------------
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
Letter Agreement
November 11,1999
Page 4
(c) The foregoing notwithstanding, NBC Sports, in its sole discretion,
reserves the right to determine which specific Total Sports'
Representational Events Coverage will be entitled to Promotion. Without
limiting the generality of the foregoing, it is agreed that (i) NBC Sports
will not provide Promotion for any Total Sports' Representational Events
Coverage related to the Olympics and (ii) NBC Sports does not presently
intend to cover fishing events or promote Total Sports' Representational
Events Coverage related to fishing events.
2. Promotion Schedule. NBC Sports and Total Sports will periodically
------------------
review the Promotion commitment against actual Promotion delivered and may
mutually agree to adjustments to future Promotion not less than six months in
advance. Within 10 days after the end of each month, NBC Sports will deliver to
Total Sports an estimated schedule of the Promotion that was delivered during
that month, and within 10 days after the end of each quarter, an actual,
detailed schedule of the Promotion that was delivered during that quarter.
Should NBC Sports not meet, for any reason, the quarterly allocation of
Promotion for any quarter, it will make up the shortfall no later than June 30
of the following year and, if reasonably possible, within the next quarter, on a
replacement schedule for Promotion for that quarter to be agreed upon by the
parties. If (a) the parties fail to agree upon a replacement schedule for
Promotion; (b) NBC Sports fails to provide Promotion according to the terms of
the replacement schedule; or (c) NBC Sports at any time notifies Total Sports
that NBC Sports will no longer provide Promotion hereunder, then as liquidated
damages and not a penalty, NBC Sports will be required to compensate Total
Sports for the shortfall in one of two ways, as chosen by NBC Sports in its
discretion: (i) pay the shortfall amount to Total Sports in cash or (ii) return
to Total Sports NBC Common Stock (as defined in Section 3(a)) (or in the event
Total Sports is consolidated or acquired by another entity in a merger, sale of
all or substantially all of Total Sports' assets or otherwise (an
"Acquisition"), the consideration payable with respect to such NBC Common Stock
in connection with the Acquisition, on an equitable basis) in aggregate value
(calculated using a price per share of $21.41, subject to equitable adjustment
for any stock splits, combinations, consolidations, recapitalizations,
reorganizations, reclassifications, stock distributions, stock dividends or
other similar events with respect to such NBC Common Stock) equal to the
shortfall amount. In the event that NBC Sports elects to compensate Total Sports
for a shortfall pursuant to clause (ii) of this Section 2 and (x) NBC continues
to hold any series E preferred stock or (y) NBC has acquired any additional
shares pursuant to Section 3(b) below (the "Additional Shares"), NBC Sports
shall also return to Total Sports a pro rata percentage of such series E
preferred stock and/or such Additional Shares, as the case may be (in either
case, such percentage being equal to the shortfall amount divided by $17.4
million) in the same manner as Total
<PAGE>
Letter Agreement
November 11,1999
Page 5
Sports is compensated pursuant to clause (ii) above. The foregoing shall be
Total Sports' exclusive remedy in the event of a shortfall.
3. Equity.
------
(a) Subject to the terms and conditions of this letter agreement and
as consideration for NBC Sports' commitment to deliver Promotion pursuant
hereto, on the Closing Date, Total Sports will issue, and NBC Sports will
receive, 811,423 shares of common stock of Total Sports (the "NBC Common
Stock") and 811,423 shares of series E preferred stock of Total Sports (one
share of common stock and one share of series E preferred stock shall
together be referred to as a "Unit"), at an aggregate purchase price of
$21.41 per Unit, upon the terms and conditions of, and pursuant to, the
Stock Purchase Agreement. Total Sports covenants that NBC Sports will be
made a party to the agreement between Total Sports and its stockholders
regarding certain rights relating to its capital stock (including co-sale
rights) (the "Stockholder Agreement") and the agreement between Total
Sports and its stockholders regarding registration and other rights with
respect to its capital stock (the "Investor Rights Agreement"), as those
agreements are to be amended in connection with Total Sports' Series D
Preferred Stock financing.
(b) Notwithstanding the foregoing, immediately prior to the
consummation of an initial Public Offering (as defined below) of the common
stock of Total Sports in which the price per share at which such shares of
common stock are initially sold to the public (the "IPO Price") is less
than $32.11, as adjusted for stock splits, stock dividends, reorganizations
and the like, then Total Sports will issue additional shares of common
stock to NBC Sports in an amount equal to the difference between (i) the
shares of NBC Common Stock multiplied by the quotient of (x) $32.11, as
adjusted for stock splits, stock dividends, reorganizations and the like,
divided by (y) the IPO Price, minus (ii) the shares of NBC Common Stock.
For purposes of this Section 3(b), a "Public Offering" means any offering
by Total Sports of its equity or debt securities to the public pursuant to
an effective registration statement under the Securities Act of 1933, as
then in effect, or any comparable statement under any similar federal
statute then in force.
(c) Total Sports shall only be obligated to issue shares in connection
with Total Sports's initial Public Offering pursuant to Section 3(b), and
upon such issuance Section 3(b) shall terminate and be of no further force
and effect.
<PAGE>
Letter Agreement
November 11,1999
Page 6
4. Additional Promotion and Equity. If Total Sports secures from the
-------------------------------
National Basketball Association ("NBA"), in writing, rights to provide
Representational Events Coverage of NBA and WNBA regular season games (including
all necessary rights for NBC Sports to promote the coverage without infringing
on the NBA's or any third party's rights) before July 31, 2000 (the "NBA
Rights"), NBC will commit to deliver an additional $8.0 million of Promotion of
Total Sports' Representational Events Coverage of NBA/WNBA events, subject to
NBC Sports' ownership of television broadcast rights for those events and NBC
Sports' receipt of permission from the NBA (at no cost to NBC Sports) to run the
Promotion. The value of the additional Promotion will be calculated pursuant to
Section 1(b) hereof, and NBC Sports will deliver the additional Promotion in the
following amounts of undiscounted Promotion during the respective calendar
years:
2000 $ [*]
2001 [*]
2002 [*]
2003 [*]
2004 [*]
-----
Total $ 8.0 million
Within 60 days of Total Sports' receiving the rights from NBA described above,
NBC Sports and Total Sports shall agree on a schedule for the additional
Promotion commitment.
In return for its additional Promotion commitment described above, NBC
Sports would receive $8.0 million in additional shares of common stock of Total
Sports at a per share price equal to (a) if shares of Total Sports common stock
are not publicly traded on a nationally recognized exchange, a base price equal
to the lower of (1) $25.69, representing a 20% premium on the current valuation
of $21.41 per share, and (2) the price per share associated with Total Sports'
round of private cash financing (if applicable) of $10.0 million or more
completed most recently prior to the acquisition of
Portions of this exhibit marked by [*] have been omitted pursuant
to a request for confidential treatment.
<PAGE>
Letter Agreement
November 11,1999
Page 7
such NBA Rights, with such price per share increased at a rate of 1% per month,
compounded monthly, with such increase commencing on the date of the closing of
the private financing, or (b) if shares of Total Sports common stock are
publicly traded on a nationally recognized exchange, the 30-day trailing average
closing price as of the date on which Total Sports obtained the NBA Rights in
writing. The shares shall be issued on, and subject to, such same terms and
conditions as set forth in sections 2 and 3 above.
Exclusivity. During the term of this letter agreement, NBC Sports will not
-----------
provide Audio Mentions for any other current or future Representational Events
Coverage, including such coverage as may be provided by [*] etc., or their
affiliates, but this exclusivity only applies to*events for which Total Sports
has, at such time, all necessary exclusive or nonexclusive rights to provide
Representational Events Coverage. Nothing in the preceding sentence shall
preclude NBC Sports from providing Audio Mentions of events coverage other than
Representational Events Coverage, even if such events are covered by [*] etc.,
or their affiliates. During the term of this letter agreement, Total Sports will
not: (a) enter into any similar agreement with [*] or their affiliates or
successors (the "Designated Entities"), or (b) permit any of the Total Sports
web sites that may be accessed by an end user via a link from an NBC Sports
promoted web site to be branded to include the name or trademark of any
Designated Entity, or to include any links, buttons or similar features that
include a name or trademark of a Designated Entity, in either case without
permission from NBC Sports, except that Total Sports shall not be prohibited
from carrying out its book publishing venture with Sports Illustrated or from
providing a license to its baseball statistics and data to CNNSI. Nothing
contained in this letter agreement shall prevent NBC Sports or its affiliates
from making an investment in any entity that provides Representational Events
Coverage, so long as NBC Sports does not promote such coverage on the air in
violation of its obligations to Total Sports hereunder.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
Letter Agreement
November 11,1999
Page 8
6. Operations. NBC Sports will designate a liaison person to work with a
----------
member of the Total Sports production team to coordinate the online production
and convergence with broadcast production of sporting events. NBC Sports will
use its commercially reasonable efforts to cause Total Sports to be considered
part of the NBC Sports coverage team, including, but not limited to,
accreditation (where available), travel and hotel accommodation. Total Sports
shall be responsible for its own expenses (and those of its employees and
agents) in connection with production (phone lines, trailers, etc.), travel,
meals and lodging in connection with such live events.
7. Online Promotion. NBC Sports shall use its commercially reasonable
----------------
efforts to assist Total Sports to secure advantageous promotion and distribution
on NBC Sports' affiliated web-site properties, including MSNBC.com's sports site
and any other dedicated NBC Sports web-site other than its Olympics sites.
8. Board of Directors. NBC Sports shall be entitled to one seat on the
------------------
Board of Directors of Total Sports pursuant to Section 14 of the Stockholder
Agreement. NBC Sports shall have the exclusive right to remove and replace its
Board designee at any time, provided that any such replacement designee shall be
an officer of NBC Sports. NBC Sports has initially designated Ken Schanzer to
fill its seat on the Board of Directors of Total Sports.
9. Information. Total Sports hereby covenants to promptly notify NBC
-----------
Sports, and to disclose to NBC Sports the nature, of any material international
strategic alliances being considered by Total Sports during the term of this
letter agreement.
10. Representations and Warranties. NBC Sports and Total Sports each
------------------------------
represent and warrant that this letter agreement has been duly authorized,
executed and delivered by such party and that this letter agreement constitutes
a legal, valid and binding obligation, enforceable against such party in
accordance with its terms.
11. Confidentiality. In connection with the execution of this letter
---------------
agreement, NBC Sports and Total Sports will issue a mutually agreeable joint
press release and any other mutually agreed upon promotional materials regarding
the relationship described in this letter agreement. Neither party shall make
any other disclosures concerning this letter agreement, the Stock Purchase
Agreement or the relationship described herein without the prior written consent
of the other party; provided, however, that NBC Sports agrees that Total Sports
may file this letter agreement with the SEC and/or describe this letter
agreement in any registration statement filed with the SEC, in each case if so
required by applicable securities laws, as long as Total Sports agrees to use
its best efforts to obtain confidential treatment of the economic and other
material terms of this
<PAGE>
Letter Agreement
November 11,1999
Page 9
letter agreement under the securities laws and to consult with NBC Sports at all
times during the process.
12. Term and Termination. Unless NBC Sports notifies Total Sports
--------------------
pursuant to Section 2 that NBC Sports will no longer provide Promotion
hereunder, the term of this letter agreement shall be 51 months from the date of
its execution, except in the event that Total Sports secures the NBA Rights in
which event the term of this letter agreement shall be 63 months from the date
of its execution. Sections 10, 11, 13, 14 and 15 shall survive any termination.
NBC Sports shall have the right to terminate this letter agreement at any time
if during the term hereof, control of Total Sports is transferred to a
Designated Entity. For purposes of the foregoing sentence, a transfer of
control shall be deemed to occur whenever a Designated Entity (i) becomes the
beneficial owner of more than 40% of Total Sports' outstanding voting
securities, (ii) acquires all or substantially all of Total Sports' assets,
(iii) otherwise merges or consolidates with Total Sports where Total Sports is
not the surviving entity, or (iv) obtains the right to appoint a majority of the
directors to the Total Sports's board. In addition, NBC Sports shall have the
right to terminate this agreement if any of the Total Sports web sites that may
be accessed by an end user via a link from an NBC Sports promoted web site are
branded to include the name or trademark of any Designated Entity, or include
any links, buttons or similar features that include a name or trademark of a
Designated Entity (except as allowed under Section 5) in violation of this
agreement, if Total Sports fails to cure such violation within 10 business days
after NBC Sports's written notice to Total Sports of such violation.
13. Limitation of Liability. Except for damages arising out of the gross
-----------------------
negligence of willful misconduct of either party hereto, no party shall be
liable to the other party of their affiliates, officers, directors, successors
or assigns for any incidental, consequential, special or punitive damages or
lost profits arising out of this letter agreement, whether liability is asserted
in contract or tort and irrespective of whether it has advised or been advised
of the possibility of any such loss or damage.
14. Miscellaneous. This letter agreement constitutes the entire agreement
-------------
and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations, and
understandings between the parties, both oral and written relating to the
subject matter hereof. No waiver or modification of any provision of this
letter agreement shall be effective unless in writing and signed by both prices.
Any waiver by either party of any provision of this letter agreement shall not
be construed as a waiver of any other provision of this letter agreement, nor
shall such waiver operate as or be construed as a waiver of such provision
respecting any future event or circumstance. The terms of this letter agreement
shall apply to the parties hereto and any of their successors or assigns. This
<PAGE>
Letter Agreement
November 11,1999
Page 10
letter agreement may be executed in counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
15. Governing Law and Jurisdiction. This letter agreement shall be
------------------------------
governed by and construed under the laws of the State of New York applicable to
contracts fully performed in New York, without regard to New York conflicts of
law provisions. The parties hereto irrevocably consent to and submit to the
exclusive jurisdiction of the federal and state courts located in the County of
New York. The parties hereto irrevocably waive any and all rights to trial by
jury in any proceeding arising out of or relating to this letter agreement.
If you are in agreement with the above terms and conditions, please
indicate your acceptance by signing in the space provided below, and return one
original to me. This letter agreement shall be null and void if not signed
within 30 days of the date set forth above.
Very truly yours,
NBC SPORTS, A DIVISION OF NATIONAL
BROADCASTING COMPANY, INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
ACCEPTED AND AGREED:
TOTAL SPORTS INC.
________________________________
Frank Daniels III
Chief Executive Officer
<PAGE>
EXHIBIT 10.7
WEB SITE AND CYBERCASTING AGREEMENT
THIS WEB SITE AND CYBERCASTING AGREEMENT ("Agreement") is made effective as
of February 15,1998 by and between HOST COMMUNICATIONS, INC., a Kentucky
corporation ("HCI") having an address at 546 East Main Street, Lexington,
Kentucky 40508 and the TOTAL COLLEGE COMMUNICATIONS COMPANY, L.L.C., a Kentucky
limited liability company ("TC/3/") having an address at 133 Fayetteville
Street, Sixth Floor, Raleigh, North Carolina 27601.
WHEREAS, the NCAA has granted HCI the exclusive rights to promote certain
NCAA Championships using Cybercasts and a Web Site accessible over the Internet
under a License dated of even date herewith (the "License"); and
WHEREAS, TC/3/, as an independent contractor, desires to create a Web Site
for HCI in order to provide access to certain NCAA Championships through the
Internet; and
WHEREAS, TC/3/ desires to produce and broadcast certain NCAA Championships
through the use of Internet Cybercasts; and
WHEREAS, the NCAA has licensed HCI to use the NCAA's name, the letters
"NCAA", its seal, logo and the phrases "National Collegiate Championships", "The
Final Four", "Women's Final Four', "College Sports USA", "NCAAction!", "College
World Series", 'Women's College World Series", and "Stagg Bowl" registered or
pending registration before the United States Patent and Trademark Office
(hereinafter collectively referred to as the Marks"); and
WHEREAS, HCI desires to promote the NCAA Championships using Cybercasts and
a Web Site accessible over the Internet and to grant TC/3/ a license to use the
Marks in association with such Cybercasts and Web Site; and
WHEREAS, the parties have mutually agreed upon the terms and conditions set
forth in this Agreement;
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
bound, hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have the ascribed
meanings:
"Contract Year" means February 15, 1998 through June 30, 1998 for the first
-------------
Contract Year and thereafter each twelve (12) month period from July 1 through
June 30 during the term of this Agreement.
"Cybercasts" means a transmission resulting in the representation,
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visualization, and/or exhibition of NCAA Championships or Special Events on
computers, Set-Top Boxes, Video Game Entertainment Equipment utilizing the
Internet or Intercasting technologies as the transmission medium, and including
without limitation, all improvements now known or hereafter developed, without
limitation. Notwithstanding the foregoing, the term "Cybercasts" shall not
include any distribution of radio broadcasts and/or video feeds over the
Internet.
"Domain Name" means a name associated with a specific registered address
-----------
for a computer acting as an information repository on the Internet (e.g.
"www.ncaatournament.com").
"Internet" means a global information network consisting of interconnected,
but independent, computers including, but not limited to, the World Wide Web, by
any name now known or hereafter developed, without limitation.
"Marketing Programs" shall have the meaning set forth in Section 5.1.
------------------
"Marketing Revenues" shall have the meaning set forth in Section 7.2.
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"NCAA Championship(s)" means any tournament organized and/or sanctioned by
--------------------
the NCAA to recognize the champion of any given NCAA sport.
"Set-Top Box(es)" means a computer system connected as is to a television
---------------
and/or other monitor.
"Special Event(s)" means any nongame event(s) involving NCAA Championships.
----------------
"Sports Web Site" means the Web Site developed by TC/3/ with the
---------------
assistance, and at the direction of, HCI and the NCAA that contains information
related to NCAA Championships.
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"Video Game Entertainment Equipment" means a video game system that is
----------------------------------
connected to a television or monitor, or is self-contained and which would
permit reception of a Cybercast or access to the Web Site.
"Web Server" means a computer system executing software that makes the
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Sports Web Site available on the Internet.
"Web Site(s)" means document(s) that consist of text, graphics, sound
-----------
and/or animation clips and that contain links to other documents either self-
contained or located in places elsewhere on the Internet.
2. TERM.
The term of this Agreement shall commence effective as of February 15, 1998
and terminate on June 30, 2001. Should HCI extend its License with the NCAA,
the parties agree to exclusively negotiate for a renewal of the term of this
Agreement based on the terms and conditions of HCI's License and any other
mutually agreeable terms and conditions.
3. GRANT OF RIGHTS.
3.1 HCI hereby grants to TC/3/ an exclusive worldwide sublicense to use
the NCAA Marks to create and host the NCAA's official Sports Web Site in English
on TC/3/'S Sports Web Server or other Web Server designated by TC/3/ for all
NCAA Championships. In connection herewith, TC/3/ agrees that such Sports Web
Site will include coverage of the following NCAA Championships during the first
Contract Year: the Division I Men's Basketball Championship, the Division I
Women's Basketball Championship, the Division I Baseball (The College World
Series) and fifty-three (53) other Championship final games or events (excluding
the sites of any regionals or preceding rounds) as selected by the NCAA by
February 15, 1998. During the second Contract Year, such Sports Web Site will
include coverage of the following NCAA Championships: the Division I Men's
Basketball Championship, the Division I Women's Basketball Championship, the
Division I Baseball (The College World Series), and a mutually agreeable number
of additional Championship final games or events (excluding the sites of any
regionals or preceding rounds). All NCAA Championships will be included on the
Sports Web Site on or before June 1, 1999. TC/3/'s coverage of the NCAA
Championships identified herein on the Sports Web Site will, at a minimum,
include the following: one (1) page generally relating to and previewing the
Championship, one (1) page relating to the Championship venue and ticketing
information and three (3) pages relating to the Championship results. During the
term of this Agreement, HCI shall not permit any party other than TC/3/ to
create or host the official NCAA Championship Web Site. Notwithstanding the
foregoing, TC/3/ acknowledges that HCI and/or the NCAA may authorize schools
participating in a Championship, host institutions, local organizing committees
venues and/or host cities to include Championship specific information on their
respective Web Sites provided that the same does not constitute an official
Championship Web Site. In addition, TC/3/ acknowledges that the license granted
herein
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shall not prevent the NCAA from authorizing the use of the NCAA Marks to create
and host an official foreign language NCAA Web Site and that all such rights are
expressly excluded from this Agreement; provided, however, TC/3/ shall have an
exclusive first right of negotiation for any foreign language official NCAA Web
Site of a period of fifteen (15) days following the NCAA's written notice of its
intent to secure any such foreign language Web Site of an NCAA Championship.
3.2 HCI hereby grants to TC/3/ a worldwide license to use the NCAA Marks
to create, produce, syndicate and broadcast via Cybercasts, in English, on
TC/3/'S Sports Web Server or other Web Server designated by TC/3/, all pre-game,
play-by-play and post-game commentary for all NCAA Championships. During the
first Contract Year, TC/3/ agrees to Cybercast each the following: (i) the
Division I Men's Basketball Championship, (ii) the Division I Women's Basketball
Championship, and (iii) the Division I Baseball Championship (The College World
Series). In each remaining Contract Year, TC/3/ agrees to Cybercast the
following: (i) the Division I Men's Basketball Championship, (ii) the Division I
Women's Basketball Championship, (iii) the Division I Baseball Championship (The
College World Series), and at least five additional Championships as mutually
determined by HCI and the NCAA on or before July 1. During the term of this
Agreement, HCI shall not permit any party other than TC/3/ to create, produce,
syndicate or broadcast via Cybercast any such NCAA Championships without TC/3/'s
consent, except participating schools in a Championship or other sports specific
organizations shall be permitted to do a Cybercast if TC/3/ is not doing one for
that Championship. TC/3/ acknowledge that the license granted herein shall not
prevent the NCAA or HCI from authorizing the use of the NCAA Marks to create,
produce, syndicate and broadcast via Cybercasts any NCAA Championships in a
foreign language; provided, however, TC/3/ shall have an exclusive first right
of negotiation for any foreign language Cybercast of an NCAA Championship for a
period of fifteen (15) days following the NCAA's written notice of its intent to
secure any such foreign language Cybercast of an NCAA Championship.
3.3 In accordance with the foregoing, TC/3/ shall be responsible for:
(a) setting up the Domain Name for the NCAA Championships, the
ownership of which shall remain and vest in the NCAA's wholly
owned subsidiary, NCAA Marketing, Inc.;
(b) creating the initial page layout, content, content layout, and
graphic design for the Sports Web Site, subject to the prior
approval of HCI and the NCAA, such approval not to be
unreasonably withheld or delayed;
(c) online promotion of the Sports Web Site, subject to the prior
approval of HCI and the NCAA, such approval not to be
unreasonably withheld or delayed;
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(d) maintenance and support of the Web Server used for the Sports Web
Site, including keeping backups of data stored on the Web Server,
checking for errors in the accessibility of the Sports Web Site,
and monitoring connectivity of the Web Server to the Internet;
(e) the monthly delivery of statistical data regarding the access
logs of those visiting the Sports Web Site, including the number
of page views to the Sports Web Site per day and a summary of
Domain Names registered by the logs;
(f) forwarding to the NCAA's prearranged e-mail account any comments
or other communications from the Sports Web Site;
(g) providing tools for NCAA personnel to update the Web Site via the
Internet.
3.4 TC/3/ reserves the right to perform routine maintenance up to once a
week, which may require taking the Web Server off the Internet for a reasonable
period of time. TC/3/ shall make a good faith effort, without any additional
expenditure of funds, to minimize the impact of such maintenance and to perform
the work during off-peak hours and to perform maintenance on a secondary server
and then move updated server to a primary server.
3.5 TC/3/ agrees that "NCAA Online" shall be acknowledged in the title
banner as the presenter on the Web Site.
4. HCI OBLIGATIONS.
4.1 HCI shall (or shall cause the NCAA to) provide all NCAA documents,
photographs, films, statistics and other media and/or information in formats
agreed upon by the parties, to TC/3/ as it may reasonably require for its
performance of its duties hereunder. HCI further agrees to (and will request
that the NCAA) review and approve converted Web Site and Cybercast components in
a timely manner. In connection herewith, HCI shall be solely responsible for all
editing, creation and/or maintenance of all such NCAA documents and/or
information at rates to be mutually agreed upon by the parties.
4.2 HCI hereby grants TC/3/, as an independent contractor, a worldwide
exclusive license to use the NCAA Marks solely for the term and purposes of this
Agreement for its creation, maintenance, and distribution of the Web Site and
Cybercasts. TC/3/ agrees that it will submit copies of all materials and
proposed uses of the NCAA Marks to HCI for its prior approval and the prior
approval of the NCAA. HCI and/or the NCAA shall instruct TC/3/ in writing within
ten (10) business days following receipt, as to whether any such materials
and/or proposed use of the NCAA Marks areapproved, such approval not to be
unreasonably withheld or delayed. If no approval
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<PAGE>
or disapproval is provided to TC/3/ within the time allotted herein, then such
materials and/or proposed use of NCAA Marks shall be deemed approved.
4.3 TC/3/ will have the right, to the extent that HCI has the right from
the NCAA, to make all appropriate references to the NCAA and the universities
and colleges of the teams, the sites, the games and participants in and others
identified with the NCAA Championships including, without limitation,
photographs, video footage, audio, images, statistics and other elements as may
be required for TC/3/ to perform its obligations hereunder.
4.4 HCI represents and warrants that it has the right to enter into this
Agreement and to grant TC/3/ the rights granted herein, including the exclusive
rights to Cybercast events taking place at the sites of NCAA Championships
before, during and after such Championships and during intermissions.
5. ON-LINE MARKETING PROGRAMS.
5.1 HCI hereby reserves the rights to market, sell and include
advertising and/or other promotions, including, without limitation, sales of
licensed merchandise (collectively referred to as the "Marketing Programs") of
third persons and/or entities, either by directly incorporating the content of
such advertising or promotions as part of the Sports Web Site and Cybercasts or
by providing links to such advertising or promotions. In connection herewith,
TC/3/ shall also have the right to market, sell and include advertising of third
persons and/or entities, either by directly incorporating the content of such
advertising as part of the Sports Web Site and Cybercasts or by providing links
to such advertising. For the purposes of this Agreement, such Marketing Programs
shall include the NCAA Corporate Partner Marketing Program Packages described in
paragraph 5.2 below.
5.2 Notwithstanding the foregoing, the parties agree to develop each
Contract Year an NCAA Corporate Partner Marketing Program Package (herein
referred to as the "Package(s)") to be offered by HCI to any NCAA Corporate
Partners and/or other NCAA sponsors identified by HCI during the term of this
Agreement (herein collectively referred to as "NCAA Corporate Partner(s)"). Such
Packages will include all available Marketing Programs on the Sports Web Site
and be priced at a mutually agreed upon discount for the benefit of the NCAA
Corporate Partners. NCAA Corporate Partners shall have an exclusive first right
to purchase any such Packages for a period of time mutually agreed upon by the
parties prior to any solicitation by TC/3/ for sales of Marketing Programs
and/or advertising under this Agreement to any entity which HCI reasonably
determines competes with the respective NCAA Corporate Partners within their
exclusive product and/or service categories. Should any NCAA Corporate Partner
decline a Package offered by HCI within the time period agreed upon by the
parties, TC/3/ shall be free to negotiate and/or secure an agreement with a
competitor to the respective NCAA Corporate Partner which declines a proposed
Package for the purchase of a Marketing Program or advertising on the Sports Web
Sites.
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5.3 All sales of advertising by TC/3/ hereunder shall be subject to the
prior approval of HCI and the NCAA. TC/3/ acknowledges and agrees that the NCAA
has reserved the right to prohibit sales of Marketing Programs and/or
advertising to any entity which the NCAA, in its sole discretion, believes would
or might bring discredit to the purposes or principles of the NCAA as set forth
in its Manual. All marketing and sales of advertising by TC/3/ shall be done in
such a manner as to preserve the integrity, character and dignity of the NCAA
and to advance its purpose of fostering higher education. In order to assure
compliance with the NCAA's standards and policies, TC/3/ shall provide in
advance to HCI (and the NCAA if requested) samples of all literature and
promotional material that TC/3/ intends to use in its marketing efforts
hereunder, and none shall be used without the advance written approval of HCI
(or the NCAA), such approval not to be unreasonably withheld or delayed.
Notwithstanding any contrary term contained herein, no license is granted herein
to TC/3/ to license any entity with the rights to use or feature the NCAA Marks
and/or to conduct any related promotion in any manner whatsoever.
5.4 TC/3/, at no cost or expense to HCI or any Marketing Program
customers, shall place, feature, update and maintain all such Marketing Programs
secured by HCI on the Sports Web Site and/or within Cybercasts, as the case may
be, for the full term of any agreement between HCI and the Marketing Program
customer. In addition, TC/3/ shall prominently feature the NCAA's official
Championship event merchandiser by use of a graphic display throughout the Web
Site at no cost to such merchandiser and will provide links to such
merchandiser's web site. HCI agrees to regularly consult with TC/3/ with respect
to: (i) any technical specifications required to fulfill any commitments to a
Marketing Program customer relative to the Sports Web Site and/or the Cybercasts
prior to finalizing any contracts with the customer to insure TC/3/'s ability to
fulfill such commitments; and (ii) HCI's Marketing Program solicitation and
sales efforts.
5.5 The parties will mutually agree upon all fees and rates to be charged
to third parties for all Marketing Programs and/or advertising, including, but
not limited to the discount offered to NCAA Corporate Partners as a part of the
Packages.
5.6 As approved by the NCAA, TC/3/ may place its logo (no larger than 1"
x 0.75") on the bottom of every page contained within the Sports Web Site and as
part of all Cybercasts. TC/3/ further agrees to display the NCAA Online logo
hyperlink and that of the NCAA's official Championship merchandiser on the
bottom of every page contained within the Sports Web Site and as part of all
Cybercasts.
5.7 Each of HCI and TC/3/ shall use its best efforts to market the Sports
Web Site and Cybercasts to potential customers. Except as permitted hereunder in
accordance with paragraph 5.1, TC/3/ shall not authorize any entity which
competes with any NCAA Corporate Partner, or other exclusive Marketing Program
customers to link to the NCAA Web Site in a manner which directly or indirectly
implies a sponsorship or other association with the NCAA or the NCAA Web Site.
It is understood that any merchandise sold through the Sports Web Site shall be
licensed by the NCAA or its
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<PAGE>
authorized licensees and no other merchandise shall be permitted to be
advertised without HCI's prior approval.
6. ACCESS.
For the purposes of this Agreement, HCI shall (or will cause the NCAA to)
grant TC/3/ reasonable access to (or otherwise provide):
(a) NCAA photograph, video, audio, statistical, and print libraries;
(b) players, coaches, and others participating in the NCAA Championships;
(c) NCAA press conferences;
(d) NCAA special events associated with the Championships (including
necessary media and parking passes);
(e) all facilities (including a minimum of [*] rooms in the NCAA
Championship or media hotel or the NCAA "overflow" hotel should space
be unavailable in the NCAA Championship or media hotel);
(f) the Championship events (including, at no cost or expense, a minimum
of [*] media passes);
(g) the opportunity to purchase, at face value, at least [*] tickets for
admission to all NCAA Championships; provided, however, any
promotional use of such tickets must be approved in advance by the
NCAA;
(h) public service announcements of at least five (5) seconds in length
featuring the URL address for each Championship Cybercast by TC/3/
within the telecasts and broadcasts of such Championships; and
Portions of this exhibit marked by [*] have been omitted pursuant to a
request for confidential treatment.
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(i) HCI shall cause the NCAA to use its best efforts to provide signage
featuring the URL address for each Championship Cybercast by TC/3/
including, (1) a maximum of two (2) on-field (or courtside) signs, no
larger than those permitted the network carrying the television
broadcast of the event, (at least three (3) feet by six (6) feet)
within plain view of the field of play at each such Championship.
7. PAYMENTS.
7.1 HCl shall invoice and attempt collection of all Marketing Revenues
(as herein defined) due from Marketing Program and/or advertising customers
secured by HCI under this Agreement, including, but not limited to, all NCAA
Corporate Partners purchasing NCAA Corporate Partner Marketing Program Packages
(herein collectively referred to as "Customers"). HCI shall be entitled to
retain a Commission (herein so called) of [*] percent ([*]%) of all such
Marketing Revenues collected by HCl from Customers which it secures hereunder
(including all NCAA Corporate Partners purchasing NCAA Corporate Partner
Marketing Program Packages) and will remit to TC/3/ the balance of Net Marketing
Revenues collected which in the aggregate equal the lesser of $[*] or the actual
Costs and Expenses associated with the creation, production, distribution and
maintenance of the Sports Web Site and Cybercasts. The balance of any Net
Marketing Revenues in excess of the lesser of $[*] or the actual Costs and
Expenses of the Sports Web Site and the Cybercasts shall be paid by HCI as
follows: (i) [*] percent ([*]%) of all such Net Marketing Revenues shall
retained by HCI for all necessary settlements with the NCAA and (ii) [*] percent
([*]%) of all such Net Marketing Revenues shall be paid to TC/3/. Within thirty
(30) days from HCl's date of collection, HCI agrees to pay TC/3/ all amounts due
hereunder; provided, however, HCI may reserve such amounts as may be necessary
to make HCl's required settlement with the NCAA; provided, however, such amounts
will be deposited by HCI in an interest bearing account, with any accrued
interest thereon to be paid to TC/3/ within ten (10) days from the date of HCl's
settlement with the NCAA. HCI will use its commercially reasonable efforts to
require Customers to pay at least fifty percent (50%) upon execution of the
agreements with such Customers with the remaining amounts due within six (6)
months following the date of execution.
7.2 As used herein, (i) "Marketing Revenues" shall mean all amounts
collected by HCI from Customers secured by either TC/3/ or HCI less any
unaffiliated agency fees; and (ii) "Net Marketing Revenues" shall mean all
Marketing Revenues collected by HCI from Customers less its Commission. As used
herein, "Costs and Expenses" shall
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
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mean: (i) all advertising, acknowledgment and promotion expenses (including, but
not limited to, newspaper, Arbitron and other research for sponsor and visitor
interest); (ii) all costs associated with marketing and sales of the Marketing
Programs, including, without limitation, all fulfillment costs and/or other
expenses associated with sales of Marketing Programs including a commission of
[*] percent ([*]%); (iii) any amounts required to be withheld for applicable
taxes or amounts required to be refunded customers; (v) all agency commissions;
and (vi) all operational and production expenses associated with the creation,
maintenance, hosting, and broadcasting of the Web Site and all Cybercasts as the
same directly relates to HCl's performance of this Agreement. Notwithstanding
the foregoing, TC/3/ agrees that all general administrative and overhead
expenses of TC/3/ shall be its sole expense. Neither HCI nor the NCAA shall bear
any legal or financial responsibility for said Costs and Expenses.
7.3 Each party will be solely responsible for the payment of its
employees' compensation, including employment taxes, worker's compensation, and
any similar taxes associated with employment of its employees. No party shall be
liable for the debts, accounts, obligations or other liabilities of the other
party, including without limitation, the other party's obligation to withhold
payroll and income taxes.
7.4 Each party shall keep complete and accurate records pertaining to its
activities hereunder; and the books, records and accounts of the parties
pertaining to its business relating to this Agreement may be inspected and
audited by the other party, the NCAA or agents of such party or the NCAA at
anytime during normal business hours upon giving reasonable notice to party from
whom the inspection or audit is sought.
7.5 TC/3/ shall make quarterly financial reports to HCl on or before
October 1, January 1 and July 1 that shall separately list information about its
revenues and expenses pursuant to this Agreement and shall be certified by
TC/3/'s Chief Executive Officer or his designated representative. The July I
financial report shall include a year-end summary of all such revenues and
expenses. All such reports received by HCl and the information contained therein
shall be used only for HCl's internal purposes and its requirements to the NCAA
and shall not be provided to third parties other than the NCAA except as
required by law or with the consent of TC/3/.
8. INDEMNIFICATION.
8.1 By TC/3/ TC/3/ agrees to indemnify fully and save harmless HCI, the
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NCAA and their respective officers, agents, employees and each of the NCAA
member institutions, of and from any and all claims, demands and causes of
actions, including
Portions of this exhibit marked by [*] have been omitted pursuant to a
request for confidential treatment.
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legal costs and costs of attorneys' fees, arising out of any breach by TC/3/ of
any provision of this Agreement or any acts or omissions of TV or any of its
officers, agents or employees pursuant to this Agreement.
8.2 By HCI HCI agrees to indemnify fully and save harmless TC/3/, its
------
officers, agents, and employees, of and from any and all claims, demands and
causes of actions, including legal costs and costs of attorneys' fees, arising
out of any breach by TC/3/ of any provision of this Agreement or any acts or
omissions of TC/3/ or any of its officers, agents or employees pursuant to this
Agreement; or any claims of trademark infringement brought by third parties from
any use of the Marks by TC/3/ approved under the terms of this Agreement.
9. INSURANCE.
9.1 Throughout the term of this Agreement, TC/3/ agrees to maintain,
through a carrier having a A.M. Best rating A (excellent), VII or better,
comprehensive general liability insurance in the amount of Five Million Dollars
($5,000,000) per occurrence for bodily injury, property damage and contractual
liability. Said insurance will protect the named insured against any claims,
demands, or causes of action or damages including costs and attorneys' fees
arising out of that party's action under this Agreement. Said insurance will
name HCI and the NCAA as additional insureds and will not be cancelable until at
least thirty (30) days after written notice of cancellation is given by the
insurer to HCI and the NCAA. TC/3/ shall furnish HCI (and/or the NCAA) a
certificate of such insurance demonstrating that the above-stated coverage is in
effect.
9.2 Throughout the term of this Agreement, HCI agrees to maintain,
through a carrier having a A.M. Best rating A (excellent), V11 or better,
comprehensive general liability insurance in the amount of Five Million Dollars
($5,000,000) per occurrence for bodily injury, property damage and contractual
liability. Said insurance will protect the named insured against any claims,
demands, or causes of action or damages including costs and attorneys' fees
arising out of that party's action under this Agreement. Said insurance will
name TC/3/ as an additional insured and will not be cancelable until at least
thirty (30) days after written notice of cancellation is given by the insurer to
TC/3/. HCI shall furnish TC/3/ a certificate of such insurance demonstrating
that the above-stated coverage is in effect.
10. TERMINATION.
10.1 Upon material breach of any obligation by the other party, each
party shall have the right to terminate this Agreement by written notice to the
other if such breach remains uncured for a period of thirty (30) days after
written notice of such breach is sent to the other party.
10.2 If either party files a bankruptcy petition, becomes the subject of
an involuntary bankruptcy petition, makes a general assignment for the benefit
of creditors, has a receiver appointed for its assets, or ceases to conduct
business, it shall be
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considered a material default of this Agreement. Upon the happening of any of
these events, the defaulting party shall immediately send notice of default to
the other party.
10.3 In addition to its other rights, HCI reserves the right to terminate
this Agreement, without penalty, upon any termination or expiration of its
separate agreement with the NCAA relative to the Sports Web Site and Cybercasts
which are the subject of this Agreement.
11. RIGHTS OF THE PARTIES UPON TERMINATION.
11.1 Sections 7 through 13 of this Agreement shall continue to bind the
parties after termination of the Agreement as provided herein.
11.2 In the event of a permitted termination of this Agreement under
Section 10 upon a material breach by HCI, all amounts owed or accrued for the
work performed under this Agreement shall become immediately due and payable and
all rights and licenses granted to TC/3/ by HCI under this Agreement for such
work performed shall continue and survive royalty-free and fully paid through
the effective date of termination of this Agreement.
11.3 Upon any event of termination or expiration of this Agreement,
ownership of the Sports Web Site shall reside in HCI and/or the NCAA, as
applicable in accordance with HCI's License with the NCAA.
12. ASSIGNMENT.
Neither party may assign or subcontract its rights or obligations under
this Agreement, either in whole or in part, without the prior written consent of
the other party, which shall not be unreasonably withheld, and any attempt to do
so shall be void and of no effect. An assignee of either party authorized under
this Agreement shall be bound by the terms of this Agreement and shall have all
of the rights and obligations of the assigning party set forth in this
Agreement. If any assignee shall fail to agree to be bound by all of the terms
and obligations of this Agreement, then such assignment shall be deemed null and
void and of no force or effect. Notwithstanding the foregoing, any consent to an
assignment may be conditioned upon an approval of the assignment by the NCAA.
13. MEDIATION AND ARBITRATION.
The parties agrees that any disputes arising hereunder that the parties
cannot resolve between themselves shall be addressed in the following manner:
13.1 First, the parties shall engage the services of a mediator through
the American Arbitration Association, which mediator must have a background or
training in computer law, computer software technology or Internet related
issues. The parties shall share the costs of the mediation equally. Unless the
parties agree otherwise, the
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mediation shall be in the city where the headquarters of the NCAA is located, at
a time reasonably agreeable to both parties. Both parties may be represented at
such mediation by attorneys, and each side shall have present a member of senior
management with full authority to bind said party to any resolution that may be
mediated.
13.2 Second, in the event mediation fails, any controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgement upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. Unless
the parties otherwise agree, the arbitration hearing shall be held in the city
where the headquarters of the NCAA is located. The parties, their
representatives, other participants and the mediator and/or arbitrator shall
hold the existence, content and result of any mediation or arbitration in
confidence unless otherwise prohibited by law.
14. MISCELLANEOUS.
14.1 This Agreement together with all exhibits and other related
documents that are incorporated herein by reference, embodies the entire
Agreement and except as otherwise contemplated herein and/or other agreements
between the parties, supersedes all prior agreements, written and oral, relating
to the subject matter hereof. This Agreement is in addition to that certain
Services Agreement between the parties and that certain Marketing Agreement
between the parties. In the event of a conflict between the provisions of the
main body of the Agreement and any attached exhibits, the Agreement shall take
precedence. Notwithstanding any contrary term herein, this Agreement shall be
subject to all terms and conditions of HCI's License.
14.2 Modifications and amendments to this Agreement, including any
exhibit or appendix hereto, shall be enforceable only if they are in writing and
are signed by authorized representatives of both parties.
14.3 No term or provision of this Agreement shall be deemed waived and no
breach excused unless such waiver or consent is in writing and signed by the
party claimed to have waived or consented.
14.4 Nothing contained in this Agreement shall be construed so as to
constitute either party as a partner or joint venturer or agent of the other
party, or to require either party to share profits, gains or ownership interest
in or from any property or activities.
14.5 The parties acknowledge that TC/3/ will perform its obligations
hereunder as an independent contractor. Subject to the terms hereof, the manner
and method of performing such obligations will be under TC/3/'s sole control and
discretion; HCI's sole interest is in the result of such services. It is also
expressly understood that TC/3/'s employees and agents are not HCI's employees
or agents, and have no authority to bind HCI by contract or otherwise.
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14.6 All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and will be deemed to have been
given if delivered by hand, prepaid telegram or mailed (registered or certified
mail, postage prepaid, return receipt requested, or any means of express mail
with confirmed delivery) as follows:
If to HCI, to:
W. James Host
Host Communications, Inc.
546 East Main Street
Lexington, Kentucky 40508
With copies to:
Marc S. Kidd
Host Communications, Inc.
12221 Merit Drive, Suite 1325
Dallas, Texas 75251
If to TC/3/, to:
Ezra Kucharz, CEO
TC/3/
133 Fayetteville Street
Sixth Floor
Raleigh, North Carolina 27601.
14.7 If any action at law or in equity is necessary to enforce the terms
of this Agreement, the prevailing party shall be entitled to reasonable attorney
fees, costs and expenses, in addition to any other relief to which it may be
entitled.
14.8 This Agreement will be governed by the laws of the Commonwealth of
Kentucky.
14.9 Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
14.10 Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
14.11 Without limitation upon other provisions of this Agreement, TC/3/
agrees that: (i) it will not attack the title of the NCAA in and to the NCAA
Marks and/or the
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Sports Web Site and Cybercasts, nor will it attack the validity of the license
granted hereunder; (ii) it will not knowingly harm, misuse or bring it to
disrepute the NCAA Marks nor the Sports Web Site nor Cybercasts; and (iii) it
will not create any expenses chargeable to HCI without the prior written
approval of HCI.
14.12 Upon any request by the NCAA, HCI may provide a copy of this
Agreement to such person.
14.13 This Agreement shall not be binding upon HCI unless and until it is
duly executed by its Chief Executive Officer or his designee.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed effective as of the date first written above.
HOST COMMUNICATIONS, INC.
By: ___________________________
Title: ___________________________
Date: ___________________________
TOTAL COLLEGE COMMUNICATIONS COMPANY, L.L.C.
By: __________________________
Title: __________________________
Date: __________________________
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<PAGE>
AMENDMENT
---------
THIS AMENDMENT (the "Amendment") is made and entered into effective as of
February 1, 1999 between HOST COMMUNICATIONS, INC. ("HCI") and TOTAL SPORTS,
INC. (f/k/a TOTAL COLLEGE COMMUNICATIONS COMPANY, L.L.C. and herein referred to
as "Total").
W I T N E S S E T H:
WHEREAS, the NCAA has granted HCI the exclusive rights to construct,
maintain and service an NCAA Merchandise Web Site (herein so called) to be
featured and included in www.finalfour.net under HCI's License with the NCAA
dated as of February 1, 1998, as amended (the "License"); and
WHEREAS, HCI and Total entered into that certain Web Site and Cybercasting
Agreement dated effective as of February 15, 1998, a copy of which is attached
hereto as Exhibit A and is incorporated herein by this reference (herein the
"Agreement"); and
WHEREAS, HCI and Total desire to amend the Agreement to permit Total to
create a Merchandise Web Site in order to market and sell officially licensed
NCAA products through the Internet; and
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged the parties, intending to be bound,
hereby agree as follows:
1. Paragraph 3 of the Agreement is hereby amended by the addition a new
subparagraph 3.6 as follows:
3.6 Subject to and in accordance with HCI's License, HCI
hereby grants to Total an exclusive world-wide license to
use the NCAA Marks to create and host the official NCAA
Merchandise Web Site in English on Total's Sports Web Server
or other Web Server designated by Total and approved by HCI
and the NCAA. Such Merchandise Web Site will: (i) only be
accessible by the general public through www.finalfour.net
or such other NCAA Sports Web Site hosted by Total pursuant
to the Agreement and approved by the NCAA; (ii) conform with
the quality and appearance of the Merchandise Web Site as
the same currently exists as of the commencement date of the
1999 Men's and Women's Division I Basketball Tournament; and
(iii) be (and all related advertising and promotion thereof
will be subject to the approval of HCI and the NCAA in
accordance with the Agreement. Total agrees that such
<PAGE>
Merchandise Web Site will only feature and offer merchandise
items which are officially licensed products of the NCAA
secured through NCAA merchandise licensees. Total will be
responsible for all costs and expenses to construct,
maintain and service the Merchandise Web Site, including,
without limitation all costs associated with the purchase,
sales and distribution of licensed merchandise offered to
the public through the Merchandise Web Site. During the term
of this Agreement, HCI shall not grant any party other than
Total with the right to create or host any "official" NCAA
merchandise web site in association with or using the NCAA
Marks. In the event of any termination or expiration of the
Agreement, Total shall promptly remove the Merchandise Web
Site from its Web Server. Neither HCI nor the NCAA shall
have any liability whatsoever from, and Total shall
indemnify and defend HCI and the NCAA from, any and all
claims arising from sales of licensed merchandise by Total
through the Merchandise Web Site, including, but not limited
to, claims of product liability.
2. Paragraph 4 of the Agreement is hereby amended by the addition of a
new sub-paragraph 4.5 as follows:
4.5 HCI agrees to cause the NCAA to include
www.finalfour.net, as a banner, during [*] public service
announcements (PSAs) to be aired during telecasts of the
1999 and 2000 Men's and Women's Division I Basketball
Tournament telecasts by CBS.
3. Paragraph 5 of the Agreement is hereby amended by the addition of a
new sub-paragraph 5.8 as follows:
5.8 In connection with the Merchandise Web Site, Total
agrees to pay to HCI a royalty of [*] percent ([*]%) of all
revenues collected by Total from items sold through the
Merchandise Web Site. Such royalties shall be based upon
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
retail prices for items sold through the Merchandise Web
Site. In addition to other payment requirements under the
Agreement, Total agrees to quarterly pay HCI all royalty
payments due from merchandise sold through the Merchandise
Web Site commencing on April 30, 1999 and continuing on
October 1, January 1 and July 1 of each calendar quarter
thereafter during the term of the Agreement.
Total agrees to maintain accurate and complete sales records
relating to the Merchandise Web Site in accordance with the
terms and condition of the Agreement, including,
subparagraphs 7.3 and 7.4.
4. All terms defined in the Agreement shall have the same meanings in
this Amendment. In all other respects the parties ratify and agree to be bound
by the remaining unchanged provisions of the Agreement. In the event of any
inconsistency between the Agreement and the terms relating to the Merchandise
Web Site under this Amendment, the terms of this Amendment shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the date first written above.
HOST COMMUNICATIONS, INC.
By: ________________________
Its: ________________________
Date: ________________________
TOTAL SPORTS, INC.
By: ________________________
Its: ________________________
Date: ________________________
<PAGE>
EXHIBIT 10.8
MLBE/TOTAL SPORTS TOTALCAST AGREEMENT - 1999-2001
-------------------------------------------------
This agreement ("Agreement"), dated as of April 1, 1999 (the "Effective
Date"), is by and between Major League Baseball Enterprises, Inc. ("MLBE"), on
its behalf and as agent for the Office of Commissioner of Baseball (the "BOC"),
the MAJOR LEAGUE BASEBALL Clubs (the "Clubs"), the American and National Leagues
of Professional Baseball Clubs (the "Leagues"), and MAJOR LEAGUE BASEBALL
Properties, Inc. ("MLBP") (MLBE together with the BOC, the Clubs, the Leagues,
and MLBP, are referred to herein as the "MAJOR LEAGUE BASEBALL Entities"), and
Total Sports Inc. ("Total Sports") (Total Sports together with MLBE are referred
to herein as the "Parties").
WHEREAS, the Parties agree that the BOC and the Clubs own all rights in
the Games (as defined below);
WHEREAS, the Parties agree that the BOC, MLBP, the Clubs and the Leagues
own all rights in the MAJOR LEAGUE BASEBALL Marks (as defined below);
WHEREAS, the Parties desire to make available over the Internet (as
defined below) real time and archival reports and simulations of the Games;
WHEREAS, Total Sports represents and warrants that: (i) it owns or is the
licensee of technology that enables it to provide abstract, graphical
representations of the action that takes place on a baseball field during a
Game, and that transmits, distributes, displays and perform such simulations
("Total Sports Technology"); and (ii) the Total Sports Technology can report
such Game action on a real-time and on an archival basis, through various media;
and
WHEREAS, Total Sports represents and warrants that it owns copyrights and
other proprietary rights for various works based on the Total Sports Technology
("Total Sports Copyrights").
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and the foregoing preambles, each of which is an essential
part of and included within this Agreement, the parties hereby agree as follows:
1. Term. This Agreement shall be effective as of the Effective Date and shall
continue through and including December 31, 2001 (the "Term"), unless
terminated earlier pursuant to Section 17. Notwithstanding the foregoing, in
the event that the appropriate MLB Entities cease to
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
authorize MLBE to grant the rights and assume the obligations under this
Agreement, this Agreement will immediately terminate, and MLBE will pay
Total Sports a pro-rated refund of any Rights Fee paid by Total Sports for
the Term.
2. Definitions. As used in this Agreement, the following terms shall have the
following meanings:
a. The term "Baseball Service" shall mean the production and delivery of
the Works that Total Sports makes available as "Totalcasts" on the Total Sports
Sites (as defined below).
b. The term "Baseball Works" shall mean any or all of the Works and the
"MAJOR LEAGUE BASEBALL" Marks (as defined below).
c. The term "Dynamic Sports Databases" shall mean compilations,
computations, and computer files created from the Encodings.
d. The term "Encodings" shall mean the accounts and descriptions of the
Games that are distributed through use of the Total Sports Technology.
e. The term "Games" shall mean, collectively, all MAJOR LEAGUE BASEBALL
games played during the Term or any Renewal Term, including all pre, regular,
and post season games, and the MAJOR LEAGUE BASEBALL ALL-STAR GAME and related
exhibitions.
f. The term "Hyperlink" shall mean the connection from one document on a
World Wide Web site that, when activated by a user, automatically accesses a
document on a different World Wide Web site.
g. The term "Interface Elements" shall mean all text (including phrases),
graphics, displays, animation, and audio and/or visual components of the Total
Sports Technology used to permit human perception of the Dynamic Sports
Databases and of a nature exemplified by the text, graphics, displays,
animation, and audio and visual components created by Total Sports and
transmitted over the Internet as part of the Baseball Service.
h. The Term "Internet" shall mean a global communications network
comprised of interconnected computer networks each using TCP/IP or other
standard network interconnection protocols as may be adopted from time to time,
which is used to transmit information that is directly or indirectly delivered
to a computer or other digital electronic device for display to an end-user,
whether via online browsers, offline browsers, hybrid browsers, such technology,
email, broadband, satellite, wireless or otherwise.
i. The term "MAJOR LEAGUE BASEBALL Marks" shall mean the names,
trademarks and service marks owned, controlled, first used and/or applied for in
and/or requested within the United States Patent and Trademark Office by each of
the following: (i) MLBP; (ii) the BOC;
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<PAGE>
and (iii) each of the Clubs. By way of example, MAJOR LEAGUE BASEBALL Marks
include, without limitation, the following: (i) the MAJOR LEAGUE BASEBALL All-
Star Game Marks;
(ii) the Division Series Marks; (iii) the League Championship Series Marks; (1v)
the World Series Marks; (v) the Grapefruit League Marks; and (vi) the Cactus
League Marks.
j. The term "Statistical Data" shall mean numerical information
determined by mathematical calculation from factual data that is based in whole
or in part upon the Games, including, but not limited to, scores, player batting
averages, and numbers of hits, runs and errors.
k. The term "Total Sports Sites" shall mean those World Wide Web sites
owned, operated and controlled by Total Sports.
l. The term "Works" shall mean the content, including without limitation,
the arrangement of Interface Elements, as determined by the Encodings, the
Statistical Data and the Dynamic Sports Databases, that Total Sports displays to
end users on its Total Sports Sites (as defined below) and that comprise the
Baseball Service (as defined below).
m. The term "World Wide Web" shall mean the universe of hypertext
documents linked together on the Internet via HyperText Transport Protocol.
3. Grant of Rights to Total Sports.
a. Subject to the terms and conditions set forth in this Agreement, MLBE
hereby grants to Total Sports a limited, non-exclusive, non-transferable and
worldwide license, and Total Sports hereby agrees, during the Term to use
Encodings and Statistical Data furnished either by MLBE, Total Sports itself, or
a third party source which must be approved in advance by MLBE, for the purpose
of creating the Dynamic Sports Databases and the Works for use on the Total
Sports Sites. Such approval by MLBE must not be unreasonably withheld. The
foregoing license to Total Sports shall include the right to reproduce the
Encodings and the Statistical Data, and to use, copy, transmit, and otherwise
distribute on the Total Sports Sites, and make derivative works of the Encodings
and the Statistical Data for the purpose of creating the Dynamic Sports
Databases and the Works for use on the Total Sports Sites, and shall also
include the right to publicly and privately perform and display the Encodings
and the Statistical Data on the Total Sports Sites as part of the Dynamic Sports
Databases, the Works and the Baseball Service. Any approval required by MLBE
under this Section 3.a. shall not be unreasonably withheld, and MLBE shall use
reasonable efforts to respond to such request for approval within ten (10)
business days of receipt thereof. If MLBE has not responded within such time
period, the request for approval shall be deemed granted.
b. Subject to the terms and conditions set forth in this Agreement, MLBE
hereby grants to Total Sports a limited, non-exclusive, non-transferable and
worldwide license, and Total
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<PAGE>
Sports hereby agrees, during the Term to transmit, distribute and publicly
display the Works on the Total Sports Sites through the Baseball Service, at any
time during the Term, including on a real-time basis (that is, contemporaneously
or immediately following the playing of each Game).
c. Subject to the terms and conditions set forth in this Agreement, MLBE
hereby grants to Total Sports a limited, non-exclusive, non-transferable and
worldwide license, and Total Sports agrees, to display on the Baseball Service
on the Total Sports Sites during the Tenn, in a manner approved in advance by
MLBE, the MAJOR LEAGUE BASEBALL Marks. Such license shall be subject to the
terms of Section 15 below.
d. All rights in the Games not expressly granted to Total Sports are
reserved by MLBE. The licenses granted herein specifically exclude, without
limitation, any rights to: (i) telecast or broadcast any MAJOR LEAGUE BASEBALL
game using any technology, including without limitation, over-the-air television
and radio, cable television, MMDS, MATV, SMATV, TVRO, DBS, interactive
television, pay television or advanced television; (ii) transmit, retransmit,
distribute, perform, display or reproduce any telecast or broadcast of any MAJOR
LEAGUE BASEBALL game; and (iii) transmit, retransmit, distribute, display or
reproduce any photographs, video clips or audio information concerning and/or
originating from any MAJOR LEAGUE BASEBALL game. Total Sports acknowledges that
such rights may have been or may be granted to others on an exclusive or non-
exclusive basis.
4. Creation of Encodings. Total Sports may create the Encodings or have the
Encodings created by a third party from the Games for use by Total Sports in
accordance with the grants of license in this Agreement. Such Encodings shall be
subject to the license granted in Section 3 herein.
5. Distribution.
a. Total Sports shall, at its sole cost and expense, make the Baseball
Service accessible only from the Total Sports Sites. Total Sports shall not
authorize or allow the Baseball Service to be accessible from or through any
World Wide Web site other than any Total Sports Site by any means, including
Hyperlinks, pop-up windows, framing, importing or harvesting, except as follows:
(i) Total Sports shall agree in writing to authorize any third party
("Authorized Linking Party") to include in any World Wide Web site the
Authorized Linking Party owns, operates and controls ("Authorized Site"),
a Hyperlink in the form annexed hereto as Exhibit A which shall link from
such Authorized Site to the first page of the Total Sports Sites
displaying the Baseball Service ("Authorized Hyperlink");
(ii) Total Sports shall not enter into any agreement with any prospective
Authorized Linking Party without first obtaining the written approval of
MLBE with respect to the identity of every such prospective Authorized
Linking Party and the
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<PAGE>
prospective Authorized Site which shall include the prospective
Authorized Hyperlink. MLBE shall use reasonable efforts to respond to any
request for approval under this Section 5.a(ii) (which shall be submitted
in writing by Total Sports pursuant to the notice mechanism described in
Section 27) within fourteen (14) business days of receipt thereof. If
MLBE has not responded to such written request within fourteen (14)
business days of receipt of such request for approval, the request for
approval shall be deemed granted;
(iii) Total Sports shall cause each Authorized Linking Party to agree in
writing that it shall not make any use of any MAJOR LEAGUE BASEBALL
Entity Mark on its Authorized Sites distributing Authorized Hyperlinks
other than for editorial purposes;
(iv) Total Sports shall cause each Authorized Linking Party to agree in
writing that it shall not permit the Baseball Service to be accessible
from or through its Authorized Site(s) or any other World Wide Web site
such Authorized Linking Party owns, controls or operates by any means,
including Hyperlinks, pop-up windows, framing, importing or harvesting,
except through use of the Authorized Hyperlink as set forth in Section
5.a(i); and
(v) Total Sports shall cause all Authorized Linking Parties to comply with
the terms and conditions set forth in Sections 5.a(iii) and 5.a(iv), and
if any Authorized Linking Party breaches any such term or condition,
Total Sports shall immediately terminate such Authorizing Linking Party's
agreement with Total Sports as set forth in Section 5.a(i), and
immediately notify MLBE in writing of such termination.
b. Total Sports shall not display any advertisement, sponsorship or
promotion on any page of the Total Sports Sites displaying the Baseball Service
for any of the following goods or services: (i) gaming or gambling; (ii)
religion; (iii) spirits; (iv) tobacco, including chewing and smokeless tobacco;
(v) adult-oriented; or (vi) any substance that claims to enhance athletic
performance.
c. Total Sports shall not display any promotion or sponsorship on any
page of the Total Sports Sites displaying the Baseball Service without first
obtaining the written approval of MLBE. MLBE shall use reasonable efforts to
respond to any request for approval under this Section 5.c (which shall be
submitted in writing by Total Sports pursuant to the notice mechanism described
in Section 27) within fourteen (14) business days of receipt thereof. If MLBE
has not responded within such fourteen ( 14) business days of receipt of such
request for approval, the request for approval shall be deemed granted.
d. Total Sports may, at its discretion, require users to pay a fee,
determined by Total Sports, for access to the Baseball Service. Such fee may be
in the form of a daily, monthly or annual subscription to the Baseball Service,
on an event basis, on a time basis, or otherwise as
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<PAGE>
Total Sports may determine in its sole discretion ("Subscriptions"). Upon MLBE's
request. Total Sports shall provide to it free of charge the names, postal
mailing addresses and other demographic information, to the extent such
information is available to Total Sports and may be lawfully disclosed, of users
who acquire such subscriptions. No such fee shall be charged to the MAJOR LEAGUE
BASEBALL Entities for access to the Baseball Service. Each of the MAJOR LEAGUE
BASEBALL Entities shall be entitled to use such information at its sole
discretion.
e. Total Sports shall electronically register and record each time a
browser on the Internet requests any page on the Total Sports Sites containing
the Baseball Service, and provide MLBE of a current copy of such records,
certified as accurate by an officer of Total Sports, from time to time at MLBE's
request.
f. Total Sports shall notify MLBE about any unauthorized use or access of
the Baseball Service immediately after it becomes aware of such activity.
6. Compensation.
a. Total Sports shall pay to MLBE $[ * ] by no later than the Effective
Date ("Settlement Fee"). In exchange for the timely receipt of the Settlement
Fee, MLBE shall release Total Sports from all claims enumerated in MLBE's letter
to Total Sports dated February 10, 1999 (the "Letter"), a copy of which is
annexed hereto as Exhibit B. Total Sports acknowledges that MLBE's release is
based upon facts now known to it about the subject matter of the Letter, which
facts Total Sports represents and warrants are complete and accurate. In the
event that Total Sports breaches any term of this Agreement, as a partial remedy
in addition and without prejudice to any other legal or equitable remedy
available to any MLB Entity, the release of Total Sports by MLBE as set forth in
this Section 6.a shall be null and void.
b. Total Sports shall pay to MLBE by check the following fees
(collectively, the "Rights Fees") as follows:
(i) $[*] for the year 1999, by no later than the Effective Date;
(ii) $[*] for the year 2000, by no later than June 1, 2000; and
(iii) $[*] for the year 2001 by no later than June 1, 2001.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request of confidential treatment.
6
<PAGE>
c. Total Sports shall pay to MLBE an additional percentage of (i) the
amount that Total Sports bills third parties for Subscriptions; and (ii) all
other fees and revenues, including advertising, promotion and sponsorship
revenues, related to the Baseball Service (collectively, "Percentage
Compensation") as follows:
(i) [*] percent ([*]%) for the year 1999;
(ii) [*] percent ([*]%) for the year 2000; and
(iii) [*] percent ([*]%) for the year 2001.
Percentage Compensation must be paid for each calendar quarter of the Term, with
each such payment due within fifteen (15) days of the end of each such quarter.
7. Periodic Statements.
a. Within thirty (30) days of the end of each calendar quarter of the
Term, Total Sports shall furnish to MLBE complete and accurate statements (the
"Periodic Statements"), certified to be accurate by an officer of Total Sports,
setting forth information on which the calculation of Percentage Compensation
for such calendar quarter is based, including, but not limited to, in respect of
such calendar quarter the amounts attributable to billings to third parties in
respect of each of Subscriptions and all other fees and revenues, including
advertising, promotion and sponsorships, related to the Baseball Service. Total
Sports shall furnish with each Periodic Statement sufficient background
information to make such statements intelligible to MLBE.
b. Total Sports shall furnish the Periodic Statements to MLBE regardless
of whether any Percentage Compensation is shown to be due MLBE during the
calendar quarters covered by such statements.
c. Any late payments of any compensation due to MLBE pursuant to this
Agreement shall require Total Sports to pay to MLBE, in addition to the amounts
due on such payments, interest on such amounts at one percent (I%) or the
highest prime lending rate of Chase Manhattan Bank per month, whichever is
greater on a per month basis, for the period of the delinquency, in addition and
without prejudice to any other rights of MLBE in connection with such
delinquency.
d. Receipt or acceptance by MLBE of any of the statements, including the
Periodic Statements, ftirnished pursuant to this Agreement or of any sums paid
hereunder shall not preclude MLBE from questioning the correctness thereof at
any time, including pursuant to
Portions of this exhibitvmarked by [*] have been omitted pursuant to
a request for confidential treatment.
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<PAGE>
MLBE's right of audit pursuant to Section 8, and in the event that any
inconsistencies or mistakes are discovered in such statements or payments, they
shall immediately be rectified and the appropriate payments made by Total
Sports. Late payment penalties, if any, shall be made pursuant to Section 7.
8. Books and Records.
a. Total Sports shall keep, maintain and preserve in its principal place
of business for at least three (3) years following termination, cancellation or
expiration of this Agreement complete and accurate records and accounts covering
all transactions relating to this Agreement (including without limitation any
licenses granted hereunder) and pertaining to the various items required to be
shown on the Periodic Statements, including, without limitation, invoices,
correspondence and banking, financial and other records in Total Sports'
possession or under its control. Such records and accounts shall be available
for inspection and audit (and copying at the expense of MLBE) by MLBE, or its
representatives, at any time or times during or after the Term during reasonable
business hours and upon reasonable notice by MLBE or its representatives. Total
Sports shall not cause or permit any interference with MLBE or its
representatives in the performance of their duties of inspection and audit.
b. The exercise by MLBE, in whole or in part or at any time or times, of
the right to audit records and accounts shall be without prejudice and in
addition to any rights or remedies of MLBE and shall not estop or prevent MLBE
from thereafter disputing the accuracy of any such statement or payment.
c. If pursuant to its right hereunder to audit and inspect MLBE causes an
audit and inspection to be instituted that thereafter discloses a deficiency
between the amount found to be due to MLBE and the amount actually paid or
credited to MLBE, then Total Sports shall be responsible for payment of the
entire deficiency, together with interest thereon at the then current prime rate
of Chase Manhattan Bank or its successor from the date such amount became due
until the date of payment. If the amount of such deficiency is three percent
(3%) or more of the amount found to be due to MLBE, then Total Sports shall also
pay to MLBE the costs and expenses of such audit and inspection.
9. Indemnification.
a. MLBE shall indemnify, defend and hold harmless Total Sports, and its
owners, principals, officers, employees, agents and representatives from any
claims, liabilities, damages and expenses (including attorneys' fees and
expenses) arising from or related to any: (i) use by Total Sports of the MAJOR
LEAGUE BASEBALL Marks that is authorized by this Agreement or any use by Total
Sports of the MAJOR LEAGUE BASEBALL Marks used in the MAJOR LEAGUE BASEBALL
Promotions authorized by Section 16 below; or (ii) breach by MLBE of this
Agreement, or of any representation, warranty, or covenant made by it herein.
b. Total Sports shall indemnify, defend and hold harmless the MAJOR
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LEAGUE BASEBALL Entities and their respective general and limited partners,
shareholders, officers, employees, agents and representatives from any claims,
liabilities, damages and expenses (including attorneys' fees and expenses)
arising from or related to any: (i) matter contained in the Encodings, Dynamic
Sports Databases, Interface Elements, Statistical Data, Works or Baseball
Service which allegedly or actually infringes or violates any third party
patent, process, method, device, technology, know-how, trade secret, copyright,
trademark, right of publicity or privacy, moral right or other proprietary
right, or which is defamatory or obscene or known to be inaccurate, misleading
or otherwise in violation of law; (ii) alleged defects or deficiencies in the
Baseball Service, or false advertising, fraud, misrepresentation or other
claimsrelated to the Baseball Service not involving a claim of right to the
Games; (iii) unauthorized use of the Baseball Works; (iv) breach of any term,
representation or warranty in this Agreement by Total Sports; (v) libel or
slander against, or violation or 1111'sappropriation of any other right of any
third party; or (vi) agreements or alleged agreements made or entered into by
Total Sports to effectuate the terms of this Agreement.
10. Insurance.
a. During the Term and for a period of three (3) years thereafter, Total
Sports shall maintain comprehensive general liability insurance from any
insurance company acceptable to MLBE, providing adequate protection for the
MAJOR LEAGUE BASEBALL Entities against any claims or suits arising out of any of
the indemnities described in Section 9.b above for which such insurer is able to
provide insurance, with minimum limits of five million dollars ($5,000,000.00)
for each occurrence or Total Sports' standard insurance policy limits, whichever
is greater, and shall have each of the MAJOR LEAGUE BASEBALL Entities designated
as additional insured parties therein.
b. During the Term and for a period of three (3) years thereafter, Total
Sports shall maintain advertising liability insurance from an insurance company
acceptable to MLBE providing adequate protection for the MAJOR LEAGUE BASEBALL
Entities with minimum limits of five million dollars ($5,000,000) for each
occurrence, which insurance shall have each of the MAJOR LEAGUE BASEBALL
Entities designated as additional insured parties therein.
c. The insurance policies required by Sections 10.a. and 10.b. shall
provide that they may not be modified, terminated or cancelled unless MLBE is
given thirty (30) days prior written notice by the respective insurance
carriers. Certificates of such insurance issued by Total Sports' insurance
carriers shall be provided to MLBE prior to or on the Effective Date and
subsequently, prior to the renewal of such insurance policies.
11. Representations, Warranties and Covenants of Total Sports. Total Sports
represents, warrants, and covenants to MLBE as follows:
a. It has the authority to use and to authorize others to use any
Encodings that are created or developed by a third party or in which a third
party otherwise has rights.
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b. It shall not use the Baseball Works in any way that creates or is
likely to create the impression that any of the MAJOR LEAGUE BASEBALL Entities
endorses any Internet site or service with which such MAJOR LEAGUE BASEBALL
Entity is not directly associated, except as licensed hereunder as to the Total
Sports Sites and the Baseball Service.
c. It shall conduct its business in full compliance with all applicable
laws and regulations.
d. It shall not make and has not made any unauthorized use of the
Baseball Works.
e. It shall display the Baseball Works in connection with the Baseball
Service only and shall not display the Baseball Works in any advertisements.
f. It shall only present or depict the Baseball Works on the Total Sports
Sites pursuant to Section 15 of this Agreement.
g. It shall display prominently within the body of the first page of the
Total Sports Sites that displays the Baseball Service the following credit:
"Major League Baseball(R) trademarks, service marks and copyrights, including
the descriptions and accounts of any Major League Baseball games, are used with
the permission of the Office of the Commissioner of Baseball and Major League
Baseball Enterprises, Inc. However, the information and statistics contained on
this Sites have not been provided by any Major League Baseball-related entity.
No further retransmission of Total Sports' coverage of Major League Baseball
games may be made without the express written consent of Major League Baseball
Enterprises."
h. It shall not contest the validity or scope of the MAJOR LEAGUE
BASEBALL Entities' exclusive property rights in the Games, including, without
limitation, the exclusive right to distribute live or real-time play-by-play
accounts and descriptions of the Games in any medium, including the Internet.
i. It shall not do anything in connection with the Total Sports Sites or
the Baseball Service that will bring the Baseball Works, the MAJOR LEAGUE
BASEBALL Entities, or the MAJOR LEAGUE BASEBALL Marks into disrepute or in any
manner affect the validity or scope of the MAJOR LEAGUE BASEBALL Marks.
12. Representations and Warranties of MLBE. MLBE hereby represents, warrants,
and covenants to Total Sports that it has the full authority to grant the
licenses herein pursuant to the terms of this Agreement, including the licenses
for Total Sports to use the MAJOR LEAGUE BASEBALL Promotions as set forth in
Section 16 below.
10
<PAGE>
13. Mutual Representations and Warranties. Each Party hereby represents and
warrants to the other that: (i) it is duly incorporated in the United States;
(ii) it has full power and authority to execute and deliver this Agreement and
perform its obligations hereunder; (iii) it has duly executed and delivered this
Agreement; (iv) this Agreement constitutes the legal, valid and binding
obligation of it, enforceable against it in accordance with the terms hereof,
and (v) its execution, delivery, and performance of this Agreement will not
conflict with, result in the breach of, or constitute a default under any
arrangement or agreement to which it is a party or by which it is bound,
provided, however, that to the extent that the execution, delivery, or
performance of this Agreement, or the consummation of the transactions
contemplated hereby, results in any conflict with, breach of, or default under
any television or radio broadcast rights agreements entered into by the BOC or
any of the Clubs and any third party prior to the Effective Date of this
Agreement (each such third party, a "Broadcast Rightsholder"), (A) the BOC and
any such Club shall waive and shall endeavor to cause such Broadcast
Rightsholder to waive, any such conflict, breach, or default, or, if such
Broadcast Rightsholder does not provide such waiver, (B) each of the Parties
hereto shall (i) waive its rights pursuant to this Agreement to the extent
required to eliminate such conflict, breach, or default or (ii) be entitled to
terminate this Agreement, provided, further, however, that the remedies set
forth in the previous proviso shall be the sole remedies available to Total
Sports in the event of any such conflict, breach of default.
14. Transfer, Ownership and Acknowledgement of Rights.
a. The Parties intend that the Encodings, Baseball Works and all derivative
works based on them created, displayed or performed by Total Sports during the
Term, shall be considered works made for hire under applicable law specifically
ordered or commissioned for use by the appropriate MAJOR LEAGUE BASEBALL
Entities, which shall be the sole and exclusive owners for all purposes of the
copyrights and all other proprietary rights in the Encodings, Baseball Works and
all derivative works based on them; therefore, the right of termination provided
by 17 U.S.C. (S) 203 shall not apply with respect to the Encodings, Baseball
Works and all derivative works based on them. If, however, any of the Encodings,
Baseball Works or any derivative works based on them is deemed not to be a work
made for hire by a court of competent jurisdiction, in a final and nonappealable
order, or to the extent that Total Sports otherwise has proprietary rights with
respect to any of them, Total Sports hereby irrevocably assigns to the
appropriate MAJOR LEAGUE BASEBALL Entities any and all of Total Sports'
worldwide copyrights and other proprietary rights in such Encodings, Baseball
Works and all derivative works based on them, and any and all claims, demands,
causes of action arising out of or related to infringements of the copyrights or
other proprietary rights in the Encodings, Baseball Works all derivative works
based on them that may occur at any time. No rights are reserved by Total
Sports, except Total Sports reserves the right to use the Works after the Term
without consent of the appropriate MAJOR LEAGUE BASEBALL Entities to the extent
it may legally make such use under applicable law without such consent. Such
assignment and transfer shall be in perpetuity or for the longest period
otherwise permitted by law, without the necessity of further consideration. The
appropriate MAJOR LEAGUE BASEBALL Entities shall have the sole right to bring
enforcement actions for infringement of any and all rights in the Encodings,
11
<PAGE>
Baseball Works and all derivative works based on them, and may make all
decisions in their sole discretion regarding the conduct of any such action and
any settlement thereof. Upon the appropriate MAJOR LEAGUE BASEBALL Entities'
request, Total Sports shall sign and deliver any assignments or other documents
necessary and otherwise assist the appropriate MAJOR LEAGUE BASEBALL Entities in
obtaining, maintaining, perfecting, defending, enforcing or otherwise protecting
the appropriate MAJOR LEAGUE BASEBALL Entities' rights hereunder.
b. MLBE shall have the right to control and to supervise the creation of
the Baseball Works, as may be mutually agreed to by the parties from time to
time.
c. Without limiting the generality of Sections 14.a. and 14.b. above and
subject to Total Sports' reservation of rights in Section 14.a above, upon the
expiration of this Agreement, the appropriate MAJOR LEAGUE BASEBALL Entities
alone shall own all worldwide copyrights and other proprietary rights in the
Encodings and Baseball Works that will or do exist or may be secured under the
laws now or hereinafter in effect in the United States of America, Canada or any
other country or jurisdiction, including without limitation, the exclusive
rights to reproduce, display, distribute, perform and otherwise use and exploit
the Encodings and Baseball Works and any derivative works based on them in any
form or media, now known or later developed, in any language throughout the
world. Notwithstanding the foregoing, at all times during and subsequent to the
Term, Total Sports reserves all its rights in and to the Total Sports
Technology.
d. Total Sports acknowledges that the MAJOR LEAGUE BASEBALL Entities alone
own all right, title and interest in and to the MAJOR LEAGUE BASEBALL Marks and
the goodwill associated therewith, and that all use of these MAJOR LEAGUE
BASEBALL Marks by Total Sports shall be on behalf of, and inure to the benefit
of, such Entities. Total Sports agrees not to do or cause to be done anything
that will adversely affect the MAJOR LEAGUE BASEBALL Entities' rights in the
MAJOR LEAGUE BASEBALL Marks or that shall be inconsistent with the MAJOR LEAGUE
BASEBALL Entities' ownership of such MAJOR LEAGUE BASEBALL Marks, including
without limitation applying to register the Marks or challenging the MAJOR
LEAGUE BASEBALL Entities' ownership of, or the validity of, such MAJOR LEAGUE
BASEBALL Marks.
e. Notwithstanding anything to the contrary in this Agreement, Total Sports
acknowledges the MAJOR LEAGUE BASEBALL Entities alone shall, both during and
following the Term, own all worldwide copyright and other proprietary rights in
the Games, including the exclusive right to distribute live or real-time play-
by-play accounts and descriptions of the Games in any medium, including the
Internet.
15. Approvals and Quality Control. Any use by Total Sports of the Baseball
Works, including, without limitation, its use of the MAJOR LEAGUE BASEBALL
Marks, shall be subject to the following:
a. The use of the MAJOR LEAGUE BASEBALL Marks pursuant to this Agreement
shall conform to the MAJOR LEAGUE BASEBALL Official Style Guide, a current copy
of
12
<PAGE>
which MLBE shall provide to Total Sports. Each such use of the MAJOR LEAGUE
BASEBALL Marks shall be subject to the prior written approval of MLBE in respect
of quality, style, and content.
b. All other content on the Total Sports Sites displayed in connection with
the Baseball Works other than that described in subsections a. and b. of this
Section 15, shall be subject to the prior written approval of MLBE in respect of
quality, style, and content. Total Sports shall submit to MLBE for such
approval: (i) in respect of information that is subject to updating on a
continuous basis, including, but not limited to, schedules and statistics,
representative depictions of the manner in which such information shall be
presented on the Total Sports Sites; and (ii) in respect of other MAJOR LEAGUE
BASEBALL content, including, but not limited to third-party, advertisements,
depictions of such content as it shall appear on the Total Sports Sites.
c. Any approval required by MLBE under this Section 15 shall not be
unreasonably withheld, and MLBE shall use reasonable efforts to respond to such
request for approval within ten (10) business days of receipt thereof. If MLBE
has not responded within such time period, the request for approval shall be
deemed granted.
d. Pursuant to Section 15 of this Agreement, MLBE approves Total Sport's
proposed uses of the MAJOR LEAGUE BASEBALL Marks in connection with the Baseball
Service as set forth in Exhibit C annexed hereto.
16. Promotional/Commercial Rights. MAJOR LEAGUE BASEBALL Promotions. Total
Sports shall establish as soon as practical after execution of this Agreement
and maintain during the Term, at Total Sports' sole cost and expense and in the
manner approved by MLBE including, without limitation, as to style and content,
permanent content areas on the Total Sports Sites that must present the
following information, updated as necessary: (i) national television broadcast
schedules of the Games; (ii) material submitted by MLBE promoting MAJOR LEAGUE
BASEBALL programming other than that set forth in clause (i) above; and (iii)
material submitted by MLBE promoting MAJOR LEAGUE BASEBALL products and
services, other than that set forth in clauses (i) and (ii) above. Total Sports
shall, at its own sole cost and expense, obtain any and all rights and approvals
necessary, including licenses, waivers, releases, and regulatory approvals, to
carryout its obligations under this Section 16. Any approval required by MLBE
under this Section 16 shall not be unreasonably withheld, and MLBE shall use
reasonable efforts to respond to such request for approval within ten (10)
business days of receipt thereof. If MLBE has not responded within such time
period, the request for approval shall be deemed granted.
17. Termination.
a. Either Party shall have the right to terminate this Agreement upon
written notice to the other Party, without prejudice to any rights that it may
have in law, in equity, or otherwise, if the other Party shall cause a Default
(as defined below) to occur. For purposes of this Agreement, a "Default" shall
occur upon the following events:
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<PAGE>
(i) a breach by MLBE of any term in this Agreement or failure by MLBE
otherwise to comply with or to perform any term of this Agreement
and continuance of such failure for a reasonable period under the
circumstances, but in no event more than ten (10) business days,
after Total Sports provides MLBE with written notice of such alleged
breach or failure;
(ii) a Party becomes insolvent, is unable to pay its debts as they
mature, or is the subject of a petition in bankruptcy, whether
voluntary or involuntary, or of any other proceeding under
bankruptcy, insolvency, or similar laws; or is named in, or its
property is the subject of, a suit for the appointment of a
receiver; or is dissolved or liquidated;
(iii) any representation or warranty made by a Party is breached or is
false or misleading in any respect; or
(iv) a breach by Total Sports of any term in this Agreement or failure by
Total Sports otherwise to comply with or to perform any term of this
Agreement.
b. Upon receipt by any Party of a written notice of termination, the
Parties shall immediately discontinue the performance of their respective
obligations pursuant to this Agreement, provided that termination of this
Agreement shall not relieve the Party causing a Default of any obligation
accruing in respect of this Agreement prior to such termination including
without limitation any payment obligations hereunder.
c. Each of the Parties agrees that, in addition to, and without limiting,
any other remedy or right that each Party may have at law or in equity, each
Party shall have the right to seek an injunction or restraining order against
another Party's failure to comply with or to perform any provision of this
Agreement.
18. No Partnership. Nothing contained in this Agreement is intended or shall be
construed to place the Parties in the relationship of partners, joint venturers,
or agents. Notwithstanding anything contained herein, neither any of the Parties
nor any of their respective representatives, agents, or subcontractors, or their
respective officers, directors or employees shall be considered or treated as
agents or employees of any of the other Parties for any purpose, including, but
not limited to, any of the following: common law master and servant or principal
and agent liability, worker's compensation; federal or state employee laws or
regulations; social security laws or regulations; or affirmative action, pension
or disability laws or regulations.
19. Confidentiality.
a. Each of the Parties shall treat as confidential all Confidential
Information (as defined below) of the other Party, provided that if any of the
Parties becomes legally compelled to
14
<PAGE>
disclose any Confidential Information, it shall promptly notify the Party to
which such Confidential Information is proprietary and such Party may seek a
protective order or other appropriate remedy and/or waive compliance with this
Section, and provided, further, however, that such Confidential Information
shall at all times remain proprietary to such Party regardless of any such
disclosure. For purposes of this Agreement, "Confidential Information" shall
mean:
(i) the amount of the Settlement Fee set forth in Section 6.a, the amount
of the Rights Fee set forth in Section 6.b and the amount of
Percentage Compensation set forth in Section 6.c of this Agreement;
and (ii) all records, data or information received by any of the
Parties from each other in the performance of this Agreement and
designated orally or in writing as confidential upon disclosure,
including, but not limited to, all proprietary information relating to
such other Party or any MAJOR LEAGUE BASEBALL Entity's business,
technology, or internal operations, other than information: (i) that
is publicly known or available; (ii) approved in advance for public
disclosure by the furnishing Party; (iii) received by the receiving
Party from a third party without obligation of confidentiality; (iv)
known to the receiving Party prior to receipt thereof from the
disclosing Party; or (v) independently developed by the receiving
Party.
b. None of the Parties shall use any Confidential Information regarding any
other Party outside the scope of the performance of its obligations pursuant to
this Agreement.
c. Each of the Parties may disseminate Confidential Information only to its
employees, agents, and representatives only on a "need-to-know" basis and shall
cause each of its employees, agents, and representatives who has access to any
Confidential Information to comply with the terms and provisions of this Section
19 in the same manner as it is bound by this Section 19, provided that such
Party shall remain responsible for the actions and disclosures of its employees,
agents, and representatives.
d. Notwithstanding anything to the contrary in this Section 19, the
provisions of this Section 19 shall not apply to any sharing or transfer of any
information, including without limitation to any Confidential Information, among
MLBP, MLBE and the BOC.
e. Each of the Parties shall promptly return to each other Party all
documents, written materials and other tangible property, including copies
thereof, containing any Confidential Information or otherwise belonging to each
other Party, and shall promptly destroy all information not reasonably
returnable, including but not limited to computer files and digital information
contained in computer systems or on storage media, upon the earlier to occur of
such other Party's request or the termination or expiration of this Agreement.
f. Each of the Parties acknowledges that any breach of this Section 19
shall cause irreparable injury for which there would not be an adequate remedy
at law. In the event of such
15
<PAGE>
breach, the injured Party shall be entitled to injunctive relief in addition to
any other remedies it may have at law or in equity.
g. None of the Parties shall under any circumstances remove any records,
data or information from the premises of any other Party without the prior
consent of such other Party.
20. Assignment. None of the Parties may assign any of its rights or delegate
any duties or obligations under this Agreement to another individual or entity
without the written consent of the other Parties, provided that MLBE may, with
notice to Total Sports, assign such rights and delegate such duties or
obligations to any of the MAJOR LEAGUE BASEBALL Entities or their wholly owned
subsidiaries, and provided, further, that Total Sports' rights, duties and
obligations may be assigned and delegated by sale or transfer of all or
substantially all of the assets of the business to which such rights, duties and
obligations pertain. This Agreement shall inure to the benefit of each of the
Parties' respective assigns, successors, and affiliates.
21. Integration. This Agreement constitutes the entire agreement and
understanding between the Parties and cancels, terminates, and supersedes any
prior written or oral agreement or understanding between the Parties relating to
the subject matter hereof.
22. Choice of Law; Jurisdiction. This Agreement shall be governed by the laws
of the State of New York applicable to contracts entered into and performed
exclusively within that State. The United States District Court for the Southern
District of New York and the Supreme Court of the State of New York, sitting in
New York County, shall be the exclusive jurisdictions and venues for any dispute
arising directly or indirectly from the relationship created or the transactions
contemplated by this Agreement. Each of the Parties consents to the exclusive
jurisdiction and venue of any such court and waives any argument that any such
court does not have jurisdiction over such Party or such dispute or that venue
in any such forum is not appropriate or convenient. In the event that any of the
Parties commences any action against any other Party in another jurisdiction or
venue respect of any such dispute, such other Party shall be entitled, at
option, to have the action transferred to one of the jurisdictions and venues
described in this Section 22, or if such transfer cannot be accomplished under
applicable law, to have such action dismissed without prejudice.
23. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be invalid or unenforceable under
applicable law, such provision shall be ineffective to the extent of such
unenforceability or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All obligations and
rights of the Parties expressed herein shall be in addition to, and not in
limitation of, those provided by applicable law.
24. No Waiver. No failure or delay on the part of any of the Parties in the
exercise of any right, power, or remedy under this Agreement shall operate as a
waiver by such Party thereof, nor shall
16
<PAGE>
any single or partial exercise by any of the Parties of any right, power, or
remedy preclude other or further exercise thereof by such Party, or such Party's
exercise of any other right, power, or remedy, provided that in no event shall
any of the Parties be liable for any consequential, punitive, special, or
indirect damages of any kind. No waiver or modification of this Agreement or of
any provision herein, including this Section, shall be valid unless it is in
writing and duly executed by the Party charged with it, and no evidence of any
waiver or modification shall be offered or received in evidence in any
proceeding, arbitration, or litigation between the Parties arising out of
affecting this Agreement, or the rights or obligations of any of the Parties
under it, unless such waiver or modification is in writing and duly executed as
prescribed above.
25. Headings. The headings contained in this Agreement are for convenience only
and shall not be construed as an interpretation of any of the language contained
herein.
26. Survival. The respective obligations of the Parties under this Agreement
that by their nature would continue beyond the termination, cancellation or
expiration of this Agreement, including but not limited to representations,
warranties, indemnities, insurance, payment of fees, confidentiality,
obligations imposed on Total Sports with respect to the MAJOR LEAGUE BASEBALL
Entities' copyrights, trademarks and other proprietary rights in the Baseball
Works under Sections 14 and 15, and acknowledgements of rights under Section 14,
shall survive its termination, cancellation or expiration.
27. Notices. Any notice under this Agreement will be considered given when
delivered in writing: (i) personally; (ii) by facsimile, but only if a copy of
transmittal confirmation is retained; or (iii) five business days after it is
mailed by recognized courier service or registered or certified mail, return
receipt requested, to the appropriate Party at the following addresses (or at
such other address as either Party may specify by notice to the other):
To MLBE:
--------
Major League Baseball Enterprises, Inc.
245 Park Avenue
New York, NY 10167
Attn: Ethan G. Orlinsky, Esq., General Counsel
and Corporate Secretary
Tel: (212) 931-7973
Fax: (212) 949-5697
With a Copy to:
---------------
Major League Baseball Enterprises, Inc.
245 Park Avenue
New York, NY 10167
Attn: Alex Kam, Director of New Media
Tel: (212) 931-7990
17
<PAGE>
Fax: (212) 949-5794
To Total Sports:
----------------
Total Sports Inc.
133 Fayetteville Street Mall, 6th Floor
Raleigh, NC 27601
Tel: (919) 832-8926
Fax: (919) 832-8927
28. Exhibits. Exhibits A, B and C annexed hereto are incorporated into and made
part of this Agreement.
29. Prior Agreement. The Agreement between MLBE and Total Sports dated September
11, 1990, shall be hereby terminated.
30. Total Sports shall not communicate with any MLB Entity concerning (i) this
Agreement, (ii) the Baseball Service, or (iii) any request to obtain any
credential for any Game with first having such communication approved by Total
Sports' President. Nothing in this Agreement shall be construed to obligate any
MLB Entity to procure any ticket or credential for any Game for Total Sports.
31. Notwithstanding any term to the contrary in this Agreement, this Agreement
shall in all respects be subordinate to, and shall not prevent the issuance,
entering into, or amendment of any of the following, each as may be issued,
entered into, or amended from time to time: any present or future agreements or
arrangements entered into between and/or among the Office of the Commissioner of
Baseball, the American and/or National Leagues of Professional Baseball Clubs
and/or their constituent clubs, Major League Baseball Properties, Inc., Major
League Baseball Enterprises, Inc., Major League Baseball International, Inc.,
including the Website Guidelines between Major League Baseball and the Clubs,
and any agreement or arrangement that is amended by them or entered into based
on authority granted in such agreements.
32. Execution. This Agreement shall be binding upon the parties upon execution.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
MAJOR LEAGUE BASEBALL ENTERPRISES, INC.
18
<PAGE>
By: ___________________________________
Name: Ethan G. Orlinsky
Title: Corporate Secretary
TOTAL SPORTS INC.
By: ___________________________________
Name: George Schlukbier
Title: President
19
<PAGE>
EXHIBIT A: AUTHORIZED HYPERLINK
[graphical depiction of baseball player and "Catch Every MLB Game Live" caption
for authorized hyperlink to the Total Sports Sites displaying Baseball Service]
<PAGE>
EXHIBIT B: LETTER
MAJOR LEAGUE BASEBALL
February 10, 1999
By Fax to (919) 781-4865
- ------------------------
John Fuscoe, Esq.
Wyrick, Robbins, Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, NC 27607-7506
Re: MLBE/Total Sports Agreement Regarding "TotalCast" Real-Time
Simulations of Major League Baseball Games (the "Agreement")
Dear John:
The purpose of this letter is to follow-up on our February 2, 1999
telephone conference call about the Agreement.
At the outset, we wish to emphasize that MLBE values its relationship with
Total Sports. It was for this reason that on December 16, 1998, Alex Kam and I
first notified George Schlukbier about Total Sports' breaches of the Agreement
in person rather than through a notice letter. Having opted to proceed in this
way, we were disappointed and surprised by Total Sports' January 7, 1999 letter
to the Major League Baseball Clubs offering them the opportunity to "syndicate"
1999 Major League Baseball game TotalCasts on their Official World Wide Web
sites. In our view, that letter not only required us to have the February 2/nd/
conference call, but also formalize our positions in this letter under Section
17 of the Agreement.
As we discussed, Total Sports materially breached the Agreement in two ways
about which we are aware as follows:
1. Making TotalCasts Available on Third Party Websites: The Agreement
---------------------------------------------------
grants Total Sports a limited license to make TotalCasts available only on the
Total Sports Site (as defined in the Agreement). It does not grant Total Sports
a license to make TotalCasts available on any third party site. Despite this
limitation, Total Sports made 1998 Major League Baseball game TotalCasts
available on a number of third party sites, including Dow Jones'
wallstreetjournal.com site, through "framing" -- a technology that allowed third
party site users to view them without actually leaving those sites. (We note
that in The Washington Post Co. et al. v. TotalNews, Inc., 97 Civ. 1190 (PKL)
---------------------------------------------
(S.D.N.Y. Complaint filed Feb. 20,1997), Dow Jones sued a site for unauthorized
framing.) This practice, which was apparently repeated on a daily basis
throughout the 1998 Major League Baseball season, constituted a material breach
of the Agreement.
<PAGE>
Total Sports' January 7/th/ letter states that Total Sports recorded 92
million page views for Major League Baseball game TotalCasts in 1998. Given the
apparent extent to which Total Sports made TotalCasts available on third party
sites, it appears that only a small fraction of the 92 million page views are
attributable to uses authorized under the Agreement. In light of this. MLBE's
exclusive right to transmit live, continuous, play-by-play accounts and
descriptions of Major League Baseball games over the Internet has been
significantly and irreparably damaged.
2. Unauthorized Use of Major League Baseball Marks: Under Section 3(c) of
-----------------------------------------------
the Agreement, MLBE granted Total Sports a limited license to use Major League
Baseball Marks (as defined in the Agreement) (the "Marks") in connection with
the license grant for TotalCasts. Total Sports' unauthorized uses of the Marks
on third party sites also constituted a material breach of the Agreement.
We note that Total Sports' uses of the Marks included branding TotalCasts
with Major League Baseball Properties' famous Silhouetted Batter Logo and the
phrase: "Officially Licensed by Major League Baseball Enterprises, Inc." Web
users who viewed 1998 Major League Baseball game TotalCasts from unauthorized
third party sites saw this branding, and were therefore misled into believing
that there was some sort of affiliation between those third party sites and the
Major League Baseball Entities (as defined in the Agreement). This caused
significant and irreparable damage to the Major League Baseball Entities, their
Marks and the businesses and goodwill represented by them.
As Alex stated during our February 2/nd/ call, cure of the breaches will
require: (1) compensation for the damages caused by them: and (2) Total Sports'
assurance that it will not permit 1999 Major League Baseball game TotalCasts to
be made available on any site other than the Total Sports Site, whether by
framing or any other means (e.g., pop-up windows). We understand, however, that
Total Sports would prefer to continue to engage in framing in order to maximize
the audience for Major League Baseball game TotalCasts. In light of this, we are
willing to consider an alternative proposal to cure Total Sports' breaches that
will: (1) retrospectively compensate MLBE; (2) prospectively provide MLBE with
appropriate increases in license fees and revenue sharing; and (3) protect
MLBE's proprietary and trademark rights in connection with a network of third
party site distribution.
Finally, Total Sports offered to send a letter to the Clubs retracting its
January 7/th/ letter, subject to our approval over its content. Although we
cannot accept this offer as a cure or settlement of the breaches, we believe
sending such a letter would be a step in the right direction. Therefore, please
call me at (212) 931-7973 so that we may discuss the process of drafting such a
letter, and also how Total Sports should cure its breaches.
<PAGE>
This letter does not purport to be a complete statement of the facts or law
and is without prejudice to the legal or equitable rights of any Major League
Baseball Entity.
Very truly yours,
Michael J. Mellis
New Media Counsel
cc: Alex Kam
Ethan G. Orlinsky
George Schlukbier - Total Sports (by fax to (919) 832-8927)
<PAGE>
EXHIBIT C: USE OF MAJOR LEAGUE BASEBALL MARKS
IN BASEBALL SERVICE
[graphical depiction of placement of Major League Baseball logo and legal and
credit description on Total Sports Sites]
<PAGE>
EXHIBIT 10.9
ADVERTISING SALES REPRESENTATION AGREEMENT
This ADVERTISING SALES REPRESENTATION AGREEMENT (the "Agreement") is made
effective the 1/st/ day of January 1999 by and between Total Sports Inc., a
Delaware corporation with offices at 234 Fayetteville Street, 2/nd/ Floor,
Raleigh, North Carolina 27601 (hereinafter referred to as "TOTAL"), and Golf.Com
L.L.C., a Delaware limited liability company with offices at 234 Fayetteville
Street, 2/nd/ Floor, Raleigh, North Carolina 27601 (hereinafter referred to as
"GOLF").
1. APPOINTMENT. GOLF hereby appoints TOTAL as its worldwide, exclusive
advertising sales representative to sell all on-line advertising and
sponsorship (collectively, the "Advertisements") for the Web Site (as
defined below) and any related publications or materials produced by GOLF,
subject in each case to the exceptions set forth on Schedule A. For the
purposes of this Agreement, "Web Site" shall mean the web site designated
by the URL "www.golf.com" and all other webpages that utilize such URL.
Except as set forth in this Agreement, including Schedule A, GOLF shall
retain no rights to sell advertising, sponsorship or promotional packages
for the Web Site or for related publications or materials produced by GOLF.
2. TOTAL'S OBLIGATIONS. TOTAL, at its own expense, shall use best efforts to
market and sell the Advertisements and shall collect all revenues, fees and
income from or attributable to the Advertisements sold hereunder. Except as
set forth in Schedule A, TOTAL shall have sole discretion in the sales of
Advertising, including forms of payment and the approval of credit;
provided, however, that the Golf board of directors shall have the right to
exclude from the Web Site any Advertising that does not comply with the
standard editorial policies and practices of Golf or its members. TOTAL, at
its own expense, shall be solely responsible for the collection of all fees
and payments related to the Advertisements including reimbursement for all
bad debts and uncollectable accounts.
3. GOLF'S OBLIGATIONS. Upon receipt of an agreement or purchase order to
provide Advertising, GOLF shall, to the extent practicable, work with TOTAL
and the advertiser or sponsor to obtain the required Advertising materials
from such advertiser or sponsor and fulfill all advertising and sponsorship
obligations. GOLF shall direct all Web Site advertising inquires or
opportunities, save as set out in Schedule A, to TOTAL, and shall advise
its Affiliates that Web Site advertising sales are to be arranged by and
through TOTAL.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
4. CONSIDERATION.
4.1 In consideration for the right to be appointed GOLF's exclusive
advertising sales representative, TOTAL shall pay GOLF $[*] on January
1, 2000 and thereafter on each January 1 that occurs during a term
of this Agreement.
4.2 In consideration for its services provided hereunder, commencing April
1, 1999 TOTAL shall retain [*]% of the Net Advertising Revenues (as
defined below) it collects pursuant to this Agreement. For the
purposes of this Agreement, "Net Advertising Revenues" shall mean all
fees and payments booked from the sale of Advertisements less any
third party commissions, fees, refunds, discounts and taxes. The Term
"Net Advertising Revenues" as used herein shall not include revenues
from the transactions described on Schedule A. Net Advertising
Revenues shall be calculated and distributed to GOLF on a monthly
basis not later than thirty (30) days following the last day of the
month.
4.3 TOTAL shall provide monthly reports to GOLF showing Net Advertising
Revenues and a detailed listing of all Advertisements provided on the
Web Site. The monthly reports shall also show all other revenues
attributable to the Web Site including revenues from commerce; amounts
invoiced and received from each Corporate Sponsor (as defined in the
Services Agreement); and Page Views (as defined in the Services
Agreement). With respect to the all advertising space sold for the Web
Site, TOTAL and GOLF shall mutually agree on (and the monthly report
shall show) cash discounts and allowances and adjustments from
Corporate Sponsors. The monthly reports shall be provided with the
payments made pursuant to Section 4.2.
5. INSPECTION OF BOOKS AND RECORDS. During the term of this Agreement, TOTAL
shall keep at its usual places of business complete, accurate and proper
books and records containing all of the documentation necessary to
substantiate payments made pursuant to Section 4. Upon GOLF's reasonable
request, TOTAL shall produce such records for inspection by an authorized
representative of GOLF at all reasonable times during TOTAL's normal
business hours. In the event that any audit or inspection conducted by GOLF
or its representative reveals that TOTAL has underpaid any Net Advertising
Revenues to GOLF, TOTAL shall immediately pay such underpayment to GOLF,
along with interest accrued on such amount at a rate of 8% per annum from
the date on which the amount was initially owed. In addition, in the event
that a payment by TOTAL is understated by more than 5% of the actual amount
due, then TOTAL shall also pay all reasonable costs of the inspection
and/or audit conducted by GOLF or its representatives (but only up to the
amount of the underpayment).
Portions of this exhibit marked by [*] have been omitted pursuant to a
request for confidential treatment.
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6. WARRANTIES AND DISCLAIMER
6.1 Each party hereby represents and warrants that (i) it is capable of
performing its obligations hereunder; (ii) it has the full right,
power, and authority to enter into and perform this Agreement; (iii)
the performance of its obligations hereunder will not breach any other
contract by which it is bound; and(iv) the performance of its
obligations hereunder will not violate any applicable laws or
regulations.
6.2 EXCEPT AS SET FORTH ABOVE, TOTAL MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES IT IS
PROVIDING PURSUANT TO THIS AGREEMENT.
7. INDEMNIFICATION. Each party shall hold harmless the other party and its
officers, employees and agents from any demand, claim, loss, liability or
damage, including reasonable attorneys' fees, whether in tort or in
contract, related to or arising out of the defaulting party's (i) breach of
its representations or warranties, (ii) its gross negligence or willful
misconduct, or (iii) its acts or omissions related to this Agreement.
8. LIMITATION OF DAMAGES AND LIABILITY. NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER HEREUNDER FOR INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES
(INCLUDING REASONABLE ATTORNEYS' FEES AND LOST PROFITS) THAT RESULT FROM OR
ARE RELATED TO THE OBLIGATIONS HEREUNDER, EVEN IF THE PARTY FROM WHOM
INDEMNITY IS SOUGHT HAS BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES
(EXCEPT FOR DAMAGES CAUSED BY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
PARTY FROM WHOM INDEMNITY IS SOUGHT). IN ANY EVENT, NEITHER PARTY'S
AGGREGATE LIABILITY TO THE OTHER SHALL EXCEED ALL THE AMOUNTS RETAINED BY
TOTAL UNDER SECTION 4.2 HEREOF. NOTHING IN THIS SECTION SHALL LIMIT IN ANY
MANNER EITHER PARTY'S RIGHTS TO SEEK INJUNCTIVE RELIEF.
9. TERM AND TERMINATION.
9.1 Except as provided herein, this Agreement shall be effective as of the
date first set forth above and terminate on June 15, 2003.
9.2 This Agreement shall terminate immediately upon the termination of the
Services Agreement entered into by and between GOLF and TOTAL on July
29, 1998 (the "Services Agreement").
9.3 Upon material breach of any obligation under this Agreement by a
party, the other party shall have the right to terminate this
Agreement by written notice to the breaching party if such breach
remains uncured for a period of thirty (30) days after written notice
of such breach is sent to the breaching party.
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<PAGE>
9.4 If either party files a bankruptcy petition, becomes the subject of an
involuntary bankruptcy petition and fails to cure such petition in its
favor within sixty (60) days, makes a general assignment for the
benefit of creditors, has a receiver appointed for its assets, or
ceases to conduct business, it shall be considered a material default
of this Agreement. Upon the happening of any of these events, the
defaulting party shall immediately send notice of default to the other
party.
9.5 Sections 6, 7, 8, 9 and 11 of this Agreement shall continue to bind
the parties after termination of the Agreement provided herein.
10. ASSIGNMENT. Neither party may assign or subcontract its rights or
obligations under this Agreement, either in whole or in part, without the
prior written consent of the other party, which shall not be unreasonably
withheld, and any attempt to do so shall be void and of no effect. An
assignee of either party authorized under this Agreement shall be bound by
the terms of this Agreement and shall have all of the rights and
obligations of the assigning party set forth in this Agreement. If any
assignee shall fail to agree to be bound by all of the terms and
obligations of this Agreement, then such assignment shall be deemed null
and void and of no force or effect.
11. MISCELLANEOUS
11.1 This Agreement constitutes the entire Agreement as to TOTALS'
advertising sales representation of GOLF and except as otherwise
contemplated herein, supersedes all prior agreements, written and
oral, relating to the subject matter hereof, to the extent directly
applicable.
11.2 Modifications and amendments to this Agreement, including any exhibit
or appendix hereto, shall be enforceable only if they are in writing
and are signed by authorized representatives of both parties.
11.3 No term or provision of this Agreement shall be deemed waived and no
breach excused unless such waiver or consent is in writing and signed
by the party claimed to have waived or consented.
11.4 Nothing contained in this Agreement shall be construed so as to
constitute either party as a partner or joint venturer or agent of the
other party, or to require either party to share profits, gains or
ownership interest in or from any property or activities. Each party
will be solely responsible for the payment of its employees'
compensation, including employment taxes, worker's compensation, and
any similar taxes associated with employment of its employees. No
party shall be liable for the debts, accounts, obligations or other
liabilities of the other party, including without limitation, the
other party's obligation to withhold payroll and income taxes.
11.5 All notices or other communications given under this Agreement shall
be in writing, and shall be sent by telex, facsimile, or registered
airmail to the party for which it is intended at the address stated at
the beginning of this Agreement for such party, or at such other
address as such party shall have designated for such
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<PAGE>
purpose by written notice to the other party. Such notices shall be
considered as received two (2) business days after sending and
obtaining confirmation of receipt in the case of telex and facsimile
and ten (10) days in the case of registered airmail.
11.6 If any action at law or in equity is necessary to enforce the terms of
this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and expenses, in addition to any other relief
to which it may be entitled.
11.7 This Agreement will be governed by the laws of the State of Delaware
without regard to its conflicts of law provisions.
11.7.1 Any claim, controversy or dispute, whether sounding in
contract, statue, tort, fraud, misrepresentation or other
legal theory, whenever brought and whether between the
parties to this Agreement or between one of the parties to
this Agreement and employees, agents or affiliated
businesses of another party, shall be resolved by
arbitration as prescribed in this Section 11.7. The Federal
Arbitration Act, 9 U.S.C. (S) 1-15, not state law, shall
govern the arbitrability of all claims.
11.7.2 A single arbitrator engaged in the practice of law shall
conduct the arbitration under the then current rules of the
American Arbitration Association (AAA), unless otherwise
provided herein. The arbitrator shall be selected in
accordance with AAA procedures from a list of qualified
people maintained by AAA. The arbitration shall be conducted
in Raleigh, N.C., and all expedited procedures prescribed by
the AAA rules shall apply.
11.7.3 The arbitrator shall only have authority to award
compensatory damages and shall not have authority to award
punitive damages, other non-compensatory damages or any
other form of relief; provided, however, any party may apply
to any court having jurisdiction thereof for the entry of
injunctive relief to maintain the status quo under such time
----------
as the arbitration award is rendered or the controversy is
otherwise resolved. Each party shall bear its own costs and
attorneys' fees and the parties shall share equally the fees
and expenses of the arbitration. The arbitrator's decision
and award shall be final and binding, and judgment upon the
award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
11.7.4 If any party files a judicial or administrative action
asserting claims subject to arbitration, as prescribed
herein, and another party successfully stays such action
and/or compels arbitration of said claims, the party filing
said action shall pay the other party's costs and expenses
incurred in seeking such stay and/or compelling arbitration,
including reasonable attorneys' fees.
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11.8 Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other
jurisdiction.
11.9 Neither party shall be liable for failure to deliver or
perform due to causes beyond its reasonable control, acts of
God, acts of the other party, acts of civil or military
authorities, fires, strikes, floods, earthquakes, epidemics,
war, riots, delays in transportation or the unavailability
of information or material to be furnished by the other
party.
11.10 The parties agree that the execution and delivery of this
Agreement satisfies all obligations, if any, that GOLF might
have to negotiate with TOTAL pursuant to Section 6.2 of the
Services Agreement.
11.11 The terms and conditions of this Agreement are considered
"Confidential Information" for purposes of Article 13 of the
Services Agreement.
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be executed on the date first above written.
GOLF.COM L.L.C. TOTAL SPORTS INC.
By:________________________ By:_________________________
Alex Miceli Frank Daniels III
President Chief Executive Officer
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Schedule A
The exclusivity granted to TOTAL hereunder nevertheless allows:
(1) NBC Sports, MediaOne Interactive Services and their respective affiliates
to sell advertising on the Web Site and any related publications or
materials, to advertisers on or sponsors of their respective broadcast,
cable or satellite (including DBS) coverage of golf events and other golf-
related programming.
(2) revenue sharing arrangements between GOLF and event sponsors or other
enterprises; and
(3) partnership selling arrangements between GOLF and event sponsors or other
enterprises.
<PAGE>
Exhibit 10.10
MARKETING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT is made on January 1, 1999 between PUBLISHERS GROUP WEST
INCORPORATED, a California corporation, with principal place of business
located at 1700 Fourth Street, Berkeley, Ca 94710 ("PGW"), as the
purchaser, and TOTAL SPORTS INCORPORATED with principal place of business
located 133 Fayetteville Street Mall, 6th Floor, Raleigh, NC 27601 (the
"PUBLISHER"), as the seller.
RECITALS
PUBLISHER is in the business of publishing books, and may in the future
publish audio products, multimedia CD-ROMs and software, and calendars
(collectively "PRODUCTS"). This agreement excludes PRODUCTS produced by
PUBLISHER and licensed to a 3rd party.
PGW is in the business of obtaining such products for the purposes of
soliciting the sale thereof on a sale or return basis and distributing such
products to BOOKSELLERS (as herein defined) in the United States.
The parties intend PGW to be the exclusive United States distributor of
PUBLISHER'S PRODUCTS as set forth herein.
1. Appointment and Acceptance. PUBLISHER grants to PGW, and PGW accepts
from PUBLISHER, the exclusive right to solicit BOOKSELLERS within the
United States for the purchase of the PRODUCTS on a sale or return basis,
or on a non-returnable basis (when applicable), in accordance with the
terms and provisions of this AGREEMENT and the right to maintain an
inventory of all the PUBLISHER'S PRODUCTS, except those that may be
described in attached Exhibit E made a part hereof if applicable.
2. Market. As used in this agreement, BOOKSELLERS means any business that
sells PRODUCTS in the following channels, including the suppliers thereto:
[*]. Publisher reserves the exclusive right to license PRODUCT from
time-to-time to a third party for sales outside of markets defined above as
BOOKSELLERS. PUBLISHER also reserves the exclusive right to solicit orders
outside of markets defined as BOOKSELLERS for bundled products (i.e., to
sporting goods stores and sports specialty stores). PUBLISHER reserves the
non-exclusive right to solicit orders outside of the above-defined channels
in the United States, including direct mail, corporate and text sales, and
premium sales.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
<PAGE>
3. Duration of Agreement. This AGREEMENT shall continue in effect for a
period of two (2) years and shall be automatically renewed for successive
two (2) year periods at the end of such period unless terminated by either
party's six (6) months prior written notice effective at the end of any
such period.
4. Title. PUBLISHER shall hold title to each PRODUCT until PGW's
consummation of a sale of any PRODUCT to any BOOKSELLER. Immediately prior
to making sale of a PRODUCT to a BOOKSELLER, PGW shall acquire from
PUBLISHER title to the PRODUCT, provided, further, however, that upon any
BOOKSELLER'S return of the PRODUCT to PGW, title thereto shall
automatically revest in PUBLISHER.
5. Obligations of the PUBLISHER. PUBLISHER shall perform, at its sole
expense, the following duties:
a. To supply PGW, for the purpose of PGW's filling BOOKSELLERS'
purchase orders, such quantities of the PRODUCTS as may reasonably be
required by PGW, provided PGW uses reasonable efforts to keep PUBLISHER
advised of order trends and inventory status, so that PUBLISHER may
anticipate reprint needs.
b. To ship the PRODUCTS to the storage facility or facilities
designated by PGW in Exhibit A.
c. To package the PRODUCTS in accordance with the specifications set
forth in the document, "PGW SHIPPING REQUIREMENTS", in Exhibit A.
d. To provide PGW with not less than sixty (60) days written notice
before orders for any new PRODUCTS can be solicited unless PUBLISHER finds
it advantageous to publish an "instant" book. In such a case, PUBLISHER
acknowledges that a shorter than 60 day notice period for publication may
adversely effect complete pre-publication distribution.
e. To provide book covers, quality sales materials, and up to forty
(40) sample copies of each of the PRODUCTS for PGW's sales purposes, and as
needed and mutually agreed upon, review copies for BOOKSELLERS (see Exhibit
D, Inventory Charges).
f. To provide editorial information and cover graphics material for
the purpose of cataloging the PRODUCTS in accordance with PGW`s schedule
for catalogs, if applicable (see Exhibit B).
g. To promptly inform PGW when PUBLISHER intends to cease printing any
PRODUCTS or has made any sales of edition, format or (subject to this
AGREEMENT) ownership rights of the PRODUCTS in the United States.
6. Obligations of PGW. PGW shall perform, at its own expense, the
following duties and obligations:
a. To employ sales representatives who are knowledgeable and
experienced in the wholesale and retail sale of intellectual property such
as the PRODUCTS, and who shall be the employees and agents of PGW and not
of the PUBLISHER, and to use its
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<PAGE>
best efforts to sell the PRODUCTS to BOOKSELLERS on a sale or return basis,
or on a non-returnable basis (when applicable).
b. To ship the PRODUCTS promptly to the BOOKSELLERS who are purchasing
them from PGW on PGW's then standard terms and conditions (see Exhibit C
for the current version of such terms and conditions). PGW will obtain
PUBLISHER's approval prior to making an increase in discount terms to
BOOKSELLERS greater than [*]% within a 12-month period.
c. To render, to each purchaser of the PRODUCTS, invoices in the name
and for account of PGW, and to collect the NET SALES PRICE as it becomes
due.
d. To maintain an accurate record of the sale of each PRODUCT, which
record (the "SALES REPORT") shall consist of the description of the PRODUCT
sold, the date of sale, the name and location of each purchaser, the
purchase price invoiced or credited to each purchaser (the "NET SALES
PRICE"), the PGW invoice number for each sale, the quantity of each PRODUCT
shipped to each purchaser, the quantity of each PRODUCT returned by each
purchaser and the amount of the credit issued for such return (the "RETURN
CREDIT"). PGW shall furnish to PUBLISHER a SALES REPORT relating to each
PRODUCT sold by or returned to PGW during the previous month, on a monthly
basis on or about the fifteenth (15th) day of each month.
e. To maintain capability for publisher online sales reporting at no
charge to PUBLISHER.
f. To provide storage facilities for twice PGW's reasonable estimate
of projected annual sales of the PRODUCTS (see Exhibit A).
g. To maintain with respect to each PRODUCT within the custody or
possession of PGW, except as set forth in the following sentence, insurance
coverage in an amount not less than [*] percent ([*]%) of the retail
price of the PRODUCT for damage due to physical loss, including but not
limited to fire and smoke damage, water damage due to earthquake, fire
damage due to earthquake, sprinkler damage due to fire, theft and
vandalism, and in-transit loss. Risks not covered by PGW's insurance
coverage include loss due to flood, nuclear peril, and structural failure
due to earthquake.
7. Terms of Payment to PUBLISHER.
With respect to each PRODUCT PGW sells to any BOOKSELLER on a sale or
return basis, or on a non-returnable basis (when applicable), PGW shall pay
to the PUBLISHER, fifty percent (50%) in sixty (60) days and fifty percent
(50%) in ninety (90) days after the end of the month for which PGW provides
the PUBLISHER with the SALES REPORT, the total NET SALES PRICE less [*]
percent ([*]%) thereof, (the "PUBLISHER'S PAYMENT") for calendar years 1999
and 2000. The PUBLISHER'S PAYMENT will be set at a maximum level of [*]%
for the calendar years 1999 and 2000, unless or until NET SALES exceed $[*]
within one calendar year,
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
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<PAGE>
at which time the rate change will adhere to the schedule below beginning
with the next calendar year.
Beginning January 1, 2001, PUBLISHER'S PAYMENT will be based onthe
percentage of total NET SALES set forth below according to the following
schedule of aggregate NET SALES recorded by the PUBLISHER through PGW
during the preceding calendar year. The PUBLISHER'S PAYMENT will decrease
or increase accordingly in the succeeding year if NET SALES drop below or
extend above the respective break points over the current annual term. All
rate changes will go into effect on January 1.
<TABLE>
<CAPTION>
Net Sales PGW Percentage
<S> <C>
$0 to 250,000 [*]%
$250,000 to 500,000 [*]%
$500,000 to 750,000 [*]%
$750,000 to 1,000,000 [*]%
$1,000,000 to 2,000,000 [*]%
$2,000,000 to 3,000,000 [*]%
$3,000,000 to 4,000,000 [*]%
$4,000,000 to 5,000,000 [*]%
$5,000,000 to 6,000,000 [*]%
$6,000,000 to 7,000,000 [*]%
$7,000,000 to 8,000,000 [*]%
$8,000,000 to 9,000,000 [*]%
$9,000,000 to 10,000,000 [*]%
$10,000,000 plus [*]%
</TABLE>
8. Withholding for Returns. Returns withholding, if necessary, shall be
based on verifiable figures from Borders Group/Waldenbooks, Barnes & Noble,
Ingram Book Company, and a like sell-through percentage from the rest of
the book trade. Publishers Group West will use the entire balance of all
earnings of the PUBLISHER against which to apply withholding, including a
reasonable assessment for ongoing sales. Publishers Group West will
reassess the withholding amount, if any, on a regular basis based on new
reporting from the above accounts. Publishers Group West is entering this
AGREEMENT with the PUBLISHER with the expectation that there will be no
automatic returns withholding. Returns withholding will be calculated on a
case-by-case basis. Specific events that could trigger withholding include
an unusually high volume of returns anticipated on a single PRODUCT or
PRODUCTS. Termination of this AGREEMENT (see Paragraph 14 below) will
result in automatic returns withholding as described above and may also
incorporate an analysis based on average sales and returns by month.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
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<PAGE>
9. Reimbursement to PGW for a Negative Account Balance. With respect to
any situation where the PUBLISHER'S account balance is in deficit due to
BOOKSELLERS' return of any PRODUCTS for which PGW has previously remitted
the PUBLISHER'S payment, PUBLISHER shall pay to PGW, within sixty (60) days
after the end of the month in which PUBLISHER'S balance becomes negative, a
sum equal to the deficit balance on PUBLISHER'S account. PGW also retains
the right to offset for such deficit. In determining whether a deficit
balance exists, PGW shall first exhaust any reserves against returns it
maintains with respect to said returned PRODUCTS, and only the amount in
excess of such reserves shall be deemed "deficit".
10. Coop Advertising. PGW will contribute a percentage equivalent to the
PUBLISHER'S PAYMENT of the cost of any mutually agreed upon cooperative
advertising within the book trade. PGW and PUBLISHER shall not unreasonably
delay or withhold approval of said cooperative advertising.
11. Risk of Loss. PUBLISHER shall bear all of the risk of loss of the
PRODUCTS until their delivery to and acceptance by PGW at the storage
facilities designated in Exhibit A. Thereafter, with respect to any
PRODUCTS within the custody or possession of PGW, PGW shall bear the risk
of loss of the PRODUCTS for damage due to physical loss covered by the
insurance maintained under paragraphs 6(f) hereof, including but not
limited to fire and smoke damage, water damage due to earthquake, fire
damage due to earthquake, sprinkler damage due to fire, theft and
vandalism, and in-transit loss,
provided, however, that PGW's total liability shall not exceed [*] percent
([*]%) of the total LIST PRICES for the lost or damaged PRODUCTS. Risks not
covered by PGW's insurance coverage include loss due to flood, nuclear
peril, and structural failure due to earthquake. Notwithstanding the
foregoing, PGW shall incur no liability for inventory shortages of any
PRODUCTS that in any year do not exceed one percent (1%) of the total
quantity of the PRODUCTS warehoused during each year by PGW.
12. Supplemental Fees and Charges. PUBLISHER will be charged with
supplemental fees and charges at PGW's standard rates for services provided
to PUBLISHER by PGW. These charges may include: PUBLISHER fulfillment
charges, coop advertising charges, microfiche charges, trade show charges,
catalog cancellation charges, sales material charges, inventory overstock
charges, statistical shortages charges, receiving non-compliance charges,
and stickering charges (see Exhibit D).
13. Assignment. Neither party shall assign, sell or otherwise transfer
any of its rights or obligations under this AGREEMENT, except that PGW and
PUBLISHER shall each have the right to assign its right to receive proceeds
pursuant hereto to any financial or banking institution as security for a
loan and that PGW and PUBLISHER reserve the right to assign this AGREEMENT
to any purchaser of substantially all of its assets. The terms and
provisions of this AGREEMENT shall be binding upon and inure to the benefit
of parties hereto, their successors and permitted assigns.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
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<PAGE>
14. Termination.
a. This AGREEMENT may be terminated for a party's failure to timely
cure its default in any terms or provisions of the AGREEMENT. Such
termination shall be effective thirty (30) days after written notice of
default is given by the non-defaulting party, unless the defaulting party
shall completely cure the default within the forty-five day period.
b. This AGREEMENT may be terminated immediately upon written notice by
either party if: (i) a receiver is appointed by either party or its
property; (ii) either party makes, or attempts to make, an assignment of
the benefits of its creditors; (iii) any proceedings are commenced by or
for either party under the bankruptcy, insolvency or debtor's relief law,
or (iv) either party liquidates or dissolves or attempts to liquidate or
dissolve its above-described business.
c. Course of Termination. Within forty-five (45) days after the date
of termination of this AGREEMENT, PGW shall return all of PUBLISHER'S
PRODUCTS within its possession to a destination designated by PUBLISHER,
the cost of which return shall be borne by the party initiating the
termination of this AGREEMENT unless the termination is for uncured breach,
in which case the breaching party shall bear the cost. Upon termination of
this AGREEMENT, PGW will continue to make timely payments to PUBLISHER as
described in Section 7 herein and PUBLISHER shall remain responsible for
the amounts due under Sections 9 and 12 herein. PGW will continue to review
the account on a monthly basis relative to withholding until the account is
closed. Within one (1) year after the termination of this AGREEMENT, PGW
shall make a final accounting of the sales and returns of the PRODUCTS, and
any amounts due and owing thereunder to either party shall be settled by
the other party's immediate payment of the amounts shown to be due, and any
PRODUCTS within PGW's possession shall be returned at the cost of the party
designated herein.
15. Intellectual Property. PUBLISHER warrants that the PRODUCTS do not
infringe upon or violate any copyright, trademark, trade name or any other
proprietary right, or any right of privacy of any third party, or any
statute, ordinance, regulation, or case law of any governmental entity
having jurisdiction over the parties. The PUBLISHER's sole obligation to
PGW for breach of this warranty shall be to defend, indemnify and hold PGW
harmless for any and all losses, damages, liabilities, costs and expenses
(including without limitation, reasonable attorney's fees) incurred by PGW
as a result of any judgment or proceeding against PGW or any BOOKSELLER in
which it is determined or alleged that the marketing or use of any PRODUCT
infringes upon or violates any of the above-described rights of any third
party, or laws or regulations of any governmental entity having
jurisdiction over the parties. Such indemnification is contingent upon
PGW's tendering to PUBLISHER the sole right to defend and settle such claim
or proceeding at the PUBLISHER's sole expense, and cooperating with the
PUBLISHER in defending or settling any such claim or proceeding at the
PUBLISHER's sole expense, provided however that (i) PGW receives reasonable
assurance that PUBLISHER will mount a competent defense and can pay
reasonably anticipated settlement amounts; (ii) that PGW shall have the
right to approve PUBLISHER's choice of defense counsel in order to
determine the experience and competence thereof (such
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<PAGE>
approval not to be unreasonably withheld or delayed); (iii) that if
PUBLISHER fails to retain counsel in a timely manner to defend any claim
against PGW, or if such counsel is unable due to a conflict of interest to
represent PGW, then PGW shall have the right to retain counsel at
PUBLISHER's expense to defend PGW and PUBLISHER against such claim.
16. Notices. Any written notices required or permitted under this
AGREEMENT shall be deemed to be delivered when personally delivered, or
when deposited by mail postage prepaid, or delivered by courier service,
addressed to the other party at its address set forth on page 1 of this
AGREEMENT, except that any notice required under Paragraphs 3 and 14 shall
be delivered by certified mail, return receipt requested, or by courier
service, signature required. Either party may change its address by notice
delivered in accordance with this paragraph.
17. Waiver. The failure of either party at any time to require
performance by the other party, or to declare a breach of any provision of
this AGREEMENT shall not operate as a waiver of any other provision of this
AGREEMENT or of said party's rights hereunder.
18. Force Majeure. Notwithstanding anything to the contrary in this
AGREEMENT, the parties hereto shall each be excused from performance of
their respective duties and obligations hereunder while and to the extent
that performance is prevented for a period not to exceed six (6) months by
an act of God, strike or labor dispute, war or war condition, riot, civil
disorder, government regulations, embargo, fire, flood, accident,
earthquake or any cause beyond the reasonable control of such party.
19. Attorneys' Fees. In the event any suit, action or any other
proceeding is commenced to enforce or interpret any part of this AGREEMENT,
the prevailing party therein shall be entitled to recover its costs and
reasonable attorneys' fees incurred therefor.
20. Severability. If any term, provision, covenant or condition of the
AGREEMENT is held invalid or unenforceable for any reason, the remainder of
the provisions of this AGREEMENT shall continue in full force and effect as
if this AGREEMENT had been executed with the invalid portion eliminated.
21. Governing Law. The validity, interpretation and performance of this
AGREEMENT shall be governed by and construed under the laws of the State of
California without giving effect to principles of conflict of law. If
litigation or arbitration is initiated by either PGW or PUBLISHER, the
party initiating action agrees to be subject to the exclusive jurisdiction
of courts located in the state of the other party. If PUBLISHER initiates
action, courts located in San Francisco, California, will have exclusive
jurisdiction. If PGW initiates action, courts located in New York, New
York, will have exclusive jurisdiction.
22. Dispute Resolution. The parties agree that disputes should be
resolved between themselves to the extent possible without resort to
litigation or arbitration. Therefore, if a dispute arises under this
AGREEMENT, each party will propose to the other party in writing its
position with respect to the matter. The parties shall then use their good
faith
7
<PAGE>
best efforts, including mediation, to attempt to settle the matter between
themselves as promptly as possible, and shall commence arbitration only
after it appears that resolution through mediation is unlikely. Should
arbitration thereafter be necessary, the parties will proceed according to
the then-prevailing rules of the American Arbitration Association. The
arbitration will take place in either the State of California or the State
of New York in accordance with the understanding regarding exclusive
jurisdiction discussed above in Paragraph 21, Governing Law. The decision
of the arbitrator will be final and binding on the parties hereto, and it
may be enforced in any court of competent jurisdiction.
23. Entire Agreement. This AGREEMENT contains all of the agreements
between the parties with respect to the subject matter hereof, and no other
agreement, understanding or representation, whether written or oral, shall
supersede, modify, amend or otherwise alter the terms of this AGREEMENT,
unless it is in writing executed by all of the parties hereto after the
date hereof.
IN WITNESS WHEREOF, the parties hereto execute this AGREEMENT on the date
first above written.
"PGW"
PUBLISHERS GROUP WEST INC.
1700 Fourth Street
Berkeley, Ca 94710
510 528-1444
By:_____________________________
Printed Name:____________________
"PUBLISHER"
TOTAL SPORTS INC.
133 Fayetteville Street Mall, 6th Floor
Raleigh, NC, 27601
919 755-8020
By:______________________________
Printed Name:_____________________
8
<PAGE>
EXHIBIT A
PACKAGING, SHIPPING AND INVENTORY REQUIREMENTS
I. PACKAGING REQUIREMENTS
a. All PRODUCTS should have the phrase "Distributed by Publishers Group
West" on the back cover for trade paper or on the back flap for cloth
titles.
b. All PRODUCTS must have a bar code and price placed in the following
manner:
Trade paper and paper over board: Bookland EAN Bar code and price
should be displayed on the back cover.
Cloth: Bookland EAN Bar code should be on the back cover and the
price should be printed on the inside front flap.
Cloth without dust jacket: Bookland EAN Bar code and price should be
printed on the back cover.
Mass market: A UPC bar code should be on the back cover and a
Bookland EAN bar code and price should be on the inside of the front
cover.
Multimedia CD-ROMs and software, audio products and other non-book
products: Bookland EAN bar code and price should be displayed on all
such products.
II. SHIPPING REQUIREMENTS
The following requirements must be met to assure proper receipt of the
TITLE. Any variation from these requirements may be cause for delay in
receipt and/or a charge to the PUBLISHER. For specific charges, see Exhibit
D.
a. Palletize shipments in excess of 15 cartons on 48"x 40" pallets, with
40" entry. Pallet height should not exceed 50". Cartons must not overhang
pallet. Pallets must be shrink-wrapped.
b. All PRODUCTS must be packed securely in 200-pound test or better
corrugated cartons. Carton weight should not exceed 40 lbs. Cartons must be
labeled with publisher, title, edition, quantity, ISBN, price, and Bookland
EAN bar code on two adjacent sides.
c. All shipments must include a packing slip. For each product the
packing slip should detail: title, ISBN, quantity, price, and number of
cartons. The packing slip should reference PGW's purchase order number and
indicate whether it is a partial or complete shipment. Attach packing slip
to the top of the load.
d. Freight must be prepaid. The PUBLISHER will be charged for collect
shipments and the freight charges will be deducted from the PUBLISHER
payment. Trucking companies must make delivery appointments 24 hours in
advance.
e. Titles must not be mixed on more than one pallet. If the balance of
stock for more than one product is palletized together then the mixed
pallet must be clearly marked.
f. Address shipments to the designated warehouse:
Publishers Group West
2724 West Winton Avenue
Hayward CA 94545
Publishers Group West
c/o JV East
115 N. 25th Street
Lebanon, PA 17042
9
<PAGE>
g. Drop Shipment Freight Cost. Publishers Group West will pay 50% of the
freight costs billed by the PUBLISHERS printer for drop shipment of
products to designated wholesale accounts.
h. It is the PUBLISHER'S responsibility to coordinate the clearance and
delivery of international shipments.
III. INVENTORY MANAGEMENT PROCEDURES
a. Excess stock. PGW agrees to inventory PUBLISHER'S active stock, which
is defined as being approximately 24 months of inventory for each product
based on the average of the last 12 months of sales. Excess stock
calculations will not apply to PRODUCTS until one year after publication
date. Inactive stock will be charged a storage fee per PRODUCT per month
billed quarterly. Deleted PRODUCTS will accrue a storage charge beginning
90 days from the time the PRODUCT is declared out of print.
b. Shopworn returns. PUBLISHER understands that PGW will accept shopworn
returns from accounts. Shopworn returns will be marked and recycled. PGW
will return PUBLISHER'S shopworn PRODUCTS to the PUBLISHER unsorted at a
cost of $.10 per copy, plus freight, at the PUBLISHER's written request.
c. Deleted titles. PUBLISHER should provide shipping instructions in
advance for any PRODUCT going to delete status. At the time a PRODUCT is
changed to delete, all stock will be collected and returned to the
PUBLISHER or recycled per the PUBLISHER'S advance instruction. Subsequent
returns will be collected and returned or recycled until all returns for
the PRODUCT are processed.
d. Physical Inventory. PGW will conduct an ongoing cycle count of its
entire warehouse resulting in a verification by location of all PGW
inventory. On request, PGW will conduct a physical inventory by product one
time per calendar year. The PUBLISHER may request more than one physical
count per year at a labor rate of $20.00 per hour. Physical counts result
in the temporary restriction of inventory from shipping. Timing of physical
counts will be coordinated with PUBLISHER to minimize the impact of this
restricted shipping.
e. Additional charges. Any charges that are not specified in this Exhibit
will be billed on a time and materials basis with a labor rate of $20.00
per hour.
10
<PAGE>
EXHIBIT B
CATALOG DEADLINES
THE EDITORIAL FACT SHEET (EFS) PACKET
We launch products by including them in PGW's catalogs. Approximately
four weeks prior to the production of each of the three seasonal catalogs,
each publisher receives a packet of information outlining everything we
need from you to successfully present PUBLISHER'S product. It is essential
that all parts of this packet are reviewed and all material arrive at PGW
by the dates requested.
If PGW does not receive the information by the dates requested, PGW
cannot guarantee that PRODUCTS will be included in the appropriate catalog.
The packet includes:
THE BLUE PREVIEW CARD
THE EDITORIAL FACT SHEET (EFS)
THE TIP SHEET
GUIDELINES FOR CATALOG GRAPHICS AND SALES MATERIALS
KEY CATALOG AND SALES MATERIALS DEADLINES FOR THE YEAR
Packets for each of the catalog seasons are mailed each year on
approximately the following schedule:
FALL WINTER SPRING
12/10 5/1 7/10
The following schedule is included in PUBLISHER'S editorial fact sheet
packet and is roughly the same each year: check the seasonal editorial fact
sheet packet for the exact deadlines.
<TABLE>
<CAPTION>
FALL WINTER SPRING
<S> <C> <C> <C>
BLUE PREVIEW CARD DUE 1/10 5/30 8/10
EDITORIAL FACT
SHEETS DUE 2/1 6/15 9/1
COVER GRAPHICS DUE 3/15 7/15 10/15
TIP SHEETS DUE 3/15 7/15 10/15
SALES CONFERENCE 5/5 8/20 12/5
</TABLE>
11
<PAGE>
EXHIBIT C
PGW'S CURRENT TRADE RETAIL AND WHOLESALE
DISCOUNT SCHEDULES
Discounts and terms with BOOKSELLERS can change without notice.
BOOKSELLERS will be notified.
RETAIL DISCOUNT
SCHEDULES
Book Schedule
1-24.....40%
25-99....43%
100-299 44%
300-599 45%
600-999 46%
1000-1999 47%
2000 plus 48%
Prepacks
No minimum.....48%
Audio/Video Schedule
1-4........44%
5-24.......45%
25-99......46%
100-249 47%
250-499 48%
500-999 49%
1000 plus 50%
Computer Book Schedule
1-9........40%
10-24......45%
25-99......46%
100-249 47%
250-499 48%
500-999 49%
1000 plus 50%
12
<PAGE>
Calendar Schedule (Returnable)
No minimum 55%
Return deadline:
April 30
Non-Returnable
Schedule
No minimum 50%
(Includes bookstores, gift and gourmet, and internet accounts)
WHOLESALE
DISCOUNT SCHEDULES
Book Schedule
No minimum 50%
Computer Book Schedule
No minimum 55%
Calendar Schedule (Returnable)
No minimum 57%
Return deadline:
April 30
Audio/Video Schedule
No minimum 55%
Non-Returnable
Schedule
No minimum 55%
(Includes book and gift and gourmet wholesalers)
13
<PAGE>
Freight Allowance
1% subtracted from
retail price before
discount is applied.
Any retail account in good credit standing with four or more stores and a
consolidated warehouse location will be eligible for an extra one percent
(1%) over earned discount, and one percent (1%) extra on audio and
calendars for orders shipping to the warehouse location.
THE ABOVE SCHEDULES DO NOT APPLY TO SHORT DISCOUNT PRODUCTS
PGW ANNUAL VOLUME INCENTIVE DISCOUNT PROGRAM
Participating retail accounts may earn a base discount on annual net
sales. Accounts are reviewed in December for adjustment. Individual orders
may earn a higher discount, but no order will be invoiced at less than the
established annual rate except for short-discount titles.
Book Schedule
$400,000 48%
$75,000 47%
$20,000 46%
$5,000 45%
$2,000 44%
$1,000 43%
Computer Book Schedule
$25,000 50%
$15,000 49%
$10,000 48%
Audio/Video Schedule
$25,000 50%
$10,000 49%
$5,000 48%
14
<PAGE>
EXHIBIT D
SUPPLEMENTAL CHARGES
A summary of charges follows that will appear on PUBLISHER'S monthly
statement as chargebacks when and if they are incurred.
SHIPPING AND WAREHOUSING:
. Freight charges:
PGW will charge PUBLISHER $50.00 for collect freight shipments.
PUBLISHER will be reimbursed for direct shipments from their printer to
retail accounts. PUBLISHER must bill PGW and provide acceptable backup as
support.
PGW pays 50% of drop ship charges to wholesalers. If PUBLISHER is billed
by printer then PUBLISHER must bill PGW. If PGW is billed by printer then
PGW will chargeback to PUBLISHER'S account.
If PGW returns overstock inventory to PUBLISHER, the freight expense will
be charged back to the PUBLISHER'S account.
. Inventory charges:
Inactive stock will be charged a storage fee of $.02 per product per
month on a quarterly basis. Deleted products will be charged a storage
fee of $.02 per product per month beginning 90 days from the time that
the PRODUCT is declared deleted.
. Receiving non-compliance charges:
Non-standard pallet: $25.00 per pallet.
Re-box carton: $3.00 per carton.
Label cartons: $2.00 per carton.
No packing slip: $25.00 per shipment.
Freight chargeback: $25.00 per shipment.
Delivery made without appointment: $15.00.
Titles mixed on a pallet: $15.00 per title.
ACCOUNTS RECEIVABLE:
. Statistical shortages charges:
Barnes & Noble and Waldenbooks chargeback their suppliers on a
statistical basis for short shipments. They each do a sampling of their
receiving on a regular basis to ascertain what the shortage chargeback
rate should be. PGW, in turn, verifies their receiving records to make
sure the shortage chargeback rate is correct.
On a quarterly basis, PGW will deduct from PUBLISHER'S account their pro
rata share of the statistical shortage deduction.
15
<PAGE>
SALES AND MARKETING:
. Catalog cancellation charges:
There is a $250.00 charge for canceling a product after it is cataloged.
. Advertising production charges:
Advertisements produced by PUBLISHERS GROUP WEST will be charged back to
the PUBLISHER at PGW's cost.
. Annotations:
Ingram and Baker & Taylor have numerous trade publications which annotate
new and backlist titles. The policies of these wholesalers state that
they may list any product they carry, and charge the publisher for each
annotation without prior approval. PGW pays 25 percent of the cost of
annotations.
. Microfiche charges:
All products carried by Ingram are included in their quarterly microfiche
at a charge of $4.50 per title. All products carried by Baker & Taylor
are included in their microfiche twice a year at a charge of $2.50 per
title.
. Sales material charges:
Each season PGW creates sales kits for each sales rep. Each kit includes
a color photocopy of each new TITLE. The cost for 25 color photocopies is
$28.00 per title. The cost will be $36.00 per PRODUCT if PUBLISHER has
both US and Canadian distribution with PGW; and double the cost for each
pair of double-listed PRODUCTS if PUBLISHER'S PRODUCT is listed in more
than one frontlist catalog. PUBLISHER can provide PGW with the sales kit
color photocopies.
. Trade show charges:
PGW participates in ABA. PUBLISHER'S participation should be discussed
with PUBLISHER'S account manager.
SPECIAL SERVICES:
. Publisher fulfillment charges:
Minimum charge, per order: $10.00.
All actual freight charges for fulfillment shipments will be charged to
PUBLISHER'S account
or will be sent collect.
Single copies: $.25 each product
One to ten cases of one title: $3.50 each case.
Over ten cases: $2.00 each case.
One full original pallet of same title: $30.00 each pallet.
Review copies with labels provided: $1.50 each product.
Scanning: $.10 each product.
. PUBLISHER may request return of shopworn PRODUCTS with a sorting cost
of $.30 per copy, $5.00 per full case, $40.00 per full pallet, and the
cost of return freight.
. Re-jacketing:
PGW will re-jacket cloth titles at a cost of $.25 per title with jackets
supplied by the PUBLISHER.
. Stickering charges:
PGW will sticker products with labels provided by the publisher at a cost
of $.10 per label.
16
<PAGE>
EXHIBIT E
PRODUCTS EXCLUDED FROM THE MARKETING
AND DISTRIBUTION AGREEMENT
Title Price ISBN
17
<PAGE>
EXHIBIT 10.11
AGREEMENT made this tenth day of November, 1999, by and between SPORTS
ILLUSTRATED, a division of Time Inc. ("SI"), a Delaware corporation with offices
at the Time & Life Building, Rockefeller Center, New York, New York 10020 and
Total Sports Inc. ("TS"), a Delaware corporation with offices at 105 Abeel
Street, Kingston, New York 12401.
WHEREAS, SI is in the business of compiling, developing, authoring, and
publishing sports information in electronic, printed and pictorial form,
including in SPORTS ILLUSTRATED Magazine (the "Magazine"), books and on the web
site known as "cnnsi.com" (the "CNNSI Site");
WHEREAS, TS is in the business of compiling, developing, authoring, and
publishing sports information in electronic, printed and pictorial form in books
and on its web sites such as "totalsports.net" (collectively, the "TS Sites");
WHEREAS, the parties desire to jointly and individually create, license,
reissue and produce books as further described in Section 4 below (collectively
and individually, the "Book(s)") for sale or license under the Total/SPORTS
ILLUSTRATED imprint (the "T/SI Imprint");
WHEREAS, each party wishes to authorize the use of its respective
trademarks for such purpose; and
WHEREAS, TS desires to produce, manufacture and distribute the Book(s)
through wholesale and retail and other channels of trade;
NOW, THEREFORE, the parties hereto hereby agree as follows;
1. Grant of License.
----------------
Subject to the conditions set forth herein, SI grants to TS, during
the Initial Term and any Renewal Term, as defined below, and throughout the
world (the "Territory"), the following rights:
Portions of this exhibit marked by [*] have been omitted pursuant to a
request for confidential treatment.
1
<PAGE>
1.1. an exclusive, nontransferable license to print, publish and sell
English language editions of the SI Book(s) and the T/SI Joint Book(s), as
defined below, and distribute the SI Book(s) and the T/SI Joint Book(s), through
TS's contractual arrangement with Publishers Group West ("PGW") or such other
distributor as TS shall then use for distribution of its books through normal
wholesale and retail trade channels and to stadiums and other sports venues,
sporting goods stores and through the TS Sites;
1.2. subject to SI's prior approval, an exclusive, nontransferable
license to distribute the SI Book(s) and the T/SI Joint Book(s), by direct
response;
1.3. subject to SI's prior consent, an exclusive license to exploit or
sublicense the following subsidiary rights in the SI Book(s) and the T/SI Joint
Book(s): book club, paperback reprint editions, serializations, audio books,
foreign language editions, electronic book editions and such other rights as the
parties shall mutually agree. "Electronic book edition" as used herein shall
mean versions of the Book(s) in information, storage and retrieval systems, and
all other non-book forms of copying, distribution or transmission, whether now
known or hereafter developed, intended to make the text of, and any
illustrations or photographs contained in the Book(s) available in visual form
for reading (including but not limited to, electronic or machine-readable media,
or online electronic data transmission). Notwithstanding the foregoing, the
parties acknowledge and agree that SI shall have the right to first offer the
opportunity to Time Warner Inc., its subsidiaries and other divisions to
exercise any of the rights granted herein. The parties agree that SI shall allow
any such Time Warner Inc. entities a period not to exceed sixty (60) days from
SI's receipt of a complete manuscript in which to notify SI whether such entity
desires to acquire rights in a Book(s). If such entity fails to make an offer
and commence negotiations with SI within said sixty (60) day period, or if SI
and such entity are unable to reach an agreement as to terms acceptable to SI
and TS within thirty (30) days after commencing negotiations, TS shall be free
to offer such right(s) to non-Time Warner entities. SI acknowledges and agrees
that it shall not offer any Time Warner Inc. entity any matching or topping
rights in connection with the disposition of any subsidiary right in the
Book(s).
1.4. Anything to the contrary in Section 1.2. above notwithstanding,
TS acknowledges and agrees that certain SI Book(s), and if mutually agreed upon,
certain TS Books as described in Section 4.6. below shall be distributed via
direct response, including via Time Warner web sites, by Time Inc. Home
Entertainment ("TIHE").
2. Reservation of Rights.
---------------------
2.1. All other rights with respect to the SI Trademark, the T/SI
Trademark, the SI Book(s) and the T/SI Joint Book(s), whether now existing or
which may hereafter come into existence, which are not expressly granted to TS
herein, including but not limited to, commercial and merchandising, video and
movie and television rights, are expressly reserved to SI. Notwithstanding the
foregoing, TS shall continue to have the unlimited and unrestricted right to use
the name, "Total Sports", as
2
<PAGE>
both a trademark and a trade name throughout the world and neither the
reservation herein to SI of all rights to the T/SI Trademark nor any actual use
by SI of such trademark shall limit or derogate from TS' prior rights to the
"Total Sports" name. Further, SI acknowledges and agrees that, except in
connection with the promotion and marketing of the Book(s), it shall neither
itself nor license others the right to exploit commercial and merchandising
rights in the T/SI Trademark.
2.2. TS shall have no right to use or distribute the SI Book(s) and
the T/SI Joint Book(s) or any derivative work thereof except as provided for
herein.
2.3. Anything to the contrary in Section 1.2 notwithstanding and
except as provided in Section 8.2, SI shall have the right to promote and
distribute the SI Book(s), the TS Book(s) and the T/SI Joint Book(s) by direct
response using the Time Inc. and/or Time Warner mailing lists, any Time Inc. or
Time Warner Inc. catalogues, any issue of SPORTS ILLUSTRATED Magazine, or other
Time Inc. or Time Warner Inc. publications, in any and all formats. TS shall
sell copies of the SI Book(s), the TS Book(s) and the T/SI Joint Book(s) to SI
for such direct response use at TS's direct cost to manufacture plus [*] percent
([*]%) (royalty inclusive). No royalty shall be payable by TS to SI in
connection with such sales.
2.4. SI shall have the right to distribute the SI Book(s), the TS
Book(s) and the T/SI Joint Book(s) as a Time Inc. premium and as a subscription
premium. TS shall sell copies of the SI Book(s), the TS Books(s) and the T/SI
Joint Book(s) to SI for such premium use at TS's direct cost to manufacture plus
[*] percent ([*]%) (royalty inclusive). No royalty shall be payable by TS to
SI in connection with such sales.
2.5. SI acknowledges and agrees that copies of the Books ordered
pursuant to Sections 2.3. and 2.4. above and/or Sections 8.2. and 8.3 and 4.6.5.
----------
below shall either (i) be purchased from TS's inventory and subject to
availability, or (ii) subject to reasonable notice to TS, SI may elect to "run
on" with any printing of the Book(s).
2.6. Subject to the royalty obligations set forth in Sections 11.2.1,
11.2.2, 11.2.3 and 11.2.5, the parties acknowledge and agree that each shall
have the right to sell hard copies and/or electronic editions of the Book(s) on
the T/S Sites, with respect to TS, and the CNNSI Site and/or any Time Warner web
sites with respect to SI. The parties agree that any electronic editions sold
shall be encrypted to prevent unauthorized copying and/or distribution.
Portions of this exhibit marked by [*] have been omitted pursuant to a
request for confidential treatment.
3
<PAGE>
3. Term.
----
3.1. The term of this Agreement shall commence upon the execution
hereof and shall continue for an initial period of three (3) years from the
initial publication of the Fall, 1999 list of T/SI Book(s) (the "Initial Term").
3.2. Provided that TS shall have paid to SI the sum of [*] Dollars
($[*]) during the Initial Term of the Agreement or within thirty (30) days
thereafter, TS shall have the right, upon sixty (60) days written notice to SI,
to renew the Agreement for an additional three (3) year term (the "Renewal
Term") on the terms and conditions as contained herein.
4. Book(s).
--------
4.1. The SI Book(s). The SI Book(s) shall be defined as book length
---------------
original works created or licensed by SI during the Initial Term and/or Renewal
Term and the Main Book Series. Additionally, TS and SI shall mutually agree on
any of SI's reissued and/or revised editions of previously published works to be
included in the SI Book(s) and shall further mutually agree on the publication
schedules for the Book(s). The parties agree that TS shall update the
"instructional line" of SI Book(s). Notwithstanding the foregoing, SI reserves
the exclusive right to create, print, publish, sell and/or giveaway: (i) custom
published publications of any nature ("Custom Published Books"); (ii) SPORTS
ILLUSTRATED branded books as a premium; and (iii) any motion picture and/or
television tie-in publications. "Custom Published Books" shall be defined as
books and/or excerpts prepared for a particular customer, which may bear such
customer's logo and which shall not be available alone at retail.
4.2. TS Book(s). The TS Book(s) shall be defined as book length
-----------
original works created or licensed by TS which bear the T/SI Trademark during
the Initial Term and/or Renewal Term. Additionally, TS and SI shall mutually
agree on any of TS's reissued and/or revised editions of previously published
works to be included in the TS Book(s).
4.3. T/SI Joint Book(s). T/SI Joint Books shall be defined as book
-------------------
length original works created during the Initial Term and/or Renewal Term to
which each of TS and SI have contributed content.
4.4. Competing Titles and Series. The parties acknowledge and agree
---------------------------
that each party may have an existing series of books and/or annual publications
which may compete and/or conflict with the other party's existing publications,
contemplated publications and/or business or editorial interests. In the event
that a party reasonably
Portions of this exhibit marked by [*] have been omitted pursuant
to a request for confidential treatment.
4
<PAGE>
determines in good faith that it would be deleterious to its interest to have a
particular title and/or series published under the T/SI Imprint, then the
objecting party shall so notify the other party and provide the other party with
its reason for excluding such book (which reason may not be based upon economic
advantage) and the parties agree that any such title and/or series shall not be
published under the T/SI Imprint; however, such title and/or series may be
published by the rights holder in such book under its own imprint or under
license to a third party publisher.
4.5. Titles Specifically Excluded. The parties acknowledge and agree
----------------------------
that the titles listed on Exhibit A attached hereto and made part hereof shall
be excluded from the Book(s) which are the subject of this Agreement. Subject to
Section 4.4., titles may be added to Exhibit A during the Initial Term and any
Renewal Term of this Agreement.
4.6. TIHE Books.
-----------
4.6.1. TIHE currently distributes via direct mail a certain series of
hard cover "coffee table" books which are SPORTS ILLUSTRATED-branded sports
retrospective books featuring SI writers and photographs from SPORTS ILLUSTRATED
Magazine (the "Main Series Books").
4.6.3. The parties acknowledge and agree that during the term hereof,
TS shall have the right to (i) print, publish and sell paperback editions of the
Main Series Books under the T/SI Imprint through wholesale, retail and other
channels of trade with the express exception of sales via the Internet and/or
through direct response, and (ii) exploit or sublicense the subsidiary rights
set forth in Section 1.3 in the Main Series Books with the express exception of
book club rights.
4.6.4. In the event that TS elects to publish paperback editions of
the Main Series Books, the development costs, including of printing, paper and
binding, of which shall have been paid by TIHE, then TS shall pay to SI a
royalty inclusive per copy unit cost of (i) an amount equal to [*] percent
([*]%) of TS's suggested retail price for a print run of [*] or more, or (ii) an
amount equal to [*] percent ([*]%) of TS's suggested retail price for a print
run of less than [*]. TIHE shall be responsible for the manufacture of such
paperback editions of the Main Series Books.
4.6.5. In the event that TIHE desires to license TS Book(s) for
distribution through direct response channels of trade, TIHE shall so notify TS
and the parties shall enter into a license agreement for the term of copyright
upon the following terms: (i) if the TIHE edition of the TS Book will have a
suggested retail price of $[*] or more, then in consideration for such exclusive
direct response rights, TIHE shall pay to
Portions of this exhibit marked by [*] have been omitted pursuant to a
request for confidential treatment.
5
<PAGE>
TS a flat fee of [*] Dollars ($[*]), or (ii) if the TIHE edition of the TS Book
will have a suggested retail price of less than $[*], then in consideration for
such exclusive direct response rights, TIHE shall pay to TS a flat fee of [*]
Dollars ($[*]). TS agrees that in connection with any such license, TS shall
provide TIHE with film or a digital version of the TS Book(s) at cost.
Notwithstanding the foregoing, the parties agree that in the event that TIHE
desires a small, mutually agreed upon quantity of copies solely for the purpose
of testing the marketability of such TS Book through direct response channels,
than TS agrees that in lieu of the flat fee provided for above, TIHE shall
purchase such test copies at TS's direct cost to manufacture plus [*] percent
([*]%). However, in the event that the test is successful, and TIHE elects to
enter into a license as set forth above, TIHE shall thereupon pay to TS either
[*] Dollars ($[*]) or [*] Dollars ($[*]), as applicable. No royalties shall be
payable to SI in connection with such direct response license to TIHE.
4.6.6. The parties acknowledge and agree that TS shall not be entitled
to any royalty and/or compensation in connection with TIHE's sale or
distribution of the work entitled SPORTS ILLUSTRATED 2000 SPORTS ALMANAC or
future editions of the SPORTS ILLUSTRATED SPORTS ALMANAC. TS acknowledges and
agrees that anything to the contrary in Section 1.2 notwithstanding, TIHE shall
have the non-exclusive right to distribute the SPORTS ILLUSTRATED 2000 SPORTS
ALMANAC or future editions of the SPORTS ILLUSTRATED SPORTS ALMANAC through
direct response channels of trade and via the Internet.
5. Ownership.
----------
5.1. SI. Subject to the rights herein granted to TS, it is expressly
---
understood that, as between the parties, SI shall be the exclusive owner of all
right, title and interest including copyright, in and to SI Book(s), in the SI
Trademark and the T/SI Trademark. SI reserves to itself complete editorial
freedom in the form and content of the SI Book(s) and may alter the same from
time to time in its discretion. Notwithstanding the foregoing, TS shall continue
to have the unlimited and unrestricted right to use the name, "Total Sports", as
both a trademark and a trade name throughout the world and neither the
reservation herein to SI of all rights to the T/SI Trademark nor any actual use
by SI of such trademark shall limit or derogate from TS' prior rights to the
"Total Sports" name.
5.2. TS. Subject to the rights herein granted to SI, it is expressly
---
understood that, as between the parties, TS shall be the exclusive owner of all
right, title and interest including copyright, in and to the TS Book(s) and in
the TS trademark (the "TS Trademark"). TS reserves to itself complete editorial
freedom in the form and content of the TS Book(s) and may alter the same from
time to time in its discretion.
Portions of this exhibit marked by [*] have been omitted pursuant
to a request for confidential treatment.
6
<PAGE>
5.3. T/SI Joint Book(s). SI and TS shall each have an undivided one-
------------------
half ( 1/2) interest in the copyrights in the T/SI Joint Book(s).
Notwithstanding the foregoing, during the Initial Term and any Renewal Term of
this Agreement, such T/SI Joint Book(s) will only be produced, licensed,
distributed and sold as set forth in this Agreement. Upon termination of this
Agreement, each party shall have the non-exclusive right to exploit any rights
in the T/SI Joint Book(s) granted herein, after consultation with the other
party and provided that the exploiting party shall pay to the other party the
applicable royalty or revenue share payable in connection with the exploitation
of such right as set forth in Section 11 and provided that with respect to SI,
SI shall remove the T/SI Trademark from such T/SI Joint Book(s) and with respect
to TS, TS shall remove the T/SI Trademark and the SI Trademark, if applicable,
from such T/SI Joint Book(s), upon the first reprinting of said Book(s)
following termination of this Agreement. In the event a party wishes to exploit
any right in a T/SI Joint Book(s) not granted herein, the parties shall mutually
agree on such exploitation and any royalty and/or division of revenues received
in connection with such exploitation.
5.4. Copyright. Except with respect to Contributed Content, as
----------
defined in Section 5.5 below, upon termination of this Agreement, each party
agrees to assign and/or transfer to the other without payment any rights in the
SI Book(s) with respect to TS, or TS Book(s) with respect to SI, or derivative
works therefrom, which such other party may have inadvertently or otherwise
acquired in the other party's Book(s).
5.5. Contributed Content. In the event that a party provides
--------------------
content, excluding any trademarks, to be included in the other party's Book(s)
(the "Contributed Content"), the contributing party grants the other party a
perpetual, non-transferable, non-exclusive license to use such content in any
and all editions of the other party's Book(s) and the advertising, promotion and
publicity thereof.
5.6. T/SI Trademark. Upon termination of this Agreement, each of TS
--------------
and SI shall, except as provided Sections 5.3 and/or 15.1, immediately cease all
uses of the T/SI Trademark and refrain from any further use of the T/SI
Trademark.
6. Editorial Responsibilities.
---------------------------
6.1. SI will deliver text and photographs for the SI Book(s), in a
format to be mutually agreed upon and suitable for reproduction. TS shall
reimburse SI for any pre-approved costs incurred with respect to the creation
and preparation of the SI Books
7
<PAGE>
(specifically excluding any Main Series Books), including but not limited to
costs in connection with Third Party Materials, as defined below, photo
duplication costs of $[*] per dupe and/or with services rendered by third
parties.
6.2. SI agrees to obtain, at TS's expense, written permission for
any content or copyrighted or other material for which permission is necessary
which is included in the SI Book(s) ("Third Party Materials") or the
advertising, promotion and publicity thereof in all necessary and mutually
agreed upon media. Third Party Materials include, by way of example, non-
original or licensed from third party articles, features, photographs, art work,
maps, content, text, code, graphics or other materials used in connection with
the SI Book(s). SI acknowledges and agrees that there shall be no charge to TS
for any text material owned by SI contained in the SI Book(s). SI further agrees
that it will use reasonable commercial efforts to provide photographs for the
Book(s) at its most favorable rates, however TS agrees to reimburse SI for
retaining a dedicated part time photo researcher for the Book(s). The parties
acknowledge and agree that with respect to SI Book(s) entitled Twentieth Century
Sports, SI has contracted for the services of a part time photo researcher for a
fee of $[*], which will be payable by TS upon completion of the research.
7. Publication.
-----------
7.1. Publication of each Book(s) will be at TS's expense at such
time and in such style and manner, whether hard bound or paperback, as the
parties mutually determine. Subject to the provisions of Section 10, each party
shall have the right of final approval as to design, cover art and copy, and
title with respect to its Book(s). Pricing of the Book(s) shall be determined by
TS in its sole discretion.
7.2. Each party shall read, correct and return any proofs of its
Book(s). TS may charge to SI the cost of alterations in type, plate or film for
SI Book(s) requested by SI and made by TS, other than those due to printer's
errors, in excess of [*] percent ([*]%) of the charge for composition.
7.3. In manufacturing the Book(s), TS represents and warrants that
they shall be in quality equal to or greater than the hard cover edition of Home
Run: My Life in Pictures. Hank Aaron with Dick Schapp, 1999 and the paperback
edition of The Total Baseball Catalog: Unique baseball stuff and how to buy it.
Edited by David Pietrusza, Lloyd Johnson & Bob Carroll, 1998 and of such style
and appearance as to be consistent with the protection and enhancement of the
T/SI Imprint, the SI Trademark and the TS Trademark and the goodwill pertaining
thereto.
Portions of this exhibit marked by [*] have been omitted pursuant to a
request for confidential treatment.
8
<PAGE>
7.4. TS will publish a Fall, 1999 list of the Book(s) as set forth
on Exhibit B attached hereto. Commencing in calendar year 2000, it is the intent
of the parties that, subject to SI's timely delivery of SI Book(s) and/or any
necessary approvals, TS will publish approximately twenty (20) to thirty (30)
Book(s) annually.
7.5. The SI Book(s) shall bear the following notice and/or such
other legal notices as are reasonably requested by SI for the protection of the
copyright: (c) [year of publication] Time Inc. Used by Permission. All Rights
Reserved. In the event SI licenses rights from a third party, SI shall notify TS
with respect to the appropriate copyright notice. TS shall register copyright in
and to the SI Book(s) in the name of Time Inc., or as otherwise instructed by
SI, in conformity with United States copyright law and the Universal Copyright
Convention. TS is authorized to execute all documents that may be necessary or
appropriate to register copyright in the SI Book(s) or to record the assignment
or transfer of any rights under copyright in any manner provided for by law
anywhere in the world. SI agrees to cooperate to the extent requested by TS in
furnishing information and executing documents required in connection with
registration of copyright or the recording of the transfer of any exclusive
rights under this Agreement or any amendment to this Agreement.
7.6. Subject to Section 10, the parties shall mutually approve all
advertising, promotion and publicity of the Book(s). SI, in its sole discretion,
may make pages in the Magazine available to promote and advertise the Book(s).
Further, neither party shall make any public announcements with respect to the
Book(s) and/or the T/SI Imprint without the prior consent of the other party.
The parties agree that SI shall retain Laurence Hughes Communications, a public
relations firm, for a period of two (2) months commencing as of April, 1999 to
publicize and promote the T/SI Imprint. TS shall be responsible for paying such
firm directly for its services and related expenses.
8. Distribution.
-------------
8.1. Wholesale and Retail Trade Channels. TS shall, except as
-----------------------------------
provided herein, have the exclusive right and sole obligation, to distribute the
Book(s) (i) through wholesale and retail trade channels and has entered into an
agreement with PGW for such distribution, and (ii) to stadiums and other sports
venues, sporting goods stores and through the TS Sites. In the event TS desires
to retain a different distributor, TS shall consult with SI prior to entering
into an agreement with any such distributor.
8.2. Direct Response. Except with respect to the Main Series
----------------
Books, SI and its affiliated companies shall have the non-exclusive right to
distribute the Book(s) outside of normal wholesale and retail trade channels in
the manner and markets set forth
9
<PAGE>
in Section 2.3. TS shall sell copies of the SI Book(s), the TS Book(s) and the
T/SI Joint Book(s) to SI for such use at TS's direct cost to manufacture plus
[*] percent ([*]%).
8.3. Advertiser Premium. Each party shall have the non-exclusive
-------------------
right to sell or license advertiser premium rights in the Book(s), subject to
the prior approval of the other. The parties shall reasonably endeavor to co-
ordinate their activities with respect to potential customers and advertisers
prior to any solicitation. In the event of a sale or license of such advertiser
premium rights in a Book(s), the parties shall share revenues as follows: [*]%
of the net proceeds received by the selling party for the advertiser premiums
(and not the amount billed for advertising insertions in SPORTS ILLUSTRATED
and/or the CNNSI Site with respect to SI or a TS publication or TS Sites with
respect to TS) to the party who had made the sale and [*]% of the net proceeds
received to the other party. "Net" as used herein shall mean the amount received
for such advertiser premium less the unit cost and any fulfillment,
manufacturing, customizing and/or freight costs. Revenues payable by TS to SI
shall be payable as set forth in Section 12 and revenues payable by SI to TS
shall be payable within sixty (60) days of SI's receipt. In the event that SI
makes such an advertiser premium sale, TS shall sell copies of the Book(s) to SI
for such advertiser premium use at TS's direct cost to manufacture. The parties
acknowledge and agree that copies of the work entitled Twentieth Century Sports
purchased and distributed as a premium by SI in connection with its "Twentieth
Century Sports Awards" event will be considered as "advertiser premiums" and
accounted for in accordance with the provisions of this Section 8.3.
8.4. Custom Published Books. Pursuant to the provisions of Section
----------------------
4.1, SI shall have the right to create, print, publish, sell and/or giveaway
Custom Published Books and/or SI branded books as premiums. SI may request TS to
perform editorial and/or production services in connection with such Custom
Published Books, upon terms to be negotiated. SI acknowledges and agrees that TS
shall have the right to create, print, publish, sell and/or giveaway custom
published books and/or TS branded books as premiums.
9. TS Content. TS shall grant a license to certain of its content to the
-----------
Magazine and/or the CNNSI Site, upon terms to be negotiated.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
10
<PAGE>
10. Trademark.
---------
10.1. Subject to the terms and conditions hereinafter set forth, SI
hereby grants to TS and its sublicensees a non-exclusive license to use the SI
Trademark and a exclusive license to use the T/SI Trademark in the Territory
during the Initial Term and any Renewal Term solely in relation to the
distribution or exploitation of the Book(s), and the advertising, promotion and
publicity thereof. TS and its sublicensees' shall not use the SI Trademark
and/or the T/SI Trademark except as specifically set forth in this Agreement.
10.2. Subject always to SI's prior written approval, which approval
may be withheld in SI's sole and absolute discretion, TS and its sublicensees
may use the SI Trademark and the T/SI Trademark on TS's advertising or
promotional materials which relate to the distribution and exploitation of the
Book(s) during the Initial Term and any Renewal Term. Any such material shall
first be submitted by TS to SI for SI's prior written approval. Once the use of
the SI Trademark and/or the T/SI Trademark on TS's advertising or promotional
materials has been approved by SI, the same or substantially similar usage need
not be resubmitted for re-approval by SI and may be used again in the like or
substantially similar manner.
10.3. TS's use of the SI Trademark and the T/SI Trademark shall
conform to the quality standards required by SI hereunder and prescribed by SI
from time to time during the Term. TS's use of the SI Trademark and the T/SI
Trademark shall remain at all times subject to SI's control and direction. SI
shall substantively respond to any TS request for approval of Trademark usage
within ten (10) business days, and shall reimburse TS for any costs incurred by
TS in the event that SI insists that TS destroy or redo materials (e.g. book
jackets, advertisements, brochures, etc.) due to SI's failure to so respond.
10.4. At no time shall TS use the SI Trademark and the T/SI Trademark
or authorize others to use the SI Trademark and the T/SI Trademark except as may
be specifically permitted by this Agreement or subsequently approved in writing
by SI. TS shall not use or display the SI Trademark and the T/SI Trademark in
any deceptive manner or misleading manner or in any manner which is likely to
bring SI into disrepute. In any use by TS of the SI Trademark and the T/SI
Trademark, TS will comply with such instructions and directions as SI may
reasonably specify from time to time. The protection of the SI Trademark and the
T/SI Trademark is a material provision of this Agreement.
10.5. TS hereby acknowledges that the SI Trademark and the T/SI
Trademark are valuable assets belonging to Time Inc. and that all rights in and
to the SI Trademark and the T/SI Trademark are and shall remain the sole
property of Time Inc. Nothing in this Agreement shall confer any right of
ownership in the SI Trademark and the T/SI Trademark in TS. TS acknowledges,
and shall not at any time contest, Time Inc.'s ownership or the validity of the
SI Trademark and the T/SI Trademark. TS acknowledges that all rights accruing
from its use of the SI Trademark and the T/SI
11
<PAGE>
Trademark shall inure to the benefit of Time Inc., and TS shall execute any
documents necessary to acknowledge such rights in SI.
10.6. TS and its sublicensees shall use the SI Trademark hereunder
only in the form of the logotype as used on the cover of the Magazine and the
T/SI Trademark only in the form of the logotype as used on Exhibit D and only in
connection with the Book(s).
10.7. TS shall promptly notify SI of any use of the SI Trademark
and/or the T/SI Trademark (or any confusingly similar trademark) by any third
party of which TS becomes aware. SI shall then decide, in its sole discretion,
whether proceedings should be commenced against said third party. In the event
that SI shall as a result thereof commence a proceeding or any other form of
action, TS shall cooperate fully with SI to whatever extent SI deems necessary
or appropriate to prosecute such action or proceeding, provided that all
expenses of such action or proceeding shall be borne by SI and all recoveries
(including settlement) resulting from any such action or proceeding shall belong
to SI. Under no circumstances shall TS commence any action to protect the SI
Trademark and/or the T/SI Trademark without first obtaining the express written
authorization of Time Inc.'s General Counsel.
10.8. TS shall assist SI, at SI's request and expense, in the
protection of SI's rights in the SI Trademark and T/SI Trademark. TS shall
execute and deliver to SI in such form as SI may reasonably request all
documents necessary to effectuate trademark/copyright protection or registration
therein.
10.9. All Book(s), packaging and related marketing materials using
the SI Trademark and/or the T/SI Trademark shall bear the following notice
and/or such other legal notices as are reasonably requested by SI for the
protection of the SI Trademark and the T/SI Trademark: "SPORTS ILLUSTRATED (R)
and Total/ SPORTS ILLUSTRATED are trademarks of Time Inc. Used Under License."
10.10. At no time shall SI use the T/SI Trademark or authorize others
to use the T/SI Trademark except as may be specifically permitted by this
Agreement. Upon termination of this Agreement, each of TS and SI shall, except
as provided Sections 5.3 and/or 15.1, immediately cease all uses of the T/SI
Trademark and refrain from any further use of the T/SI Trademark.
11. Consideration.
--------------
In consideration for SI granting to TS the foregoing rights in the SI
Trademark, T/SI Trademark, the SI Book(s) and the content in the T/SI Joint
Book(s), TS shall pay to SI the following:
12
<PAGE>
11.1. Minimum Guarantee.
-----------------
11.1.1. During the Initial Term, TS guarantees to pay SI a
minimum guarantee of [*] Dollars ($[*]) per each twelve (12) month period during
the Initial Term commencing upon publication of the Fall, 1999 list (the
"Minimum Guarantee"), payable as follows: (i) a minimum of $[*] not later than
December 31, 1999; (ii) a minimum of $[*] not later than June 30, 2000, (iii) a
minimum of $[*] not later than December 31, 2000, (iv) a minimum of $[*] not
later than June 30, 2001, (v) a minimum of $[*] not later than December 31,
2001, and (vi) a minimum of $[*] not later than June 30, 2001, If the royalties
and other revenues actually received by SI as of such dates are less than the
Minimum Guarantee, TS shall pay SI the difference within ten (10) business days
of such dates. All payments made to SI hereunder, including without limitation
payments of royalties and subsidiary rights income, shall be applied against
such Minimum Guarantee.
11.1.2. During the Renewal Term, TS guarantees to pay SI a
Minimum Guarantee per each twelve (12) month period of the Renewal Term, of the
greater of (i) [*] Dollars ($[*]) or (ii) the average annual revenues paid to SI
during the Initial Term, payable in six (6) installments each June 30 and
December 31 during the Renewal Term. If the royalties and other revenues
actually received by SI as of such dates are less than the Minimum Guarantee, TS
shall pay SI the difference within ten (10) business days of such dates. All
payments made to SI hereunder, including without limitation payments of
royalties and subsidiary rights income, shall be applied against such Minimum
Guarantee.
11.2. Royalties. TS agrees to pay to SI a royalty based on the
---------
amount received, on each copy of the Book(s) sold by TS, less actual returns and
a reasonable reserve against returns (such reserve not to exceed [*]% unless the
amount of actual returns exceed [*]%, in which event, the selling party may
increase the reserve to a percentage commensurate with such actual return rate
and to be held no longer than two (2) semi-annual royalty periods for hard cover
editions and four (4) semi-annual royalty periods for paperback editions as set
forth in Section 12.1. below), as follows:
11.2.1. With respect to copies sold in a hardcover edition:
[*]% up to and including [*] copies sold; [*]% up to and including [*] copies
sold; and [*]% on all copies sold thereafter;
11.2.2. With respect to copies sold in a trade paperback
edition: [*]% on all copies sold.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
13
<PAGE>
11.2.3. With respect to copies sold in a mass market edition:
[*]% up to and including [*] copies sold; and [*]% on all copies sold
thereafter.
11.2.4. With respect to copies sold in an audio book edition:
[*]% on all copies sold.
11.2.5. With respect to copies sold in an electronic edition:
[*]% on all copies sold.
11.2.5. With respect to copies sold to or through a book club
or for export: [*]% on all copies sold.
11.2.7. In the event that a third party license (e.g. with a
league, organization, institution or other entity) is required in connection
with the publication of a Book(s) and such license provides for a royalty
payable to such third party, then the royalty payable to SI hereunder shall be
reduced by a percentage equal to the royalty payable to such third party, but in
no event shall the royalty payable to SI be less than the greater of (i) [*]
([*]) the prevailing royalty rate set forth above or (ii) the royalty
payable to such third party. The parties acknowledge and agree that as of
execution hereof, royalties are payable to Major League Baseball, the National
Hockey League and the National Football League.
11.2.8. No royalties shall be payable on copies given away for
publicity purposes, sold to SI pursuant to Sections 2.4, 2.5., 4.6. and 8.2. or
sold at or below the cost of manufacture.
11.3. Royalties on SI Sales. In the event of sales of the Book(s) by
---------------------
SI, SI agrees to pay to TS a royalty based on the amount received, on each copy
of the Book(s) sold by SI, less actual returns and a reasonable reserve against
returns (such reserve not to exceed [*]% unless the amount of actual returns
exceed [*]%, in which event, the selling party may increase the reserve to a
percentage commensurate with such actual return rate and to be held no longer
than [*] ([*]) semi-annual royalty periods for hard cover editions and [*] ([*])
semi-annual royalty periods for paperback editions as set forth in Section 12.1.
below, at the applicable rate set forth in Sections 11.2.1 through 11.2.6.
11.4. Rights Income. The parties shall share in any net revenues
-------------
("net revenues" as used herein shall mean gross revenues actually received less
any sums payable to agents or taxing authorities) derived from the license of
any subsidiary rights in the Book(s) as set forth in Section 1.3., as follows:
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
14
<PAGE>
11.4.1 With respect to book club, paperback reprint, audio books and
electronic book licenses, parties shall each be entitled to [*] percent ([*]%)
of the net revenues received from any such licensee;
11.4.2. With respect to foreign language editions, the party which
licenses such right (pursuant to Section 1.3.) shall be entitled to [*] percent
([*]%) of the net revenues received from any such licensee and the other party
shall be entitled to [*] percent ([*]%).
11.5. If any right specified in Section 1.3 is sub-licensed by
either party to a company that is affiliated with the licensing party, it is
understood that such license will be negotiated at arm's length and on terms
similar to the terms of current agreements for similar licenses between the
licensing party and unaffiliated companies.
12. Statements and Accountings.
---------------------------
12.1. TS shall, during the Initial Term and any Renewal Term hereof,
render semi-annual statements of account in the months of June and December
covering the number of books shipped, returned, and held against returns, as
well as net sales of the book and sale, lease, or licensing of any and all other
rights in the Book(s) to the last day of March and the last day of September
preceding, and shall pay with the statement the amount due SI. Statements of
account shall be forwarded to SI as herein provided whether or not any Book(s)
have been shipped and whether or not royalties have been earned during the
preceding accounting period.
12.2. SI shall, during the Initial Term and any Renewal Term hereof,
render semi-annual statements of account in the months of June and December
covering the number of books shipped, returned, and held against returns, as
well as net sales of the book and sale, lease, or licensing of any and all other
rights in the Book(s) to the last day of March and the last day of September
preceding, and shall pay with the statement the amount due TS.
12.3. Each party shall keep accurate books and records regarding the
transactions contemplated herein, which books and records shall be available for
inspection and copying by the other party or its representatives upon reasonable
notice at any time during regular business hours for a period of two (2) years
following the termination of this Agreement. Each party shall have the right to
audit and/or inspect such records two (2) times each year in order to verify the
calculations of statements of account
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
15
<PAGE>
rendered hereunder. Such audit and/or inspection shall be conducted during
regular business hours at the audited company's facilities (or at such other
places where records are located) upon not less than ten (10) business days
prior written notice to the audited party. The audited party agrees to provide
such auditors with access to the relevant records and facilities. The auditing
party shall bear the cost of such audit and/or inspection, unless underpayment
of amounts due is thereby discovered which has resulted (or will result in the
future) in the underpayment to the auditing party of ten percent (10%) or more
of the amount to which it is entitled during the period for which the audit
and/or inspection is performed, in which event the cost of such audit and/or
inspection shall be borne by audited party. All underpayments shall be promptly
remitted to the auditing party together with interest at the prime rate of
interest offered by Citibank N.V.
12.4. All payments made hereunder shall be in U.S. currency.
12.5. The receipt or acceptance by a party of any of the statements
furnished hereunder or of any royalties paid hereunder (or the cashing of any
royalty checks paid hereunder) shall not preclude the receiving party from
questioning the correctness thereof within one (1) year of the receipt thereof,
and in the event that any inconsistencies or mistakes are discovered in such
statements or payments, they shall immediately be rectified and the appropriate
payment made.
12.6. In the event TS grants a license and SI is entitled to a share
of the proceeds of such license, SI shall be entitled to payment of SI's share
thereof, within thirty (30) days after receipt thereof by TS. TS shall provide
SI with copies of such licenses granted.
12.7. In the event SI grants a license and TS is entitled to a share
of the proceeds of such license, TS shall be entitled to payment of TS's share
thereof, within thirty (30) days after receipt thereof by SI. SI shall provide
TS with copies of such licenses granted.
13. Copies for SI. TS shall provide SI with fifteen (15) copies of each
--------------
Book(s) at no cost to SI. TS shall provide SI with additional complimentary
copies as reasonably needed for publicity purposes. SI shall have the right to
purchase additional copies of the Book(s), for SI's internal uses at TS's direct
cost to manufacture the Book(s) plus [*] percent ([*]%), subject to
availability.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
16
<PAGE>
14. Additional Provisions.
----------------------
14.1. If either party hereto commences an action or has an order for
relief entered against it under the federal bankruptcy laws as now or hereafter
constituted or any other federal or state bankruptcy, insolvency or other law,
or if within one hundred twenty (120) days after the commencement against a
party of such an action, such action shall have been consented to or shall not
have been dismissed or all orders or proceedings thereunder affecting the
operation of such party shall not have been stayed, or if a party shall fail
generally to pay its debts as such debts become due or shall make an assignment
for the benefit of its creditors, or if a party discontinues its business or
within one hundred twenty (120) days of entry of a decree appointing a trustee
or a receiver for such party or its business, such appointment shall not have
been vacated, the licenses granted herein and this Agreement shall terminate
upon written notice by one party to the other and all royalties on sales
theretofore made shall become immediately due and payable.
14.2. If TS defaults in the performance of any of its obligations
provided for in this Agreement (including any failure to make any payment in
excess of One Thousand Dollars ($1,000) hereunder on the due date), and any such
default is not cured by TS within thirty (30) business days of notice from SI of
such default and setting forth the particulars thereof, then SI shall have the
right to terminate the license granted hereby and this Agreement upon written
notice to TS.
14.3. If SI defaults in the performance of any of its obligations
provided for in this Agreement and any such default is not cured by SI within
thirty (30) business days of notice from TS of such default and setting forth
the particulars thereof, then TS shall have the right to terminate this
Agreement upon written notice to SI.
14.4. It is agreed and understood that should any act of any
government or war or fire, flood or labor troubles in the factories or plants of
TS which are beyond the reasonable control of TS, or in the factories or plants
of those manufacturing items necessary for the publication of the Book(s)
prevent the performance by TS of the provisions of this Agreement, then such
non-performance by TS shall not be considered to be a breach of this Agreement,
and such non-performance shall be excused for so long as such condition persist
except that if such condition persists for a period of six (6) months, or
longer, SI shall have the right to terminate this Agreement upon written notice
to TS.
15. Termination.
------------
15.1. Upon any termination of this Agreement pursuant to Section 14
above, TS shall immediately cease manufacturing, producing, advertising,
promoting, distributing and selling the SI Book(s), the T/SI Joint Books and any
TS Book(s) which utilize the SI Trademark and/or the T/SI Trademark and shall
promptly send to SI a complete written report on TS's then current inventories
of SI Books and the T/SI Joint Books and any TS Book(s) which utilize the SI
Trademark and/or the T/SI Trademark. TS shall have a period of one hundred
eighty (180) days following expiration or any
17
<PAGE>
termination other than pursuant to Section 14 above in which to sell SI Book(s),
the T/SI Joint Books and any TS Book(s) which utilize the SI Trademark and/or
the T/SI Trademark previously manufactured or in production as of the effective
date of termination or expiration of this Agreement, subject to the obligation
of TS to account for and to pay royalties as provided in Section 11 above with
respect to such sales. Thereafter, all copies of the SI Books and the T/SI Joint
Book(s) and any TS Book(s) which utilize the SI Trademark and/or the T/SI
Trademark shall be promptly destroyed or otherwise disposed of to the mutual
satisfaction of the parties. TS shall furnish to SI written certification,
executed by a responsible officer, attesting to such destruction.
15.2. Upon and after the expiration of termination of this Agreement,
all rights granted to TS hereunder in the SI Trademark and the SI Book(s) shall
revert to SI, and TS shall refrain from further use of the SI Trademark and the
SI Book(s) or any further reference thereto, direct or indirect. Rights in the
T/SI Trademark shall be as set forth in Section 5.6.
15.3. Upon the expiration or termination of this Agreement, all
materials created by TS for the purpose of printing the SI Trademark, the T/SI
Trademark and the SI Book(s) shall be destroyed by TS unless TS and SI shall
mutually agree to some other use or disposition thereof. TS shall furnish to SI
written certification, executed by a responsible officer, attesting to such
destruction.
15.4. Upon and after the expiration of termination of this Agreement,
all rights granted to SI hereunder in the TS Trademark and the TS Book(s) shall
revert to TS, and SI shall refrain from further use of the TS Trademark and the
TS Book(s) or any further reference thereto, direct or indirect. Rights in the
T/SI Trademark shall be as set forth in Section 5.6.
15.5. Upon the expiration or termination of this Agreement, all
materials created by SI for the purpose of printing the TS Trademark, the T/SI
Trademark and the TS Book(s) shall be destroyed by SI unless TS and SI shall
mutually agree to some other use or disposition thereof. SI shall furnish to TS
written certification, executed by a responsible officer, attesting to such
destruction.
16. Out of Print. If at any time two (2) years or more after the
-------------
original publication date of a particular SI Book(s), said SI Book(s) is out-of-
print (no longer published) for a period of twelve (12) or more months, TS will,
upon written request from SI, either restore the same to print (publication)
within twelve (12) months, or revert to SI all rights of SI in the SI Book(s).
Any licenses previously granted will continue in effect, and TS will be entitled
to its share of amounts received under any such licenses. A Book(s) will be
deemed in print (offered for publication) so long as it is in stock or on sale
in any print edition by TS or any of its licensees
17. Copyright Infringement. If the copyright of the Book(s) is infringed,
-----------------------
and if the parties proceed jointly, the expenses and recoveries, if any, shall
be shared equally.
18
<PAGE>
If the parties elect not to proceed jointly, either party shall have the right
to prosecute such action, and such party shall bear the expenses thereof, and
any recoveries shall be shared equally after the party prosecuting such action
has first recouped its expenses; and if such party shall not hold the record
title of the copyright, the other party hereby consents that the action be
brought in its name.
18. Warranties and Representations.
-------------------------------
18.1. SI represents and warrants:
18.1.1. SI has full power and authority to enter into this
Agreement, to perform all of its obligations hereunder, and its entry into this
Agreement does not violate any other agreement by which it is bound.
18.1.2. The SI Book(s), SI's Contributed Content and the
conduct of SI in performing this Agreement shall at all times comply with all
applicable United States federal, state and local laws, rules and regulations.
18.1.3. SI has acquired and shall maintain all rights and
licenses necessary in connection with the SI Book(s) and any Contributed Content
provided by SI for the T/SI Joint Book(s) hereunder, including without
limitation all copyrights and still photography rights.
18.1.4. The SI Book(s) and any Contributed Content provided by
SI for the T/SI Joint Book(s) shall not infringe upon any United States
statutory or common law copyright and shall not constitute, under United States
federal, state or local laws, a defamation, or invasion of the right of privacy
or publicity, or infringement of any other right of any kind, of any third
party.
18.1.5. Time Inc. owns the SI trademark for magazines and books
in the United States.
18.1.6. SI will not use the TS Trademark and the TS Books in
any way not authorized by this Agreement.
18.2. TS represents and warrants:
18.2.1 TS has full power and authority to enter into this
Agreement, to perform all of its obligations hereunder, and its entry into this
Agreement does not violate any other agreement by which it is bound.
18.2.2. The TS Book(s), the TS Contributed Content and the
conduct of TS in performing this Agreement shall at all times comply with all
applicable United States federal, state and local laws, rules and regulations.
18.2.3. TS has acquired and shall maintain all rights and
licenses
19
<PAGE>
necessary in connection with the TS Book(s) and any Contributed Content provided
by TS for the T/SI Joint Book(s) hereunder, including without limitation all
copyrights and still photography rights.
18.2.4. The TS Book(s) and any Contributed Content provided by
TS for the T/SI Joint Book(s) shall not infringe upon any United States
statutory or common law copyright and shall not constitute, under United States
federal, state or local laws, a defamation, or invasion of the right of privacy
or publicity, or infringement of any other right of any kind, of any third
party.
18.2.5. TS owns the TS Trademark for books in the United
States.
18.2.6. TS will not use the SI Trademark or the SI Book(s) in
any way not authorized by this Agreement;
18.2.7. TS's manufacture, sale and distribution of the Book(s)
will comply in all respects with all applicable federal, state and local laws,
ordinances, rules and regulations (including manufacturing codes). In the event
that TS contracts out the manufacture or distribution of the Book(s), TS shall
use reasonable good faith efforts to insure that said manufacturer or
distributor complies with the terms of this subparagraph.
19. Indemnification. SI and TS shall indemnify and hold each other
----------------
harmless from and against any and all liability, loss, damage or injury,
including reasonable counsel fees, arising out of a breach, or an allegation
which if true would constitute a breach, of any representation or warranty set
forth herein, provided that the party seeking to enforce such indemnity shall
provide to the indemnifying party prompt notice of any claim giving rise to such
indemnity and the opportunity to defend the same with counsel of its own
choosing.
20. Insurance. TS shall maintain insurance in an amount not less than
----------
three million dollars ($3,000,000) aggregate, one million dollars ($1,000,000)
per occurrence, with a carrier reasonably satisfactory to SI, concerning and
covering any and all claims which may arise out of TS's design, publication,
distribution and sale of the Book(s). Such insurance shall name SI as an
additional insured. Each such policy shall have attached an endorsement to the
effect that such policy shall not be modified, canceled or terminated without at
least thirty (30) days prior written notice to SI.
20
<PAGE>
21 Non-Compete. During the Initial Term and/or any Renewal Term,TS will
------------
not enter into any arrangement for the publication of books with any direct
competitors of SI, including but not limited to: [ * ]. without SI's prior
written consent. Notwithstanding the foregoing, SI acknowledges and agrees that
TS has an existing agreement with Baseball Weekly.
22. Approvals. Anything contained herein to the contrary notwithstanding,
---------
if either party has not approved or disapproved any materials and/or proposals
submitted to it for approval pursuant to Sections 1.2.,1.3., 5.3., 7.1., 7.6.,
8.3. and 21 within ten (10) business days or five (5) business days with respect
to design and cover art as set forth in Section 7.1 , then such materials shall
be deemed to have been approved. SI and TS shall not unreasonably withhold any
of their approvals hereunder. The provisions of this Section 22 shall not,
however, apply to approvals required to be given pursuant to Section 10 hereof.
23. Notices.
--------
23.1. All notices to be given under this Agreement shall be in
writing and shall be delivered to the party to whom the notice is given (i) by
hand or courier, (ii) by certified or registered mail, postage prepaid, or (ii)
by facsimile (with a copy as provided in (i) or (ii) above) at the address or
facsimile number given below or to such other address or facsimile number as may
be advised by prior notice in writing to the other party from time to time.
If to TS:
Total Sports Inc.
105 Abeel Street
Kingston, New York
Attention: John Thorn
SPORTS ILLUSTRATED,
a division of Time Inc.
Time & Life Building
Rockefeller Center
New York, New York 10020
Attention: Stanley Weil
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
21
<PAGE>
with a copy to:
Time Inc.
Time & Life Building
Rockefeller Center
New York, New York 10020
Attention: General Counsel
23.2. Notice given under this Agreement shall be deemed duly given
(i) if delivered by hand or courier, on the date of such delivery, (ii) if sent
by registered or certified mail, five (5) business days after dispatch; and
(iii) if sent by facsimile, when the copy is delivered pursuant to Paragraph
23.1(i) or (iii) above.
23.3. All payments due to either party under this Agreement shall be
delivered to at the respective address set forth above.
24. This Agreement shall not be assigned by either party without the prior
written consent of the other party, except to a parent, subsidiary or affiliate
or in connection with a transfer of substantially all its assets. This Agreement
shall inure to the benefit of and be binding upon each of the parties hereto and
their respective successors and assigns.
25. Nothing contained herein shall be construed to constitute the parties
to be partners or joint ventures with or agents for one another. Neither TS nor
SI shall have any authority to, nor shall either, obligate or bind the other in
any manner whatsoever.
26. No term or provision of this Agreement shall be considered waived by
either party, and no breach excused by either party, unless such waiver or
consent is in writing signed on behalf of the party against whom the waiver is
asserted. No consent by either party to, or waiver of, a breach by either party,
whether express or implied, will constitute a consent to, waiver of, or excuse
of any other, different or subsequent breach by either party.
27. This Agreement shall be governed by and construed and enforced in
accordance with the substantive laws of the State of the New York, without
regard to its conflict of laws rules.
28. This Agreement represents the entire understanding between the parties
with respect to the matters dealt with herein and supersedes all prior
agreements, written or oral, with respect to the subject matter hereof and may
not be changed or modified except by an instrument in writing duly executed by
both parties.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SPORTS ILLUSTRATED,
a division of Time Inc.
By:___________________
Name:
Title:
AGREED:
TOTAL SPORTS INC.
By:___________________
Name:
Title:
23
<PAGE>
EXHIBIT A
---------
24
<PAGE>
Exhibit A
Books Excluded from T/SI Agreement
Published Fall 1997:
- --------------------
The Fans' Guide to ACC Basketball
The Babe: The Game That Ruth Built
Year of Glory: The Six-Team Era
Total Football: The Official Encyclopedia of the NFL (with Harper Collins)
Published Spring 1998:
- ----------------------
The Commissioners: Baseball's Midlife Crisis
East Side, West Side: Tales of New York Sporting Life, 1910-1960
The Total Baseball Catalog: Unique Baseball Stuff and How to Buy It
The Baseball Spy
Published Fall 1998:
- --------------------
Total Hockey: The Official Encyclopedia of the NHL
The Hidden Game of Football: The Next Edition
The World According to Dean: Four Decades of Basketball as Seen by Dean Smith
Published Spring 1999:
- ----------------------
Home Run: My Life in Pictures
Total Baseball, Sixth Edition
USA TODAY Baseball Weekly 1999 Almanac
USA TODAY Baseball Weekly 1999 Insider
25
<PAGE>
EXHIBIT B
---------
26
<PAGE>
EXHIBIT B
Fall 1999 List
T/SI Books
Smoke: The Romance and Lore of Cuban Baseball
12 Leadership Principles of Dean Smith
20th Century Sports: Images of Greatness
Sports Illustrated 2000 Sports Almanac
Greatest Athletes of the 20/th/ Century
24 Seconds to Shoot: The Birth and Improbable Rise of the NBA
The Book of Boxing
TS Books
Total Browns: The Official Encyclopedia of the Cleveland Browns
Total Hockey: The Official Encyclopedia of the NHL, Updated Edition
The NHL Official Guide and Record Book 2000
99: My Life in Pictures
Total Football: The Official Encyclopedia of the NFL (Second Edition, published
with Harper Collins)
27
<PAGE>
EXHIBIT C
---------
28
<PAGE>
TOTAL SPORTS PUBLISHING
<TABLE>
<CAPTION>
PUB. TITLE AUTHORS PRINT CLASSIFICATION
SEASON RUN
<S> <C> <C> <C> <C>
FALL 97 THE BABE: THE GAME THAT RUTH BUILT LAWRENCE S. RITTER & history, biography, visual
MARK RUCKER 15,000
YEAR OF GLORY: THE SIX-TEAM ERA DAN DIAMOND history, visual
10,000
THE FAN'S GUIDE TO ACC BASKETBALL BARRY JACOBS annual guide, statistics
10,000
SPRING 98 THE BASEBALL SPY GARY GILLETTE annual guide, statistics
15,000
EAST SIDE, WEST SIDE: TALES OF NEW YORK LAWRENCE S. RITTER history, visual
SPORTING LIFE, 1910-1960 15,000
THE COMMISSIONERS: BASEBALL'S MIDLIFE CRISIS JEROME HOLTZMAN history
10,000
THE TOTAL BASEBALL CATALOG: UNIQUE BASEBALL BOB CARROLL, LLOYD annual guide
STUFF AND HOW TO BUY IT JOHNSON, 10,000
DAVID PIETRUSZA
FALL 98 THE HIDDEN GAME OF FOOTBALL: THE NEXT EDITION BOB CARROLL statistics
10,000
THE WORLD ACCORDING TO DEAN: FOUR DECADES OF BARRY JACOBS inspirational
BASKETBALL AS SEEN BY DEAN SMITH 12,500
TOTAL HOCKEY: THE OFFICIAL ENCYCLOPEDIA OF THE NHL DAN DIAMOND, JAMES encyclopedia
DUPLACEY, 68,000
RALPH DINGER, IGOR
KUPERMAN,
ERIC ZWEIG
SPRING 99 HOMERUN: MY LIFE IN PICTURES HANK AARON, DICK biographical, visual
SCHAAP
TOTAL BASEBALL, SIXTH EDITION JOHN THORN, PETE encyclopedia
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
PALMER, ET AL.
USA TODAY BASEBALL WEEKLY 1999 ALMANAC PAUL WHITE etal. annual guide
USA TODAY BASEBALL WEEKLY 1999 INSIDER GARY GILLETTE-STUART annual guide
SHEA, et al.
FALL 99 encyclopedia
T/SI BOOKS SMOKE: THE ROMANCE AND LORE OF CUBAN BASEBALL PETER BJARKMAN, MARK history, visual, biography
RUCKER
12 LEADERSHIP PRINCIPLES OF DEAN SMITH DAVID CHADWICK inspirational
20TH CENTURY SPORTS: IMAGES OF GREATNESS MIKE MESEROLE, history, visual
ROBERT CREAMER
SPORTS ILLUSTRATED 2000 SPORTS ALMANAC SPORTS ILLUSTRATED history, visual
THE BOOK OF BOXING W.C. HEINZ, NATHAN history 15-Sep
WARD
GREATEST ATHLETES OF THE 20TH CENTURY SPORTS ILLUSTRATED encyclopedia
24 SECONDS TO SHOOT: THE BIRTH AND IMPROBABLE LEONARD KOPPETT history, visual MID NOV
RISE OF THE NBA 99
annual guide
biography, visual
TS BOOKS TOTAL BROWNS: THE OFFICIAL ENCYCLOPEDIA OF THE BOB CARROLL, DAVID annual guide
CLEVELAND BROWNS NEFT et al
TOTAL HOCKEY: THE OFFICIAL ENCYCLOPEDIA OF THE NHL, DAN DIAMOND, ET AL annual guide
UPDATED EDITION
THE NHL OFFICIAL GUIDE AND RECORD BOOK DAN DIAMOND, ET AL annual guide
99: MY LIFE IN PICTURES WAYNE GREZKY, JOHN
DAVIDSON
TOTAL FOOTBALL: THE OFFICIAL ENCYCLOPEDIA OF THE NFL BOB CARROLL, DAVID
(SECOND EDITION, PUBLISHED WITH HARPER COLLINS) NEFT et al
</TABLE>
Classification Inspirational, Annual Guide, Biography, History, Visual,
Encyclopedia,
s: Statistics
30
<PAGE>
EXHIBIT 10.12
Anthony & Co.
Office Lease Agreement
Cover Page
- --------------------------------------------------------------------------------
This Standard Office Lease Agreement has been filled in for submission to your
attorney for legal approval. No representation or recommendation is made by
Anthony & Co. or its agents or employees as to the legal sufficiency, legal
effect, or tax consequences of this Lease or the transaction relating thereto;
and both Landlord and Tenant shall rely solely upon the advice of their own
legal counsel as to the legal and tax consequences of this lease.
- --------------------------------------------------------------------------------
TENANT: Total Sports, Inc.
DATED: December 1, 1998
For the purposes of this lease Agreement by and between First Raleigh Telex, LLC
("Landlord"), by its agent, Anthony & Co., and Total Sports, Inc. ("Tenant"),
the terms set forth below, when preceded by a capital letter, shall have the
meaning set forth in this Cover Page and in the Lease.
I Tenant and Landlord Information
A. Landlord: First Raleigh Telex, LLC
a North Carolina Limited Liability Company
B. Tenant: Total Sports, Inc.
a North Carolina Corporation
C. Tenant's Notice Address: 234 Fayetteville Street Mall, Raleigh, NC
D. Tenant's Representative: Frank A. Daniels, III
II Description of Premises
A. Building: Total Sports Building
B. Business Hours: Twenty-four (24) hours a day, seven (7) days a
week
C. Premises: 234 Fayetteville Street Mall, Raleigh, N.C.
Second Floor = 4,662 square feet
Third floor = 4,670 square feet
Fourth Floor = 4,670 square feet
Fifth Floor = 4,670 square feet
Basement = 4,215 square feet
----------------------------------
Total = 22,887 square feet
D. Permitted Use: General office use.
III Term
A. Commencement Date: April 1, 1999
B. Expiration Date: June 30, 2009
IV Rent
A. Advance Rent: Ten Thousand Dollars ($10,000.00) is due upon
execution for rent for the early occupancy of
floors five and the basement for the period
December 18, 1998 through March 31, 1999.
B. Base Annual Rent: Two Hundred Ninety Nine Thousand Seventy Six and
72/100 Dollars ($299,076.72).
C. Base Rental Rate: Thirteen and 76/100 Dollars ($13.76) per square
foot for the second, third, fourth and fifth
floors and Ten Dollars ($10.00) per square foot
for the basement space. Total base rent for the
first year is Two Hundred Ninety Nine Thousand
Seventy Six and 72/100 Dollars ($299,076.72).
D. Monthly Installment of
Base Annual rent: Twenty-four Thousand Nine Hundred Twenty Three and
06/100 Dollars ($24,923.06).
E. Security Deposit: Twenty-four Thousand Nine Hundred Twenty Three and
06/100 Dollars (24,923.06).
1
<PAGE>
V Adjustments
A. Adjustment Period
Consumer Price Index: On January 1 of each year, base rent shall be
escalated by a three percent (3%) fixed increase.
B. Base Period Consumer
Price Index: The Consumer Price Index as established for the
month of _____N/A________.
C. CPI Escalator: _______Three__________ Percent (_3_%).
D. Base Operating and Real
Estate Tax Expenses: To the extent operating and real estate tax
expenses exceed $5.50 per square foot, Tenant
shall pay its prorata share of the increases.
E. Tenant's Pro Rata Share: ______Seventy-nine_______ Percent (_79%) of the
Building. Total rentable square footage is
____28,821.
VI Miscellaneous
A. Broker: N/A.
B. Special Conditions None.
C. Exclusive Rights Right of first refusal to lease the first floor of
the building.
Tenant: Landlord:
Total Sports, Inc. First Raleigh Telex, LLC
By: /s/ George Schlukbier By: /s/ Frank Daniels
----------------------- --------------------------
Name: George Schlukbier
-----------------------
Title: President/COO
---------------------
Date: August 8, 1999
----------------------
(Please Print or Type)
2
<PAGE>
Table of Contents
<TABLE>
<S> <C>
ARTICLE I PREMISES
ARTICLE II USE
ARTICLE III TERM
ARTICLE IV COMPLETION OF PREMISES
Section 4.01 Substantial Completion
Section 4.02 Notice
Section 4.03 Inspection and Punchlist
Section 4.04 Delayed Possession
Section 4.05 Landlord Improvements
ARTICLE V RENT AND SECURITY
Section 5.01 Base Rent
Section 5.02 CPI Adjustment
Section 5.03 Expense and Tax Escalations
Section 5.04 Personal Property Tax
Section 5.05 Security Deposit
ARTICLE VI AFFIRMATIVE OBLIGATIONS
Section 6.01 Compliance with Laws
Section 6.02 Services and Utilities
Section 6.03 Repairs and Maintenance
ARTICLE VII NEGATIVE OBLIGATIONS
Section 7.01 Alterations
Section 7.02 Assignment and Subleasing
ARTICLE VIII INSURANCE
Section 8.01 Insurance
Section 8.02 Indemnification
Section 8.03 Limitation of Landlord's Liability
ARTICLE IX LOSS OF PREMISES
Section 9.01 Damages
Section 9.02 Condemnation
ARTICLE X DEFAULT
Section 10.01 Tenant's Default
Section 10.02 Landlord's Remedies
Section 10.03 Self-Help
Section 10.04 Survival
ARTICLE XI NON DISTURBANCE
Section 11.01 Subordination
Section 11.02 Estoppel Certificate
Section 11.03 Quiet Possession
ARTICLE XII LANDLORD'S RIGHTS
Section 12.01 Rules
Section 12.02 Mechanic's Liens
Section 12.03 Right to Enter
Section 12.04 Holdover
Section 12.05 Signs
Section 12.06 Right to Relocate
ARTICLE XIII MISCELLANEOUS
Section 13.01 Broker's Warranty
Section 13.02 Attorneys' Fees
Section 13.03 Notices
Section 13.04 Partial Invalidity
Section 13.05 Waiver
Section 13.06 Binding on Successors
Section 13.07 Governing Law
Section 13.08 Lease not an Offer
Section 13.09 Recording
Section 13.10 Survival of Remedies
Section 13.11 Authority of Parties
Section 13.12 Business Days
Section 13.13 Entire Agreement
Section 13.14 Definition of Lease
</TABLE>
3
<PAGE>
EXHIBITS
Exhibit A Floor Plan
Exhibit B Building
Exhibit C Land
Exhibit D Landlord Improvements
Exhibit E Rules and Regulations
RIDER A
RIDER B
4
<PAGE>
Anthony & Co.
Office Lease
- --------------------------------------------------------------------------------
This Standard Office Lease Agreement has been filled in for submission to your
attorney for legal approval. No representation or recommendation is made by
Anthony & Co. or its agents or employees as to the legal sufficiency, legal
effect, or tax consequences of this Lease or the transaction relating thereto;
and both Landlord and Tenant shall rely solely upon the advice of their own
legal counsel as to the legal and tax consequences of this lease.
- --------------------------------------------------------------------------------
This Lease ("Lease") is made December, 1998, between First Raleigh Telex,
LLC ("Landlord") and Total Sports, Inc. ("Tenant"). Landlord is a Limited
Liability Company, organized under the laws of North Carolina, with principal
offices at 702 Oberlin Road, Suite 100, Raleigh, North Carolina 27605.
ARTICLE 1
PREMISES
1.01 Premises. Landlord leases to Tenant Floors 2, 3, 4 and 5 and the basement
of 234 Fayetteville Street Mall, Raleigh, North Carolina ("Premises") as
outlined on the Floor Plans attached as Exhibit A. The Premises consists of
approximately 22,887 square feet of rentable space in the building ("Building")
in which the Premises are located. The Building is shown as Exhibit B and is
located on the land described in Exhibit C ("Land"). The Premises contain the
fixtures, improvements, and other property now installed plus any Landlord
Improvements required by Section 4.05 and Exhibit D.
1.02 Common Areas. Tenant and its agents, employees, and invitees have the non-
exclusive right with others designated by Landlord to the free use of the common
areas ("Common Areas") in the Building and on the Land for the Common Areas'
intended and normal purpose. Common Areas include elevators, sidewalks, parking
areas, driveways, hallways, stairways, public bathrooms, common entrances,
lobby, and other similar public areas and access ways. Landlord may change the
Common Areas if the changes do not materially and unreasonably interfere with
Tenant's access to or use of the Premises.
ARTICLE II
USE
Tenant shall use the Premises for general office use, unless Landlord gives its
advance written consent to another use. Landlord warrants that applicable laws,
ordinances, regulations, and restrictive covenants permit the Premises to be
used for general offices. Tenant shall not create a nuisance or use the
Premises for any immoral or illegal purposes.
ARTICLE III
TERM
The Lease begins ("Commencement Date") on the earlier of: April 1, 1999
The Lease ends ("Expiration Date") at 11:59 p.m. on the last day of the calendar
month ten (10) years following the Commencement Date, unless terminated earlier
under this Lease. Within thirty (30) days after the Commencement Date, the
parties shall confirm in writing the Commencement and Expiration Dates.
ARTICLE IV
COMPLETION OF PREMISES
ARTICLE V
RENT AND SECURITY
5.01 Base Rent. Tenant shall pay to Landlord Base Rent during the Term, as
follows:
<TABLE>
<CAPTION>
Months: Annual Base Rent: Monthly Base Rent:
<S> <C> <C>
April 1, 1999 through December 31, 1999 $299,076.72 $24,923.06
January 1, 2000 through December 31, 2000 $308,049.02 $25,670.75
January 1, 2001 through December 31, 2001 $317,290.49 $26,440.87
January 1, 2002 through December 31, 2002 $326,809.21 $27,234.10
January 1, 2003 through December 31, 2003 $336,613.48 $28,051.12
January 1, 2004 through December 31, 2004 $346,711.89 $28,892.66
January 1, 2005 through December 31, 2005 $357,113.24 $29,759.44
January 1, 2006 through December 31, 2006 $367,826.64 $30,652.22
January 1, 2007 through December 31, 2007 $378,861.44 $31,571.79
January 1, 2008 through December 31, 2008 $390,227.28 $32,518.94
January 1, 2009 through June 30, 2009 $401,934.10 $33,494.51
</TABLE>
With _____N/A______(___%) percent annual escalations
1
<PAGE>
The Base Rent shall be paid:
(a) without advance notice, demand, offset, or deduction;
(b) by the first day of each month during the Term; and
(c) to Landlord at its address set forth in Section 13.03 or as Landlord
may specify in writing to Tenant.
If the Term does not begin on the first day or end on the last day of a month,
the Base Rent for that partial month shall be prorated by multiplying the
monthly Base Rent by a fraction, the numerator of which is the number of days of
the partial month included in the Term and the denominator of which is the total
number of days in the full calendar month.
If Tenant fails to pay part or all of the Base Rent by the fifth (5th) day of
the month due, it is past due, the Tenant shall also pay:
(a) a late charge equal to four percent (4%) of the unpaid Base Rent and
Additional Rent, plus
(b) interest at eighteen percent (18%) per annum or the maximum then
allowed by applicable law, whichever is less, on the remaining unpaid
past due balance, retroactive to the date originally due until paid.
5.03 Expense and Tax Escalations. Base Rent shall be adjusted on each
anniversary of the Commencement Date by increasing the Base Rent paid during the
preceding year by an amount equal to the Tenant's pro rata share of the increase
of Operating Expenses and Real Estate Taxes as defined hereinafter.
(a) Definitions.
(i) "Base Operating and Real Estate Tax Expenses" means Five &
50/100_($5.50) Dollars per square foot.
(ii) "Tenant's Pro Rata Share" means seventy-nine and two-tenths
(79.2%) percent, which is calculated by dividing the
rentable square footage of the Premises (numerator) by the
rentable square footage of the Building (denominator), and
expressing the fraction as a percentage.
(iii) "Property" means the Building and its equipment and
systems, and the Land.
(iv) "Real Estate Taxes" means real property taxes and currently
due installments of assessments, special or otherwise,
imposed upon the Property, and reasonable legal fees,
costs, and disbursements incurred for proceedings to
contest, determine, or reduce Real Estate Taxes, but only
to the extent the Real Estate Taxes are reduced, but shall
exclude federal, state or local income taxes, franchise,
gift, transfer, excise, capital stock, estate, succession,
or inheritance taxes, and penalties or interest for late
payment of Real Estate Taxes.
(v) "Operating Expenses" means Landlord's operating expenses
that are reasonable, actual and necessary, out-of-pocket
(except Landlord may use its normal accrual method of
accounting), obtained at competitive prices, and that are
directly attributable to the operation, maintenance,
management, and repair of the Property, as determined under
generally accepted accounting principles consistently
applied, including:
(1) salaries, and other compensation; payroll taxes,
vacation, holiday, and other paid absences; and
welfare, retirement, and other fringe benefits
that are paid to employees, independent
contractors, or agents of Landlord engaged in the
operation, repair, management, or maintenance of
the Property;
(2) repairs and maintenance of the Property and the
cost of supplies, tools, materials, and equipment
for Property repairs and maintenance, that under
generally accepted accounting principles
consistently applied, would not be capitalized;
(3) premiums and other charges incurred by Landlord
for insurance on the Property and for its
employees including:
-a- fire insurance, extended coverage
insurance, and earthquake, windstorm, hail,
and explosion insurance;
-b- public liability and property damage
insurance;
-c- elevator insurance;
-d- workers' compensation insurance;
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-e- boiler and machinery insurance; sprinkler
leakage, water damage, water damage legal
liability insurance; burglary, fidelity,
and pilferage insurance on equipment and
materials;
-f- insurance Landlord is required to carry
under this Lease; and
-g- other insurance as is customarily carried
by operators of comparable office buildings
in the Raleigh, North Carolina area;
(4) costs incurred for inspection and servicing,
including all outside maintenance contracts
necessary or proper for the maintenance of the
Property, such as janitorial and window cleaning,
rubbish removal, exterminating, water treatment,
elevator, electrical, plumbing, and mechanical
equipment, and the cost of materials, tools,
supplies, and equipment used for inspection and
servicing;
(5) costs incurred for electricity, water, gas, fuel,
or other utilities;
(6) sales, use, and excise taxes on goods and services
purchased by Landlord, but Tenant's pro rata share
shall exclude prepaid services that are not used
by Landlord;
(7) license, permit, and inspection fees;
(8) auditor's fees for public accounting;
(9) legal fees, costs, and disbursements;
(10) management fees to a person or entity other than
Landlord (provided, such person or entity may be
affiliated with Landlord);
(11) the annual amortization over its useful life with
a reasonable salvage value on a straight-line
basis of (i) the costs of any capital improvements
made by Landlord and required by any changes in
applicable laws, rules, or regulations of any
governmental authorities; or (ii) the costs of any
equipment or capital improvements made by
Landlord, as a labor-saving measure or to
accomplish other savings in operating, repairing,
managing, or maintaining of the Property, but only
to the extent of the savings; or (iii) the costs
of any exterior window draperies provided by
Landlord and the carpeting in the Common Areas;
(12) any costs for substituting work, labor, materials,
or services in place of any of the above items, or
for any additional work, labor, materials,
services or improvements to comply with any
governmental laws, rules, regulations, or other
requirements applicable to the Property, that, at
the time of substitution or addition, are
considered operating expenses under generally
accepted accounting principles consistently
applied;
(13) other costs reasonably necessary to operate,
repair, manage, and maintain the Property in a
manner and condition consistent with comparable
office buildings in the Raleigh, North Carolina
area; and
(14) Operating Expenses exclude:
-a- leasing commissions, costs, disbursements,
and other expenses incurred for leasing,
renovating, or improving space for tenants;
-b- costs incurred by Landlord in discharging
its obligations under Section 4.05 and
Exhibit D;
-c- costs (including permit, license, and
inspection fees) incurred in renovating,
improving, decorating, painting, or
redecorating vacant space or space for
tenants;
-d- Landlord's cost of electricity or other
service sold to tenants for which Landlord
is to be reimbursed as a charge over the
Base Rent and Additional Rent payable under
the lease with that tenant;
-e- depreciation and amortization on the
Building except as expressly permitted
elsewhere in this Lease;
-f- costs of a capital nature including capital
improvements, capital repairs, capital
equipment, and capital tools, as determined
under generally accepted accounting
principles consistently applied, except
that the annual amortization of these costs
shall be included to the extent expressly
permitted elsewhere in this Lease;
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-g- costs incurred because the Landlord or other tenant violated
the terms of any lease (including without limitation legal
fees and disbursements);
-h- interest on debt or amortization payments on mortgages or
deeds of trust or any other debt for borrowed money;
-i- advertising and promotional expenditures; and
-j- repairs or other work needed because of fire, windstorm, or
other casualty or cause insured against by Landlord or to
the extent Landlord's insurance provided coverage insurance;
-k- other expenses that under generally accepted accounting
principles consistently applied would not be considered
normal maintenance, repair, management, or operation
expenses.
-l- fines or penalties incurred by Landlord;
-m- mortgage or ground rent uses.
(vi) "Adjustment Period" means each calendar year or partial calendar
year occurring during the Term.
(b) Credits/Reimbursements. Operating Expenses shall be reduced by
reimbursements, credits, discounts, reductions, or other allowances
received or receivable by Landlord for items of cost included in
Operating Expenses, except reimbursements to the Landlord by tenants
under this Article V.
(c) Tax Refund. If Landlord receives a refund of any portion of Real Estate
Taxes that were included in the Real Estate Taxes paid by Tenant, then
Landlord shall reimburse Tenant its pro rata share of the refunded
taxes, less any expenses that Landlord reasonably incurred to obtain the
refund.
(d) Substituted Taxes. If any non-Real Estate Taxes are imposed against the
Landlord in substitution for any Real Estate Taxes, then the substituted
tax shall be considered a Real Estate Tax. Conversely, if any additional
Real Estate Taxes are imposed in substitution for any non-Real Estate
Taxes (that are not Substituted Taxes) they shall not be considered Real
Estate Taxes.
(e) Payment by Landlord. Subject to reimbursement under this Article V,
Landlord shall pay the Property's Operating Expenses and Real Estate
Taxes before delinquency.
(f) Payment by Tenant. If the Operating Expenses and Real Estate Taxes, when
combined for any Adjustment Period, exceed Base Operating and Real
Estate Tax Expense ("Operating and Real Estate Tax Expense Increase"),
then Tenant agrees to pay Landlord as Additional Rent, Tenant's Pro Rata
Share of the Operating and Real Estate Tax Expense Increase.
(g) Manner of Payment.
(i) Within one hundred twenty (120) days after each Adjustment Period
ends, or as soon as reasonably practical, Landlord shall give
Tenant an itemized statement ("Statement") showing in reasonable
detail the:
(1) actual Operating Expenses and Real Estate Taxes for the
Adjustment Period;
(2) the Operating and Real Estate Tax Expense Increase for
the Adjustment Period;
(3) the amount of Tenant's Pro Rata Share of the Operating
and Real Estate Tax Expense Increase; and
(4) the amount Tenant owes toward the Operating and Real
Estate Tax Expense Increase.
Any Additional Rent due, including interest and penalty, shall
survive the Expiration Date.
(ii) During any Adjustment Period that is less than a complete
calendar year, unless this Lease was terminated because of
Tenant's default, Tenant's obligation for Additional Rent for
those Adjustment Periods shall be prorated by multiplying the
Additional Rent for the Adjustment Period by a fraction expressed
as a percentage, the numerator of which is the number of days of
the Adjustment Period included in the Term and the denominator of
which is 365.
5.04 Personal Property Tax. Before delinquency Tenant shall pay taxes assessed
during the Term against trade fixtures or personal property placed by Tenant in
the Premises. If these taxes are assessed against the Building, Tenant shall pay
its share of the taxes to Landlord within ten (10) days after receiving
Landlord's written statement setting forth the amount of taxes applicable to
Tenant's property and the basis for the charge to
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Tenant. Tenant's failure to pay within the ten-day period shall entitle Landlord
to the same remedies it has upon Tenant's failure to pay Base Rent or Additional
Rent.
5.05 Security Deposit. The Tenant has deposited Twenty-four Thousand, Nine
Hundred Twenty Three and 06/100 Dollars ($24,923.06) (Security Deposit) with
Landlord to secure Tenant's performance of its Lease obligations. If Tenant
defaults Landlord may, after giving five) days advance notice to Tenant,
without prejudice to Landlord's other remedies, apply part or all of the
Security Deposit to cure Tenant's default. If Landlord so uses part or all of
the Security Deposit, then Tenant shall within ten (10) days after written
demand, pay Landlord the amount used to restore the Security Deposit to its
original amount. The deposit shall be placed in an escrow account. Interest
shall accrue to Tenant. Any part of the Security Deposit not used by Landlord as
permitted by this paragraph shall be returned to Tenant within thirty (30) days
after the Lease ends.
ARTICLE VI
AFFIRMATIVE OBLIGATIONS
6.01 Compliance with Laws.
(a) Landlord's Compliance. Landlord warrants, that on the Commencement
Date, the Premises will comply with all applicable laws, ordinances,
rules, and regulations of governmental authorities ("Applicable
Laws"). During the Term, Landlord shall comply with all Applicable
Laws regarding the Premises and Building except to the extent Tenant
must comply under Section 6.01(b).
(b) Tenant's Compliance. Tenant shall comply with all Applicable Laws (i)
regarding the physical condition of the Premises, but only to the
extent the Applicable Laws pertain to the particular manner in which
Tenant uses the Premises; or (ii) that do not relate to the physical
condition of the Premises but relate to the lawful use of the Premises
and with which only the occupant can comply, such as laws governing
maximum occupancy, workplace smoking, and illegal business operations,
such as gambling. Notwithstanding the foregoing, Tenant shall comply
with any requirements imposed under the Americans with Disabilities
Act of 1990 ("ADA") which relate exclusively to the Premises.
6.02 Services and Utilities.
(a) Services. Landlord shall provide at its expense, subject to
reimbursement under Section 5.03:
(i) Heating, ventilation, and air conditioning ("HVAC") for the
Premises during business hours to maintain temperatures for
comfortable use and occupancy;
(ii) Automatic passenger elevators providing adequate service
leading to the floor on which the Premises are located;
(iii) Janitorial services to the Premises (all business days,
Monday through Friday);
(iv) Hot and cold water sufficient for drinking, lavatory, toilet,
and ordinary cleaning purposes;
(v) Electricity to the Premises at all times that provides
electric current in reasonable amounts necessary for normal
office use, lighting, and HVAC;
(vi) Replacement of lighting tubes, lamp ballasts, and bulbs;
(vii) Extermination and pest control when necessary; and
(viii) Maintenance of Common Areas in a manner consistent with other
comparable office buildings in the Raleigh, North Carolina
area. The maintenance shall include cleaning, HVAC,
illumination, snow shoveling, deicing, repairs, replacements,
lawn care, and landscaping.
(b) Business Hours. "Business Hours" means: twenty-four (24) hours a day,
seven (7) days a week.
(c) 24 Hour Access. Tenant, its employees, agents, and invitees shall have
access to the Premises, twenty-four (24) hours a day, seven (7) days a
week. During non business hours Landlord may restrict access by
requiring persons to show a badge or identification card issued by
Landlord. Landlord shall not be liable for denying entry to any person
unable to show the proper identification. Landlord may temporarily
close the Building if required in an emergency. Landlord shall use its
best efforts to close the Building during non business hours only. If,
however, the Building must be closed during business hours, then the
Base Rent and Additional Rent shall abate during any closing that
lasts more than twenty-four (24) hours.
(d) Extra Services. Landlord, shall have the right to monitor the Tenant's
use of electricity consumption within the Premises. Whenever Landlord
knows that any tenant (including Tenant) is using extra services
because of either non business-hours use or high electricity
consumption installations, Landlord may directly charge that tenant
for the extra use and exclude those charges from Operating Expenses.
Extra services include:
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(i) Excess Utility Use. Tenant shall not place or operate in the
Premises any electrically operated equipment or other machinery,
other than typewriters, personal computers, adding machines,
reproduction machines, and other machinery and equipment
normally used in offices, unless Tenant receives Landlord's
advance written consent. Landlord shall not unreasonably
withhold or delay its consent, but Landlord may require payment
for the extra use of electricity caused by operating this
equipment or machinery. Landlord may require that special, high
electricity consumption installations of Tenant such as computer
or reproduction facilities (except personal computers or normal
office photocopy machines) be separately sub-metered for
electrical consumption at Tenant's cost.
(ii) Payment. Tenant's charges for the utilities provided under (i)
and (ii) above shall be one hundred and ten percent (110%) of
Landlord's actual cost of labor and utilities and shall be
Additional Rent.
Tenant's failure to pay the charges in (i) and (ii) above within
thirty (30) days of receiving a proper and correct invoice shall
entitle Landlord to the same remedies it has upon Tenant's
failure to pay Base Rent.
(e) Interruption of Services. Landlord does not warrant that any services
Landlord supplies will not be interrupted. Services may be interrupted
because of accidents, repairs, alterations, improvements, or any
reason beyond the reasonable control of Landlord, and such an
interruption shall not:
(i) be considered an eviction or disturbance of Tenant's use and
possession of the Premises;
(ii) relieve Tenant from performing Tenant's Lease obligations.
6.03 Repairs and Maintenance.
(a) Tenant's Care of Premises. Tenant shall:
(i) keep the Premises and fixtures in good order;
(ii) make repairs or replacements to the Premises or Building
needed because of Tenant's misuse or negligence, except to the
extent that the repairs or replacements are covered by
Landlord's insurance or the insurance Landlord is required to
carry under this Lease, whichever is greater;
(iii) repair and replace special equipment or decorative treatments
installed by or at Tenant's request and that serve the
Premises only, except
(1) to the extent the repairs or replacements are needed
because of Landlord's misuse or primary negligence, and
are not covered by Tenant's insurance or the insurance
Tenant is required to carry under this Lease, whichever
is greater; or
(2) if the Lease is terminated under Article IX (Loss of
Premises); and
(iv) not commit waste.
(b) Landlord's Repairs. Except for repairs and replacements that Tenant
must make under paragraph 6.03(a), Landlord shall pay for and make all
other repairs and replacements to the Premises, Common Areas and
Building (including Building fixtures and equipment). Landlord shall
make the repairs and replacements to maintain the Building in a
condition consistent with other comparable office buildings in the
Raleigh, North Carolina area. This maintenance shall include the roof,
foundation, exterior walls, interior structural walls, all structural
components, and all systems, such as mechanical, electrical, HVAC, and
plumbing.
(c) Time for Repairs. Repairs or replacements required under Sections
6.03(a) or 6.03(b) shall be made within a reasonable time (depending
on the nature of the repair or replacement needed) after receiving
notice or having actual knowledge of the need for a repair or
replacement. Failure of Landlord to make repairs within a reasonable
time (normal maintenance versus emergency) shall be considered a
Landlord default.
(d) Surrendering the Premises. Upon the Expiration Date or earlier
termination of this Lease, Tenant shall surrender the Premises to
Landlord in the same condition that the Premises were in on the
Commencement Date except for:
(i) ordinary wear and tear;
(ii) damage by the elements, fire, and other casualty unless Tenant
would be required to repair under paragraph 6.03(a);
(iii) condemnation;
(iv) damage arising from any cause not required to be repaired or
replaced by Tenant; and
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(v) alterations as permitted by this Lease unless consent was
conditioned on their removal.
On surrender Tenant shall remove from the Premises its personal
property, trade fixtures, and any alterations required to be removed
under Section 7.01 and repair any damage to the Premises caused by the
removal. Any items not removed by Tenant as required above shall be
considered abandoned. Landlord may dispose of abandoned items as
Landlord chooses and bill Tenant for the cost of their disposal, minus
any revenues received by Landlord for their disposal.
ARTICLE VII
NEGATIVE OBLIGATIONS
7.01 Alterations.
(a) Definitions. "Alterations" means alterations, additions,
substitutions, installations, changes, and improvements, but excludes
minor decorations and the Improvements Landlord is to make under
Section 4.04 and Exhibit D.
(b) Consent. Tenant shall not make Alterations without the Landlord's
advance written consent. Landlord's consent shall not be unreasonably
withheld or unduly conditioned or delayed for nonstructural interior
Alterations to the Premises that do not adversely affect the
Building's appearance, value, and structural strength.
(c) Conditions of Consent. Landlord may condition its consent in Section
7.01(b) on all or any part of the following:
(i) Tenant shall furnish Landlord with reasonably detailed plans
and specifications of the Alterations as requested by Tenant.
(ii) The Alterations shall be performed and completed-
(1) in accord with the submitted plans and specifications
approved by Tenant and Landlord.
(2) in a workmanlike manner,
(3) in compliance with all applicable laws, regulations,
rules, ordinances, and other requirements of
governmental authorities,
(4) using new materials and installations at least equal in
quality to the original Building materials and
installations,
(5) by not disturbing the quiet possession of the other
tenants,
(6) by not interfering with the construction, operation, or
maintenance of the Building, and
(7) with due diligence;
(iii) Tenant shall use workers and contractors who Landlord employs
or approves in writing, which approval shall not be
unreasonably withheld or unduly conditioned or delayed;
(iv) Tenant shall modify plans and specifications because of
reasonable conditions set by Landlord after reviewing the
plans and specifications;
(v) Tenant's contractors shall carry builder's risk insurance in
an amount then customarily carried by prudent contractors and
workers' compensation insurance for its employees in
statutory limits, naming Landlord as an additional insured,
to the extent its interest may appear;
(vi) Tenant's workers or contractors shall work in harmony and not
unreasonably interfere with Landlord's workers or contractors
or other tenants and their workers or contractors;
(vii) For alterations in excess of Five Thousand Dollars
($5,000.00) Tenant shall, at Landlord's sole option, supply a
lien and completion bond, bank letter of credit, or other
security satisfactory to Landlord, in an amount equal to the
estimated cost to insure Landlord against materials and
mechanics' liens and against completion of the Alterations;
(viii) Tenant shall give Landlord at least fifteen (15) days advance
notice before beginning any alterations so that Landlord may
post or record notices of nonresponsibility;
(ix) Upon demand Tenant shall give Landlord evidence that it
complied with any condition set by Landlord;
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(x) If Tenant completes alterations, Tenant shall give Landlord
complete as-built mylar drawings, if any, of the
Alterations after they are finished; and
(xi) Upon the request of Landlord, which request must be given
at the time of consent to the Alterations, Tenant shall
remove any unusual additions, alterations and repair any
damage from their removal by the Expiration Date.
(d) Payment and Ownership of the Alterations. Alterations made under this
paragraph shall be at Tenant's expense. The Alterations shall belong
to Landlord when this Lease ends except for those Alterations required
by Landlord to be removed by Tenant, if any, under Section
7.01(c)(xi). Nevertheless, Tenant may remove its furniture and other
personal property (unless same is affixed to the premises or is
otherwise a fixture) if Tenant promptly repairs all damage caused by
their removal.
7.02 Assignment and Subleasing.
(a) Consent Required. Tenant shall not transfer, mortgage, encumber,
assign, or sublease all or part of the Premises without Landlord's
advance written consent. Landlord's consent to any assignment or
sublease shall not be unreasonably withheld or unduly conditioned or
delayed.
(b) Reasonableness. The Landlord's consent shall not be considered
unreasonably withheld if:
(i) the proposed subtenant's or assignee's financial
responsibility does not meet the same criteria Landlord
uses to select comparable Building tenants;
(ii) the proposed subtenant's or assignee's business is not
suitable for the Building considering the business of the
other tenants and the Building's prestige; or
(iii) the proposed use is inconsistent with the use permitted by
Article II.
(c) Procedure.
(i) Tenant must provide Landlord in writing:
(1) the name and address of the proposed subtenant or
assignee;
(2) the nature of the proposed subtenant's or
assignee's business it will operate in the
Premises;
(3) the terms of the proposed sublease or assignment;
and
(4) reasonable financial information so that Landlord
can evaluate the proposed subtenant or assignee.
(ii) Landlord shall, within ten (10) business days after
receiving the information under Section 7.02(c)(i), give
notice to Tenant to permit or deny the proposed sublease or
assignment. If Landlord denies consent, it must explain the
reasons for the denial. If Landlord does not give notice
within the ten (10) business-day period, then Tenant may
sublease or assign part or all of the Premises upon the
terms described in the information submitted by Tenant
under Section 7.02(c)(i).
(d) Affiliates. Notwithstanding Section 7.02(a), (b), and (c), Tenant may
assign or sublease part or all of the Premises without Landlord's
consent to:
(i) any corporation or partnership that controls, is controlled
by, or is under common control with, Tenant; or
(ii) any corporation resulting from the merger or consolidation
with Tenant or to any entity that acquires all of Tenant's
assets or stock as a going concern of the business that is
being conducted on the Premises, as long as the assignee or
sublessee is a bona fide entity and assumes the obligations
of Tenant.
(e) Conditions. Any subleases and assignments by Tenant are also subject
to the following:
(i) The terms of this Lease;
(ii) The term of any sublease shall not extend beyond the Term;
(iii) Tenant shall remain liable for all Lease obligations;
(iv) Consent to one sublease or assignment does not waive the
consent requirements for future assignments or subleases;
and
(v) Any consideration ("Excess Consideration") received by
Tenant from an assignment or sublease that exceeds the
amount Tenant must pay Landlord, which amount is to be
prorated where a part of the Premises is subleased or
assigned, shall also be paid to
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Landlord. Tenant shall pay fifty percent (50%) of this
Excess Consideration to Landlord at the end of each
calendar month during which Tenant collects any Excess
Consideration. Each payment shall be sent with a detailed
statement showing the total consideration paid by the
subtenant or assignee. Landlord shall have the right to
audit Tenant's books and records to verify the accuracy of
the detailed statement.
ARTICLE VIII
INSURANCE
8.01 Insurance.
(a) Landlord's Building Insurance. Landlord shall keep the Building,
including the Landlord Improvements insured against damage and
destruction by fire, earthquake, vandalism, and other perils in the
amount of the full replacement value of the Building, as the value may
exist from time to time.
(b) Property Insurance. Each party shall keep its personal property and
trade fixtures in the Premises and Building insured with "all risks"
insurance in an amount to cover one hundred percent (100%) of the
replacement cost of the property and fixtures. Tenant shall also keep
any non-Building-standard improvements made to the Premises at
Tenant's request insured to the same degree as Tenant's personal
property. Tenant's property insurance shall also provide for business
interruption/extra expense coverage in sufficient amounts.
(c) Liability Insurance. Each party shall maintain contractual and
comprehensive general liability insurance, including limits of no less
than $1,000,000 per occurrence/$2,000,000 aggregate per location
subject to 1,000 deductible contractual liability covering the
indemnities specified herein. This policy must be written on an
occurrence basis.
Policy shall be endorsed to name Landlord as additional insured.
Definition of additional insured shall include all Partners, Officers,
Directors, Employees, agents and representatives of the named entity
including its managing agent. Further, coverage for the additional
insured shall apply on a primary basis irrespective of any other
insurance, whether collectible or not.
(d) Workers Compensation and Employee Liability Insurance. Affording
coverage under the Workers Compensation laws of the State of North
Carolina and Employers Liability coverage subject to a limit of no
less than $100,000 each employee, $100,000 each accident, $500,000
policy limit.
(e) Umbrella Liability Insurance. Tenant shall maintain umbrella liability
insurance at not less than a $2,000,000 limit providing excess
coverage over all limits and coverage noted in Sections 8.01.c and
8.01.d above. This policy shall be written on an occurrence basis.
(f) Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant hereby waive and release each
other of and from any and all right of recovery, claim, action or
cause of action, against each other, their agents, officers and
employees, for any loss or damage that may occur to the Premises,
improvements to the Building, or personal property within the
Building, by reason of fire or the elements, regardless of cause or
origin, including negligence of Landlord or Tenant and their agents,
officers and employees. Landlord and Tenant agree immediately to give
their respective insurance companies which have issued policies of
insurance covering all risk of direct physical loss, written notice of
the terms of the mutual waivers contained in this Section, and to have
the insurance policies properly endorsed, if necessary, to prevent the
invalidation of the insurance coverage by reason of the mutual
waivers. The waiver does not apply to claims caused by a party's
willful misconduct.
If despite a party's best efforts it cannot find an insurance company
meeting the criteria in Section 8.01(f) that will give the waiver at
reasonable commercial rates, then it shall give notice to the other
party within thirty (30) days after the Commencement Date. The other
party shall then have thirty (30) days to find an insurance company
that will issue the waiver. If the other party also cannot find such
an insurance company, then both parties shall be released from their
obligations to obtain the waiver.
(g) Increase in Insurance. If due to Tenant's particular use of the
Premises, Landlord's insurance rates are increased, Tenant shall pay
the increase. In addition, the amounts of coverage required by this
Lease are subject to review by Landlord at the end of each Adjustment
Period. At each review, if necessary to maintain the same level of
coverage that existed on the Commencement Date, the amounts of
coverage shall be increased to the lesser of:
(i) the amounts of coverage carried by prudent landlords and
tenants of comparable office buildings in the Raleigh,
North Carolina area; or
(ii) twenty-five percent (25%) higher than the previous
insurance amounts.
(h) Insurance Criteria. Insurance policies required by this Lease shall:
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(i) be issued by insurance companies licensed to do business in
the state of North Carolina with general policyholder's
ratings of at least A and a financial rating of at least XI
in the most current Best's Insurance Reports available on
the date of this Lease;
(ii) name the non procuring party as an additional insured as
its interest may appear (other landlords or tenants may
also be added as additional insureds in a blanket policy);
(iii) provide that the insurance not be canceled or materially
changed in the scope or amount of coverage unless thirty
(30) days' advance notice is given to the non procuring
party;
(iv) be primary policies - not as contributing with, or in
excess of, the coverage that the other party may carry;
(v) be permitted to be carried through a "blanket policy" or
"umbrella" coverage;
(vi) have property deductibles not greater than $5,000; and
(vii) be maintained during the entire Term.
(i) Evidence of Insurance. By the Commencement Date and upon each renewal
of its insurance policies, Tenant shall give copies of certificates of
insurance to Landlord. The certificate shall specify amounts, types of
coverage, the waiver of subrogation, and the insurance criteria listed
in Section 8.01(f). The policies shall be renewed or replaced and
maintained by Tenant. If Tenant fails to give the required certificate
within thirty (30) days after the notice of demand for it, Landlord
may obtain and pay for that insurance, but is not obligated to do so,
and receive reimbursement from the party required to have the
insurance.
8.02 Indemnification.
(a) Tenant's Indemnity. Tenant indemnifies, defends, and holds Landlord
harmless from claims, including but not limited to claims:
(i) for personal injury, death, or property damage;
(ii) for incidents occurring in or about the Premises or
Building; and
(iii) caused by the negligence or willful misconduct of Tenant,
its agents, employees, or invitees.
When the claim is caused by the joint negligence or willful misconduct
of Tenant and Landlord or Tenant and a third party unrelated to
Tenant, except Tenant's agents, employees, or invitees, Tenant's duty
to defend, indemnify, and hold Landlord harmless shall be in
proportion to Tenant's allocable share of the joint negligence or
willful misconduct.
(b) Landlord's Indemnity. Landlord indemnifies, defends, and holds Tenant
harmless from claims:
(i) for personal injury, death, or property damage;
(ii) for incidents occurring in or about the Premises or
Building; and
(iii) caused by the negligence or willful misconduct of Landlord,
its agents, employees, or invitees.
When the claim is caused by the joint negligence or willful misconduct
of Landlord and Tenant or Landlord and a third party unrelated to
Landlord, except Landlord's agents, employees, or invitees, Landlord's
duty to defend, indemnify, and hold Tenant harmless shall be in
proportion to Landlord's allocable share of the joint negligence or
willful misconduct.
(c) Release of Claims. Notwithstanding Section 8.02(a) and (b), the
parties release each other from any claims either party ("Injured
Party") has against the other to the extent the claim is covered by
the Injured Party's insurance.
8.03 Limitation of Landlord's Liability.
(a) Transfer of Premises. If the Building is sold or transferred,
voluntarily or involuntarily, Landlord's Lease obligations and
liabilities accruing after the transfer shall be the sole
responsibility of the new owner, and if
(i) the new owner expressly agrees in writing to assume
Landlord's obligations; and
(ii) the Tenant's funds in the hands of Landlord, such as the
Security Deposit, shall be given to the new owner.
(b) Liability for Money Judgment. If Landlord, its employees, officers,
directors or partners are ordered to pay Tenant a money judgment
because of Landlord's default, Tenant's sole remedy to satisfy the
judgment shall be to execute against Landlord's interest in the
Building and Land,
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including the rents and profits therefrom. Under no circumstance will
Landlord, or its officers, directors, partners or employees be
personally liable for any money judgment.
ARTICLE IX
LOSS OF PREMISES
9.01 Damages.
(a) Definition. "Relevant Space" means:
(i) the Premises, excluding Tenant's fixtures installed by or
at the request of Tenant;
(ii) access to the Premises; and
(iii) any part of the Building that provides essential services
to the Premises.
(b) Repair of Damage. If the Relevant Space is damaged in part or whole
from any cause and the Relevant Space can be substantially repaired
and restored within one hundred eighty (180) days from the date of the
damage using standard working methods and procedures, Landlord shall
at its expense promptly and diligently repair and restore the Relevant
Space to substantially the same condition as existed before the
damage. This repair and restoration shall be made within one hundred
eighty (180) days from the date of the damage unless the delay is due
to causes beyond Landlord's reasonable control.
If the Relevant Space cannot be repaired and restored within the one
hundred eighty (180) day period, then either party, may, within thirty
(30) days after determining that the repairs and restoration cannot be
made within one hundred eighty (180) days, terminate the Lease by
giving notice to the other party. Nevertheless, if the Relevant Space
is not repaired and restored within one hundred eighty (180) days from
the date of the damage, then Tenant may terminate the Lease at any
time within thirty (30) days after the one hundred eightieth (180th)
day. Tenant shall not be able to terminate this Lease if its willful
misconduct causes the damage unless Landlord is not promptly and
diligently repairing and restoring the Relevant Space.
(c) Determining the Extent of Damage. If the parties cannot agree in
writing whether the repairs and restoration will take more than one
hundred eighty (180) days to make, then the determination will be
reasonably made by Landlord's architect.
(d) Abatement. Unless the damage is caused by Tenant's willful misconduct,
the Base Rent and Additional Rent shall abate in proportion to that
part of the Premises that is unfit for use in Tenant's business. The
abatement shall consider the nature and extent of interference to
Tenant's ability to conduct business in the Premises and the need for
access and essential services. The abatement shall continue from the
date the damage occurred until ten (10) business days after Landlord
completes the repairs and restoration to the Relevant Space or the
part rendered unusable and notice to Tenant that the repairs and
restoration are completed, or until Tenant again uses the Premises or
the part rendered unusable, whichever is first.
(e) Tenant's Property. Notwithstanding anything else in this Article IX,
Landlord is not obligated to repair or restore damage to Tenant's
trade fixtures, furniture, equipment, or other personal property, or
any Tenant improvements.
(f) Damage to Building. If:
(i) more than twenty percent (20%) of the Building is damaged
and the Landlord decides not to repair and restore the
Building;
(ii) any mortgagee of the Building shall not allow adequate
insurance proceeds for repair and restoration;
(iii) the damage is not covered by Landlord's insurance; or
(iv) the Lease is in the last twelve (12) months of its Term,
then Landlord may terminate this Lease. To terminate,
Landlord must give notice to Tenant within thirty (30) days
after the Landlord knows of the damage. The notice must
specify the termination date, which shall be at least
thirty (30) but not more than sixty (60) days after the
date notice is given.
(g) Termination. If either party terminates this Lease as permitted above,
then this Lease shall end on the day specified in the termination
notice. The Base Rent, Additional Rent, and other charges shall be
payable up to the termination date and shall account for any
abatement. Landlord shall promptly refund to Tenant any prepaid,
unaccrued Base Rent and Additional Rent, accounting for any abatement,
plus Security Deposit, if any, less any sum then owing by Tenant to
Landlord.
9.02 Condemnation.
(a) Definitions. The terms "eminent domain," "condemnation," "taken," and
the like in Section 9.02 include takings for public or quasi-public
use and private purchases in place of condemnation by any authority
authorized to exercise the power of eminent domain.
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(b) Entire Taking. If the entire Premises or the portions of the Building
required for reasonable access to, or the reasonable use of, the
Premises are taken by eminent domain, this Lease shall automatically
end on the earlier of:
(i) the date title vests; or
(ii) the date Tenant is dispossessed by the condemning
authority.
(c) Partial Taking. If the taking of a part of the Premises materially
interferes with Tenant's ability to continue its business operations
in substantially the same manner and space then Tenant may terminate
this Lease on the earlier of:
(i) the date when title vests;
(ii) the date Tenant is dispossessed by the condemning
authority; or
(iii) sixty (60) days following notice to Tenant of the date when
vesting or dispossession is to occur.
If there is a partial taking and this Lease continues, then the Lease
shall end as to the part taken and the Base Rent and Additional Rent
shall abate in proportion to the part of the Premises taken and
Tenant's pro rata share shall be equitably reduced.
(d) Termination by Landlord. If title to a part of the Building other than
the Premises is condemned, and in the Landlord's reasonable opinion,
the Building should be restored in a manner that materially alters the
Premises, Landlord may terminate this Lease by giving notice to
Tenant. Termination notice shall be given within sixty (60) days
following the date title vested. This Lease shall end on the date
specified in the termination notice, which date shall be at least
thirty (30) days but not more than ninety (90) days after the notice
is given.
(e) Rent Adjustment. If the Lease is terminated as provided in Sections
9.02(b), (c), or (d), then the Base Rent, Additional Rent, and other
charges shall be payable up to the date, and shall account for any
abatement. Landlord, considering any abatement, shall promptly refund
to Tenant any prepaid, unaccrued Base Rent and Additional Rent plus
Security Deposit, if any, less any sum then owing by Tenant to
Landlord.
(f) Repair. If the Lease is not terminated as provided for in Sections
9.02(b), (c), or (d), then Landlord at its expense shall promptly
repair and restore the Premises to the condition that existed
immediately before the taking, except for the part taken, to render
the Premises a complete architectural unit, but only to the extent of
the:
(i) condemnation award received for the damage; and
(ii) the Landlord's original obligation under Section 4.05 and
Exhibit D.
(g) Awards and Damages. Landlord reserves all rights to damages paid
because of any partial or entire taking of the Premises. Tenant
assigns to Landlord any right Tenant may have to the damages or award.
Tenant may make claim for, and shall be entitled to retain, any award
for the value of the leasehold estate. Notwithstanding anything else
in this Paragraph 9.02(g), Tenant may claim and recover from the
condemning authority a separate award for Tenant's moving expenses,
business dislocation damages, Tenant's personal property and fixtures,
the unamortized costs of leasehold improvements paid for by Tenant,
excluding the Landlord's Improvements, and any other award that would
not substantially reduce the award payable to Landlord. Each party
shall seek its own award, as limited by this provision, at its own
expense, and neither shall have any right to the award made to the
other.
(h) Temporary Condemnation. If part or all of the Premises are condemned
for a limited period of time not to exceed 90 days ("Temporary
Condemnation"), this Lease shall remain in effect. The Base Rent and
Additional Rent and Tenant's obligations for the part of the Premises
taken shall abate during the Temporary Condemnation in proportion to
the part of the Premises that Tenant is unable to use in its business
operations as a result of the Temporary Condemnation. Landlord shall
receive the entire award for any Temporary Condemnation.
ARTICLE X
DEFAULT
10.01 Tenant's Default.
(a) Defaults. Each of the following constitutes a default ("Default"):
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(i) Tenant's failure to pay Base Rent or Additional Rent within
five (5) days after written notice from Landlord that the
rent is past due and payable;
(ii) Tenant's failure to pay Base Rent or Additional Rent within
five (5) days after the due date, at any time during a
calendar year in which Tenant has already received two (2)
notices of its failure to pay Base Rent or Additional Rent
by the due date;
(iii) Tenant's failure to perform or observe any other Tenant
obligation after a period of thirty (30) business days or
the additional time, if any, that is reasonably necessary
to promptly and diligently cure the failure, after it
receives notice from Landlord setting forth in reasonable
detail the nature and extent of the failure and identifying
the applicable Lease provision(s);
(iv) Tenant's abandoning or vacating the Premises;
(v) Tenant's failure to vacate or stay any of the following
within sixty (60) days after they occur:
(1) a petition in bankruptcy is filed by or against
Tenant;
(2) Tenant is adjudicated as bankrupt or insolvent;
(3) a receiver, trustee, or liquidator is appointed
for all or a substantial part of Tenant's
property; or
(4) Tenant makes an assignment for the benefit of
creditors.
10.02 Landlord's Remedies.
(a) Remedies. Landlord in addition to the remedies given in this Lease or
under the law, may do any one or more of the following if Tenant
commits a Default under Section 10.01:
(i) end this Lease, and Tenant shall then surrender the
Premises to Landlord; or
(ii) enter and take possession of the Premises pursuant to
summary process of law and remove Tenant, with or without
having ended the Lease.
(b) No Surrender. Landlord's exercise of any of its remedies or its
receipt of Tenant's keys shall not be considered an acceptance or
surrender of the Premises by Tenant. A surrender must be agreed to in
writing signed by both parties.
(c) Rent. If Landlord terminates this Lease or Tenant's right to possess
the Premises because of a Default, Landlord may hold Tenant liable
for Base Rent, Additional Rent, and other indebtedness accrued to the
date the Lease expires or is terminated. Tenant shall also be liable
for the Base Rent, Additional Rent and other indebtedness that
otherwise would have been payable by Tenant during the remainder of
the Term had there been no default, reduced by any sums Landlord
receives by reletting the Premises during the Term. Landlord must use
commercially reasonable efforts to re-let the Premises during the
remainder of the term.
(d) Other Expenses. Tenant shall also be liable for that part of the
following sums paid by Landlord and attributable to that part of the
Term ended due to Tenant's Default:
(i) reasonable broker's fees incurred by Landlord for reletting
part or all of the Premises prorated for that part of the
reletting Term ending concurrently with the then current
Term of this Lease;
(ii) the cost of removing and storing Tenant's property;
(iii) the cost of repairs, alterations, and remodeling necessary
to put the Premises in a condition reasonably acceptable to
a new Tenant; provided, however, landlord shall reasonably
attempt to negotiate for reimbursement of tenant
improvements for new tenant within new lease; and
(iv) other necessary and reasonable expenses incurred by
Landlord in enforcing its remedies, including, without
limitation, reasonable attorneys fees.
(e) Payment. Tenant shall pay the sums due in Sections 10.02(c) and (d)
within thirty (30) days of receiving Landlord's proper and correct
invoice for the amounts.
(f) Reletting. Landlord may reasonably relet for a shorter or longer
period of time than the Lease Term and make any necessary repairs or
alterations. Landlord may relet on any reasonable terms including a
reasonable amount of free rent.
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10.03 Self-Help. If Tenant defaults, Landlord may, without being obligated and
without waiving the Default, cure the Default, and may enter the Premises to do
so. Tenant shall pay Landlord, upon demand, as Additional Rent, all costs,
expenses and disbursements incurred by Landlord.
10.04 Survival. The remedies permitted by this Article X and the parties'
indemnities in Section 8.02 shall survive the Expiration Date or earlier
termination of this Lease.
ARTICLE XI
NON DISTURBANCE
11.01 Subordination.
(a) Mortgages. Subject to Section 11.01(b), this Lease is subordinate to
prior or subsequent mortgages covering the Building contingent upon
execution of a non-disturbance agreement by mortagee. Landlord shall
obtain a non-disturbance agreement from subsequent lienholders in
favor of Tenant.
(b) Foreclosures. If any mortgage is foreclosed, then:
(i) This Lease shall continue;
(ii) Tenant's quiet possession shall not be disturbed if Tenant
is not in Default;
(iii) Tenant will attorn to and recognize the mortgagee or
purchaser at foreclosure sale (Successor Landlord) as
Tenant's landlord for the remaining Term; and
(iv) The Successor Landlord shall not be bound by:
(1) any payment of Base Rent or Additional Rent for
more than one month in advance, except the
Security Deposit and free rent, if any, specified
in the Lease,
(2) any amendment, modification, or ending of this
Lease without Successor Landlord's consent after
the Successor Landlord's name is given to Tenant
unless the amendment, modification, or ending is
specifically authorized by the original Lease and
does not require Landlord's prior agreement or
consent, and
(3) any liability for any act or omission of a prior
Landlord.
(c) Self-Operating. This Section 11.01 is self-operating. However,
Landlord and Tenant shall promptly execute and deliver any documents
needed to confirm this arrangement.
11.02 Estoppel Certificate.
(a) Obligation. Tenant shall from time to time, within ten (10) business
days after receiving a written request from Landlord, execute and
deliver to Landlord a written statement which may be relied upon by
Landlord and any third party with whom the Landlord is dealing and
which shall certify:
(i) the accuracy of the Lease document;
(ii) the Commencement and Expiration Dates of the Lease;
(iii) that the Lease is unmodified and in full effect or in full
effect as modified, stating the date and nature of the
modification;
(iv) whether to the Tenant's knowledge the Landlord is in
default or whether the Tenant has any claims or demands
against Landlord, and, if so, specifying the Default,
claim, or demand; and
(v) to other correct and reasonably ascertainable facts that
are covered by the Lease terms.
(b) Remedy. The Tenant's failure to comply with its obligations in
Section 11.02(a) shall be a Default, except that the cure period for
this Default shall be five (5) business days after the Tenant
receives notice of the Default.
11.03 Quiet Possession. If Tenant is not in default, and subject to the Lease
terms, Landlord warrants that Tenant's peaceable and quiet enjoyment of the
Premises shall not be disturbed by anyone claiming by or through Landlord.
ARTICLE XII
LANDLORD'S RIGHTS
12.01 Rules 14
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(a) Rules. Tenant, its employees and invitees, shall comply with:
(i) the Rules attached as Exhibit E; and
(ii) reasonable modifications and additions to the Rules adopted
by Landlord.
(b) Conflict with Lease. If a Rule issued under Section 12.01(a) conflicts
with or is inconsistent with any Lease provision, the Lease provision
controls.
(c) Enforcement. Although Landlord is not responsible for another tenant's
failure to observe the Rules, Landlord shall not unreasonably enforce
the Rules against Tenant.
12.02 Mechanic's Liens.
(a) Discharge Lien. Tenant shall, within twenty (20) days after receiving
notice of any mechanic's lien for material or work claimed to have
been furnished to the Premises on Tenant's behalf and at Tenant's
request:
(i) discharge the lien; or
(ii) post a bond equal to the amount of the disputed claim with
companies reasonably satisfactory to Landlord.
If Tenant posts a bond, it shall contest the validity of the lien.
Tenant shall indemnify, defend, and hold Landlord harmless from losses
incurred from these liens.
(b) Landlord's Discharge. If Tenant does not discharge the lien or post
the bond within the twenty (20) day period, Landlord may pay any
amounts, including interest and legal fees, to discharge the lien.
Tenant shall then be liable to Landlord for the amounts paid by
Landlord as Additional Rent.
(c) Consent not Implied. This Section 12.02 is not a consent to subject
Landlord's property to these liens.
12.03 Right to Enter.
(a) Permitted Entries. Landlord and its agents, servants, and employees
may enter the Premises at reasonable times, and at any time if an
emergency, without charge, liability, or abatement of Base Rent, to:
(i) examine the Premises;
(ii) make repairs, alterations, improvements, and additions
either required by the Lease or advisable to preserve the
integrity, safety, and good order of part or all of the
Premises or Building;
(iii) provide janitorial and other services required by the
Lease;
(iv) comply with Applicable Laws;
(v) show the Premises to prospective lenders or purchasers;
(vi) post notices of non responsibility;
(vii) remove any Alterations made by Tenant in violation of
Section 7.01; and
(viii) post "For Sale" signs and, during the one hundred twenty
(120) days immediately before this Lease ends, post "For
Lease" signs.
(b) Entry Conditions. Notwithstanding Section 12.03(a), entry is
conditioned upon Landlord:
(i) giving Tenant at least twenty-four (24) hours advance
notice, except in an emergency;
(ii) promptly finishing any work for which it entered; and
(iii) causing the least practical interference to Tenant's
business.
12.04 Holdover.
(a) Holdover Status. If Tenant continues occupying the Premises after the
Term ends ("Holdover") then:
(i) if the Holdover is with Landlord's written consent, it
shall be a month-to-month tenancy, terminable on thirty
(30) days advance notice by either party. Tenant shall pay
at the beginning of each month Base Rent and Additional
Rent that is five percent (5%) higher
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than the amount due in the last full month immediately
preceding the Holdover period unless Landlord specifies a
lower or higher Rent and Additional Rent in the written
consent;
(ii) if the Holdover is without Landlord's written consent,
then Tenant shall be a tenant-at-sufferance. Tenant shall
pay by the first day of each month twice the amount of
Base Rent and Additional Rent due in the last full month
immediately preceding the Holdover period and shall be
liable for any damages suffered by Landlord because of
Tenant's Holdover, Landlord shall retain its remedies
against Tenant who holds over without written consent.
(b) Holdover Terms. The Holdover shall be on the same terms and
conditions of the Lease except:
(i) the Term;
(ii) Base Rent and Additional Rent;
(iii) the extension Term is deleted;
(iv) the Quiet Possession provision is deleted;
(v) Landlord's obligation for services and repairs is
deleted; and
(vi) consent to an assignment or sublease may be unreasonably
withheld and delayed.
12.05 Signs. Tenant shall not place or have placed any other signs, listings,
advertisements, or any other notices anywhere in the Building without Landlord's
prior written consent.
ARTICLE XIII
MISCELLANEOUS
13.02 Attorney's Fees. In any litigation between the parties regarding this
Lease, the losing party shall pay to the prevailing party all reasonable
expenses and court costs including attorneys' fees incurred by the prevailing
party. A party shall be considered the prevailing party if:
(a) it initiated the litigation and substantially obtains the relief it
sought, either through a judgment or voluntary action before (after
it is scheduled) trial or judgment;
(b) the other party withdraws its action without substantially obtaining
the relief it sought; or
(c) it did not initiate the litigation and judgment is entered for
either party, but without substantially granting the relief sought.
13.03 Notices. Unless a Lease provision expressly authorizes verbal notice,
all notices under this Lease shall be in writing and sent by registered or
certified mail, postage prepaid, or by overnight delivery as follows:
To Tenant: Total Sports, Inc.
234 Fayetteville Street Mall
Suite 300
Raleigh, NC 27601
and
To Landlord: First Raleigh Telex, LLC and Frank A. Daniels, Jr.,
c/o Anthony & Co. Manager
702 Oberlin Road First Raleigh Telex
Suite 100 234 Fayetteville Street Mall
Raleigh, NC 27605 Suite 600
(919) 832-1110 Raleigh, NC 27601
Post Office Box 10810
Raleigh, NC 27605
Attn: Property Management
Either party may change these persons or addresses by giving notice as provided
above. Tenant shall also give required notices to Landlord's mortgagee after
receiving notice from Landlord of the mortgagee's name and address. Notice
shall be considered and three business days after deposit in the mail.
13.04 Partial Invalidity. If any Lease provision is invalid or unenforceable to
any extent, then except that provision, the remainder of this Lease shall
continue in effect and be enforceable to the fullest extent permitted by law.
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3.05 Waiver. The failure of either party to exercise any of its rights is not
a waiver of those rights. A party waives only those rights specified in writing
and signed by the party waiving its rights.
13.06 Binding on Successors. This Lease shall bind the parties' heirs,
successors, representatives, and permitted assigns.
13.07 Governing Law. This Lease shall be governed by the laws of the state in
which the Building is located.
13.08 Lease Not an Offer. Landlord gave this Lease to Tenant for review. It is
not an offer to lease. This Lease shall not be binding unless signed by both
parties and an originally signed counterpart is delivered to Tenant by July 31,
1999.
13.09 Recording. Recording of this Lease is prohibited except as allowed in
this paragraph. At the request of either party, the parties shall promptly
execute and record, at the cost of the requesting party, a short form memorandum
describing the Premises and stating this Lease's Term, its Commencement and
Expiration Dates, and other information the parties agree to include.
13.10 Survival of Remedies. The parties' remedies shall survive the expiration
or termination of this Lease when caused by the Default of the other party.
13.11 Authority of Parties. Each party warrants that it is authorized to enter
into the Lease, that the person signing on its behalf is duly authorized to
execute the Lease, and that no other signatures are necessary.
13.12 Business Days. Business day means Monday through Friday inclusive,
excluding holidays identified at Section 6.02(b). Throughout this Lease,
wherever "days" are used the term shall refer to calendar days. Wherever the
term "business days" is used the term shall refer to business days.
13.13 Entire Agreement. This Lease contains the entire agreement between the
parties about the Premises and Building. Except for the Rules for which Section
12.01(a) controls, this Lease shall be modified only by a writing signed by both
parties.
13.14 Definition of Lease. This Lease consists of the following:
(a) Title Page;
(b) Table of Contents;
(c) Articles I through XIII;
(d) Signature Page;
(e) Rider containing Option To Extend
Rider B containing Guarantee of Lease Obligations
(f) Exhibits A through E.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Lease the
day and year first above written.
LANDLORD: First Raleigh Telex, LLC (SEAL)
SIGNATURE:
/s/ Frank Daniels (SEAL)
------------------------------------
DATE: August 8, 1999
------------------------------
WITNESS: BY: /s/ Beth Ames
--------------------------------
NAME: Beth Ames
------------------------------
TITLE: Executive Assistant
-----------------------------
DATE: August 8, 1999
------------------------------
TENANT: Total Sports, Inc.
SIGNATURE:
BY: /s/ George Schlukbier
--------------------------------
NAME: George Schlukbier
------------------------------
TITLE: President/COO
-----------------------------
DATE: August 8, 1999
------------------------------
ATTEST BY:_________________________________
NAME:_______________________________
TITLE:______________________________
DATE:_______________________________
[AFFIX CORPORATE SEAL]
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RIDER
THIS RIDER constitutes a part of the Lease to which it is attached. In the
event of a conflict between this Rider and the provisions of the Lease, the
Rider will govern and control.
Right of First Refusal
Tenant shall have the first right of refusal to lease any space in the building
that shall become available for lease subsequent to the commencement of this
Lease. In the event Landlord receives a bona fide offer to lease space in the
building from a third party tenant, Landlord shall promptly notify Tenant in
writing of such offer, and then Tenant shall have the right to match the terms
of the proposed third party lease by giving written notice to Landlord of
Tenant's intent to lease the premised not later than five business days from the
date Tenant is notified of the third party lease proposal. In the event Tenant
refuses to lease the space offered then Landlord may lease the space to the
third party tenant, but Tenant shall have the ongoing right of first refusal in
the future.
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Exhibit A
Figure 1. Floorplan
234 Fayetteville Street Mall, Second Floor
[Schematic of Floorplan]
20
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Exhibit A
Figure 2. Floorplan
234 Fayetteville Street Mall, Third Floor
[Schematic of Floorplan]
21
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Exhibit A
Figure 3. Floorplan
234 Fayetteville Street Mall, Fourth Floor
[Schematic of Floorplan]
22
<PAGE>
Exhibit A
Figure 4. Floorplan
234 Fayetteville Street Mall, Fifth Floor
[Schematic of Floorplan]
23
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Exhibit A
Figure 5. Floorplan
234 Fayetteville Street Mall, Basement
[Schematic of Floorplan]
24
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Exhibit B
BUILDING
234 Fayetteville Street Mall
[Schematic of Building]
25
<PAGE>
Exhibit C
Land
BEGINNING at a point, said point being the control of a brick building, said
point having N.C. Grid Coordinates of Y=737,930.371 X=2,106,947.179, said point
located North 78 (degrees) 43' 09" West a distance of 372.31 feet from a brass
plug located at the northeast corner of the intersection of East Martin Street
and Wilmington Street, and said point being the northwest corner of the
technical rights of way of Fayetteville Street and West Martin Street; then
running with the wall line of the brick building the following courses: North 87
(degrees) 46' 12" West a distance of 82.17 feet to a point; North 02 (degrees)
13'48" East a distance of 67.5 feet to a point; South 87 (degrees) 46' 12" East
a distance of 82.17 feet to a point; then South 02 (degrees) 13'48" West a
distance of 67.5 feet to the point and place of BEGINNING, having 5,546.5 square
feet (0.1273 acres) and being the property located at 234 Fayetteville Street in
Raleigh, Wake County, North Carolina, as shown on survey dated September 16,
1998 by Al Prince & Associates, P.A. This property is the same property
described in a Deed dated January 1, 1973 from First Union National Bank North
Carolina to National Investment Company, recorded at Book 2164, Page 231, Wake
County Registry.
Save and except that portion of the above referenced property previously
conveyed by Special Warranty Deed dated May 21, 1998 and recorded in Book 8067,
Page 116, Wake County Registry.
Together with all of the land conveyed by First Union National Bank of North
Carolina to National Investment Company by Deed dated January 1, 1973 and
recorded in book 2164, Page 228, Wake County Registry.
Together with all rights and subject to those certain party wall agreements
recorded in:
(1) Book 147, Page 462
(ii) Book 151, Page 229
(iii) Book 391, Page 517
(iv) Book 438, Page 204
(v) Book 561, Page 111
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<PAGE>
Exhibit D
LANDLORD IMPROVEMENTS
Landlord shall provide to Tenant a Tenant Improvement Allowance as follows:
Basement: $10.00 per square foot or $ 42,150.00
Second Floor: $10.00 per square foot or $ 46,620.00
Third Floor $10.00 per square foot or $ 46,700.00
Fourth Floor $10.00 per square foot or $ 46,700.00
Fifth Floor $10.00 per square foot or $ 46,700.00
Total Allowance Amount: $228,870.00
The Tenant shall be solely responsible for all costs associated with Tenant
Improvement in the Premises above and beyond the above Total Amount. Landlord
at is option may amortize the excess expenditures over the lease term at an
interest rate of ten percent (10%) per annum, with payments made monthly to
Landlord by Tenant.
27
<PAGE>
Exhibit E
RULES AND REGULATIONS
(1) Access to Common Areas of the Property. Landlord may from time to time
establish security controls for the purpose of regulating access to the
common areas of the property. Tenant shall abide by all such security
regulations so established and agrees to always leave clear access for
vehicular traffic through all parking lots, loading areas and driveways.
(2) Protecting Demised Premises. Before leaving the Demised Premises
unattended, Tenant shall close and securely lock all doors or other means
of entry to the Demised Premises.
(3) Building Directories. The directories of the building shall be used
exclusively for the display of the name and location of tenants only and
will be provided at the expense of Landlord. Any company names and/or name
changes requested by Tenant to be displayed in the directories must be
approved by Landlord and, if approved, will be provided at the sole expense
of Tenant.
(4) Large Articles. Furniture, freight and other large or heavy articles may be
brought into the building in a manner so as to not damage the property and
always at Tenant's sole responsibility. All damage done to the building,
its furnishings, fixtures or equipment by moving or maintaining such
furniture, freight or articles shall be repaired at the expense of Tenant.
(5) Signs. Tenant shall not paint, display, inscribe, maintain or affix any
sign, placard, picture, advertisement, name, notice, lettering or direction
on any part of the outside or inside of the building, or on any part of the
inside of the Demised Premises which can be seen from the outside of the
Demised Premises, without the written consent of Landlord, and then only
such name or names or matter and in such color, size, style, character and
material as shall be first approved by Landlord in writing. Landlord
reserves the right to remove at Tenant's expense all matter other than that
above provided for without notice to Tenant.
(6) Compliance with Laws. Tenant shall comply with all applicable laws,
ordinances, governmental orders or regulations and applicable orders or
directions from any public office or body having jurisdiction, whether now
existing or hereinafter enacted with respect to the Demised Premises and
the use or occupancy thereof. Tenant shall not make or permit any use of
the Demised Premises which directly or indirectly is forbidden by law,
ordinance, governmental regulations or order or direction of applicable
public authority, or which may be dangerous to person or property.
(7) Hazardous Materials. Tenant shall not use or permit to be brought into the
Demised Premises or the building any flammable oils or fluids, or any
explosive or other articles deemed hazardous to persons or property, or do
or permit to be done any act or thing which will invalidate or which if
brought in would be in conflict with any insurance policy covering the
building or its operation, or the Demised Premises, or any part of either,
and will not do or permit to be done anything in or upon the Demised
Premises, or bring or keep anything therein, which shall not comply with
all rules, orders, regulations or requirements of any organization,
bureaus, department or body having jurisdiction with respect thereto (and
Tenant shall at all times comply with all such rules, orders, regulations
or requirements), or which shall increase the rate of insurance on the
building, its appurtenances, contents or operation.
(8) Defacing Demised Premises and Overloading. Tenant shall not place anything
or allow anything to be placed in the Demised Premises near the glass or
any door, partition, wall or window which may be unsightly from outside the
Demised Premises. Tenant shall not place or permit to be placed any article
of any kind on any window ledge or on the exterior walls; blinds, shades,
awnings or other forms of inside or outside window ventilators or similar
devices shall not be placed in or about the outside windows in the Demised
Premises except to the extent that the character, shape, color material and
make thereof is approved by Landlord. Tenant shall not do any painting or
decorating in the Demised Premises or install any floor coverings in the
Demised Premises or make, paint, cut or drill into, or in any way deface
any part of the Demised Premises or building without in each instance
obtaining the prior written consent of Landlord. Tenant shall not overload
any floor or part thereof in the Demised Premises, or any facility in the
building or any public corridors or elevators therein by bringing in or
removing any large or heavy articles and, Landlord may direct and control
the location of safes, files, and all other heavy articles and, if
considered necessary by Landlord, require supplementary supports at
Tenant's expense of such material and dimensions necessary to properly
distribute the weight.
(9) Obstruction of Public Areas. Tenant shall not, whether temporarily,
accidentally or otherwise, allow anything to remain in, place or store
anything in, or obstruct in any way, any sidewalk, court, passageway,
entrance, or shipping area. Tenant shall lend its full cooperation to keep
such areas free from all obstruction and in a clean and sightly condition,
and move all supplies, furniture and equipment as soon as received directly
to the Demised Premises, and shall move all such items and waste (other
than waste customarily removed by building employees) that are at any time
being taken from the Demised Premises directly to the areas designated for
disposal. All courts, passageways, entrances, exits, elevators, escalators,
stairways, corridors, halls and roofs are not for the use of the general
public and Landlord shall in all cases retain the right to control and
prevent access thereto by all persons whose presence in the judgment of
Landlord shall be prejudicial to the safety, character, reputation and
interest of the building and its tenants provided, however, that nothing
herein contained shall be construed to prevent such access to persons with
whom Tenant deals within the normal course of Tenant's business unless such
persons are engaged in illegal activities.
(10) Additional Locks. Tenant shall not attach or permit to be attached
additional locks or similar devices to any door or window, change any
existing locks or the mechanism thereof, or make or permit to be made any
keys for any door other than those provided by Landlord. Upon termination
of this lease or of Tenant's possession, Tenant shall surrender all keys to
the Demised Premises. Tenant shall be solely responsible for the costs of
all locks and keys other than the original set in the premises as of the
date of occupancy.
28
<PAGE>
(11) Communications or Utility Connections. If Tenant desires signal, alarm or
other utility or similar service connections installed or changed, Tenant
may install or change the same without the approval of Landlord, but at
Tenant's expense. Tenant shall not install in the Demised Premises any
equipment which requires a substantial amount of electrical current without
the advance written consent of Landlord. Tenant shall ascertain from
Landlord the maximum amount of load or demand for or use of electrical
current which can safely be permitted in the Demised Premises, taking into
account the capacity of the electric wiring in the building and the Demised
Premises, taking into account the capacity of the electric wiring in the
building and the Demised Premises and the needs of other tenants in the
building, and shall not in any event connect a greater load than that which
is safe.
(12) Office of the Building. Service requirements of Tenant will be attended to
only upon application at the office of Anthony & Co. Employees of Landlord
shall not perform any work outside of their duties unless under special
instructions from Landlord.
(13) Restrooms. The restrooms, toilets, urinals, vanities and the other
apparatus shall not be used for any purpose other than that for which they
were constructed and no foreign substance of any kind whatsoever shall be
thrown therein and the expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by Tenant who, or
whose employees or invitees, shall have caused it.
(14) Intoxication. Landlord reserves the right to exclude or expel from the
building any person who, in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any
act in violation of any of the rules and regulations of the building.
(15) Nuisances and Certain Other Prohibited Uses. Tenant shall not (a) install
or operate any internal combustion engine, boiler, machinery,
refrigerating, heating or air conditioning apparatus in or about the
Demised Premises; (b) engage in any mechanical business, utilize any
article or thing, or engage in any service in or about the Demised Premises
or building, except those ordinarily embraced within the permitted use of
the Demised Premises specified in Article 7; (c) use the Demised Premises
for housing, lodging, or sleeping purposes; (d) place any antennae on the
roof or on or in any part of the inside or outside of the building other
than the inside of the Demised Premises, or place a musical or sound
producing instrument or device inside or outside the Demised Premises which
may be heard outside the Demised Premises; (e) use any illumination or
power for the operation of any equipment or device other than electricity;
(f) operate any electrical device from which may emanate electrical waves
which may interfere with or impair radio or television broadcasting or
reception from or in the building or elsewhere; (g) bring or permit to be
in the building complex any bicycle or other vehicle, or dog (except in the
company of a blind person) or other animal or bird; (h) make or permit any
objectionable noise or odor to emanate from the Demised Premises; (i)
disturb, solicit or canvass any occupant of the building; (j) do anything
in or about the Demised Premises tending to create or maintain a nuisance
or do any act tending to injure the reputation of the building.
(16) Solicitation. Tenant shall not make any room-to-room canvass to solicit
business from other tenants in the building and shall not exhibit, sell or
offer to sell, use, rent or exchange any products or services in or from
the Demised Premises unless ordinarily embraced within the Tenant's use of
the Demised Premises specified herein and specific authority granted in the
lease agreement.
(17) Energy Conservation. Tenant shall not waste electricity, water, heat or
air conditioning and agrees to cooperate fully with Landlord to assure the
most effective operation of the building's heating and air conditioning,
and shall not allow the adjustment (except by Landlord's authorized
building personnel) or any controls.
(18) Building Security. Upon entry to or exit from the building the exterior
building doors and suite entry door(s) should be kept locked at all times
to assist in security. The janitorial service (if any) shall, upon
completion of its duties, lock all building doors. Problems in building
and suite security should be directed to Anthony & Co.
(19) Parking. Parking is in designated parking areas only. There should be no
vehicles in "no parking" zones or at curbs. Handicapped spaces are for
handicapped persons and the Police Department will ticket unauthorized
(unidentified) cars in handicapped spaces. No vehicles may be abandoned or
repaired on the property, and vehicles requiring extended parking should be
identified to Landlord.
(20) Janitorial Service. Tenants will remove excessive trash from inside and
outside their premises and shall deposit same in the dumpsters provided by
Landlord. Any large volume of trash resulting from delivery of furniture,
equipment, etc., should be removed by the delivery company, Tenant, or
Landlord at Tenant's expense. Any requests for extraordinary trash removal
should be directed to Anthony & Co. at 832-1110.
(21) Landlord reserves the right to make such other reasonable Rules and
Regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building and the Land, and for the
preservation of good order therein.
29
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
To Lease Dated: December 1, 1998
AGREEMENT, made this 16th day of July, 1999, by and between FIRST RALEIGH
TELEX, LLC (hereinafter called Landlord) and TOTAL SPORTS, INC. (hereinafter
called Tenant).
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into a written agreement of Lease
bearing date of December 1, 1998 (hereinafter called The Lease Agreement),
whereby Landlord leased to Tenant and Tenant hired from Landlord approximately
22,887 square feet known as FIRST RALEIGH TELEX BUILDING, 234 Fayetteville
Street Mall, located in the City of Raleigh, Wake County, North Carolina, for
the term of ten (10) years three (3) months from April 1, 1999 and ending June
30, 2009.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto with the intent
to be legally bound, hereby agree as follows:
1. Premises: the premises shall be expanded in size to include the first
--------
floor space of the building containing approximately 4,123 rentable square
feet. Tenant's prorata share of the building will be ninety five percent
(95%).
2. Commencement Date: the rent on the expansion space on the first floor will
-----------------
commence on the date Tenant takes possession of the expansion space or
November 1, 1999, whichever occurs first. Partial month occupancy shall be
prorated
3. Tenant Improvements: Landlord shall provide Tenant an upfit allowance of
-------------------
Forty One Thousand Two Hundred Thirty & no/100 Dollars ($41,230.00) , or
Ten Dollars per square foot, for the renovation of the expansion space.
Landlord will pay up to the allowance amount for costs and expenses
incurred by Tenant for Tenant's work in the expansion space. Reimbursements
to Tenant will be made within fifteen (15) days of receipt of valid
invoices from contractors, subcontractors or service providers.
4. Rent: To incorporate the expansion space, Tenant's rent shall be increased
------
by $4,810.17 per month or $57,722.00 per year. Escalations in rent shall
occur at the same rate (three percent (3%) and on the same schedule as
stated in the Lease.
5. Term: The term for the 4,123 square foot expansion space shall be from the
-----
commencement date defined above until June 30, 2009.
6. Option to Purchase:
------------------
(a) Landlord does hereby grant to Tenant or Tenant's assignee an option to
purchase the Building and the Landlord's interest under this Lease,
upon the terms and conditions herein set forth.
(b) Tenant must exercise the option to purchase, if it is to be exercised
at all, during the period from July 1, 1999 to June 30, 2000,
hereinafter referred to as the "Option Period."
(c) In order to exercise the option to purchase herein granted, Tenant
must give written notice of the exercise of the option to Landlord and
Landlord must receive the same during the Option Period, time being of
the essence, and if not so given and received, this option shall
automatically expire. At the same time the option is exercised, Tenant
must deliver to Landlord a proposed purchase and sale agreement for
the Building (a "Purchase Agreement") executed by Tenant, together
with an earnest money deposit ("Earnest Money") in the form of a
cashier's check for Fifty Thousand and 00/100 Dollars ($50,000.00)
made payable to Landlord. Upon execution of the Purchase Agreement by
Landlord, Landlord may deposit the Earnest Money into its account. The
Earnest Money shall be applied to the purchase price at the time of
closing and shall be refundable to Tenant only upon default by
Landlord and proper termination of the Purchase Agreement by Tenant.
(d) The provisions of Article X, including the provision relating to
default of Tenant set forth in Section 10.01 of this Lease are
conditions of this option.
(e) If Tenant shall exercise the option to purchase during the Option
Period, the transfer of title to Tenant and the payment of the
purchase price to Landlord shall occur within forty-five (45) days of
the date of notice, and until that time the terms of the Lease shall
remain in full force and effect.
1
<PAGE>
(f) The purchase price to be paid by Tenant to Landlord for the Premises,
if Tenant exercises its option to purchase, shall be the fair market
value of the property as determined by mutual agreement or, in the
event Tenant and Landlord are unable to agree upon fair market value,
by the "three appraiser method." The "three appraiser method" means
that fair market value shall be determined by an appraiser mutually
agreed upon by Landlord and Tenant and having at least five (5) years
experience in performing commercial real estate appraisals of office
buildings in the Raleigh, North Carolina market. In the event Landlord
and Tenant are unable to agree upon an appraiser or disagree as to the
value of the first appraisal obtained, then each party shall then
select and pay for its own commercial real estate appraiser with at
least five (5) years experience in appraising office buildings in the
Raleigh, North Carolina market. If the lower appraisal is not within
ten percent (10%) of the higher appraisal, the two appraisers shall
then jointly select a third commercial real estate appraiser having at
least five (5) years experience in appraisal of office buildings in
the Raleigh, North Carolina market, whose appraisal shall conclusively
be deemed the fair market value of the Building. The cost of the third
appraisal shall be borne equally by Landlord and Tenant.
(g) Within ten (10) days of the date the option to purchase is exercised,
Landlord and Tenant shall give instructions to consummate the sale to
Wyrick Robbins Yates and Ponton who shall act as escrow holder, on the
normal and usual escrow forms then used by such escrow holder, as
follows:
(i) Escrow shall close on the date previously called for in
paragraph (e) of this Addendum;
(ii) Landlord shall deposit the check referred to in paragraph (C)
of this Addendum into escrow upon opening thereof, with the
balance of the purchase price to be deposited into escrow one
day prior to the close of escrow;
(iii) Landlord shall convey to Tenant title to the Premises subject
only to mortgages and deeds of trust of record (the debt that
such instruments secure shall constitute a credit against the
purchase price), and easements, subsurface mineral rights and
restrictions of record. Any other liens and encumbrances shall
be removed prior to close of escrow at the expense of Landlord;
(iv) Escrow fees shall be shared equally;
(v) Interest, if any, operating expenses and rents will be prorated
to the close of escrow;
(vi) The cost of a standard title insurance policy to be issued to
Tenant shall be paid by Tenant;
(vii) The parties agree to execute any additional instructions as are
normal and usual;
(viii) All real estate transfer taxes shall be paid by Landlord;
(ix) All other expenses of the conveyance shall be apportioned
according to custom in the area.
Except as expressly modified by this Amendment and as heretofore modified,
all terms and provisions of the Lease Agreement are hereby ratified and
confirmed and shall remain in full force and effect through the term of the
Lease.
2
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their respective
hands and seals the day and year first above written.
WITNESS Landlord: FIRST RALEIGH TELEX, LLC
/s/ Beth Ames By: /s/ Frank Daniels
- ---------------------------- --------------------------------
Title:
Attest: Tenant: TOTAL SPORTS, INC.
By: /s/ George Schlukbier
--------------------------------
/s/ Petra Weishaupt
- ----------------------------
Name: George Schlukbier
------------------------------
Assistant (Corporate Secretary)
- ---------
Title: President/COO
-----------------------------
(AFFIX CORPORATE SEAL)
3
<PAGE>
EXHIBIT 10.13
TOTAL SPORTS INC.
=======================================
INVESTOR RIGHTS AGREEMENT
=======================================
November 12, 1999
<PAGE>
TOTAL SPORTS INC.
====================================
INVESTOR RIGHTS AGREEMENT
====================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. RESTRICTIONS ON TRANSFER............................................. 2
------------------------
1.1 Restrictive Legend...................................................... 2
------------------
1.2 Notice of Proposed Transfers............................................ 3
----------------------------
SECTION 2 REGISTRATION RIGHTS.................................................. 4
-------------------
2.1 Certain Definitions..................................................... 4
-------------------
2.2 Demand Registration..................................................... 5
-------------------
(a) Demand for Registration.............................................. 5
-----------------------
(b) Underwriting......................................................... 6
------------
2.3 Piggyback Registration.................................................. 6
----------------------
(a) Company Registration................................................. 6
--------------------
(b) Underwriting......................................................... 7
------------
(c) Right to Terminate Registration...................................... 8
-------------------------------
2.4 Expenses of Registration................................................ 8
------------------------
2.5 Obligations of the Company.............................................. 8
--------------------------
2.6 Indemnification......................................................... 9
---------------
2.7 Information by Holder................................................... 12
---------------------
2.8 Transfer of Rights...................................................... 12
------------------
2.9 Form S-3................................................................ 12
--------
2.10 Delay of Registration................................................ 13
---------------------
2.11 Limitations on Subsequent Registration Rights........................ 13
---------------------------------------------
2.12 Rule 144 Reporting................................................... 13
------------------
2.13 'Market Stand-Off' Agreement......................................... 14
----------------------------
2.14 Termination of Rights................................................ 14
---------------------
SECTION 3 RIGHTS OF FIRST REFUSAL.............................................. 15
-----------------------
3.1 Certain Definitions..................................................... 15
-------------------
3.2 Right of First Refusal.................................................. 16
----------------------
3.3 Required Notices........................................................ 16
----------------
3.4 Company's Right to Sell................................................. 16
-----------------------
3.5 Expiration of Right..................................................... 16
-------------------
SECTION 4 COMPANY COVENANTS.................................................... 17
-----------------
4.1 Financial Statements and Information.................................... 17
------------------------------------
4.2 Inspection.............................................................. 18
----------
4.3 Budget.................................................................. 18
------
4.4 Use of Proceeds......................................................... 18
---------------
4.5 Stock Option Plan....................................................... 18
-----------------
4.6 Compensation Committee.................................................. 19
----------------------
4.7 Expiration of Covenants................................................. 19
-----------------------
SECTION 5 PARTICIPATION RIGHTS................................................. 19
--------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.1 Series D Right to Participate in Initial Public Offering................ 19
--------------------------------------------------------
5.2 Compliance.............................................................. 20
----------
5.3 Notices................................................................. 20
-------
SECTION 6 MISCELLANEOUS........................................................ 20
-------------
6.1 Governing Law........................................................... 20
-------------
6.2 Successors and Assigns.................................................. 20
----------------------
6.3 Entire Agreement........................................................ 20
----------------
6.4 Severability............................................................ 20
------------
6.5 Amendment and Waiver.................................................... 21
--------------------
6.6 Delays or Omissions..................................................... 21
-------------------
6.7 Notices, etc............................................................ 21
------------
6.8 Titles and Subtitles.................................................... 22
--------------------
6.9 Counterparts............................................................ 22
------------
</TABLE>
ii
<PAGE>
TOTAL SPORTS INC.
=========================================
INVESTOR RIGHTS AGREEMENT
=========================================
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of this
12/th/ day of November 1999, by and among Total Sports Inc., a Delaware
corporation (the "Company"), certain holders of the Common Stock of the Company
(the "Common Holders"), the holders of certain warrants (the "Warrants") to
purchase capital stock of the Company (the "Warrant Holders"), the holders of
Series A Preferred Stock (the "Series A Stock") of the Company (the "Series A
Holders"), the holders of the Series B Preferred Stock (the "Series B Stock") of
the Company (the "Series B Holders"), the holders of the Series C Preferred
Stock (the "Series C Stock") of the Company (the "Series C Holders"), the
holders of the Series C1 Preferred Stock (the "Series C1 Stock") of the Company
(the "Series C1 Holders") and the holders of Series D Preferred Stock (the
"Series D Stock") of the Company and warrants to purchase Series D1 Preferred
Stock (the "Series D1 Stock") of the Company (collectively, the "Series D
Holders"), each as listed on Exhibit A attached hereto. The Common Holders,
---------
Warrant Holders, Series A Holders, Series B Holders, Series C Holders, Series C1
Holders and Series D Holders shall be collectively referred to herein as the
"Stockholders," and the Common Stock, Series A Stock, Series B Stock, Series C
Stock, Series C1 Stock, Series D Stock and Series D1 Stock shall be collectively
referred to herein as the "Investor Stock."
RECITALS
WHEREAS, the Company, the Common Holders, the Warrant Holders, the Series A
Holders, the Series B Holders, the Series C Holders and the Series C1 Holders
are parties to that certain Registration Rights Agreement dated as of August 6,
1998 and amended on December 31, 1998 (the "Prior Rights Agreement");
WHEREAS, Section 12 of the Prior Rights Agreement provides that such
agreement may be amended with the written consent of the Company, the Common
Holders, Series A Holders and Series B Holders holding at least 80% of the
Shares (as defined therein) then held by such holders, and the Series C Holders
and Series C1 Holders holding at least 80% of the Shares then held by such
holder s;
WHEREAS, the undersigned Stockholders (excluding the Series D Holders) hold
sufficient Shares to amend the Prior Rights Agreement and desire to terminate
the Prior Rights Agreement and to accept the rights created pursuant hereto in
lieu of any rights pursuant to the Prior Rights Agreement;
WHEREAS, pursuant to the terms of that certain Series D Preferred Stock and
Warrant Purchase Agreement dated as of the date hereof, the Company will issue,
and the Series D Holders will purchase, Series D Stock and warrants to purchase
Series D1 Stock (the "Series D Private Placement");
<PAGE>
WHEREAS, the Company has entered into a stock purchase agreement with NBC
Sports, Inc. ("NBC Sports") whereby the Company will issue to NBC Sports 811,423
shares of Common Stock of the Company and 811, 423 shares of Series E Preferred
Stock of the Company and will grant to NBC Sports the right to purchase
additional shares of Common Stock of the Company and registration rights with
respect to all such shares of Common Stock in exchange for certain on-air
promotion and marketing of real time, live graphic sporting events coverage by
the Company (the "NBC Sports Transaction");
WHEREAS, as a condition to the Series D Private Placement and the NBC
Sports Transaction, the Company and the Stockholders desire to amend and restate
the Prior Rights Agreement in its entirety in order to rename the agreement the
"Investor Rights Agreement," add the Series D Holders and NBC Sports as parties,
grant registration rights to the Series D Holders and NBC Sports as hereinafter
provided, amend certain provisions of the Prior Rights Agreement and add certain
covenants in favor of all the Stockholders and certain covenants in favor of the
Series D Holders; and
WHEREAS, the Prior Rights Agreement provides certain preemptive rights to
the Stockholders, and, in connection with the amendment and restatement of the
Prior Rights Agreement, the Company and Stockholders desire to provide for
termination of such preemptive rights upon the effectiveness of a Qualified
Public Offering (as defined herein) and to exempt certain equity issuances from
triggering such preemptive rights.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Prior Rights Agreement is
amended and restated in its entirety to read as follows, and the Company and the
Stockholders agree as follows.
Section 1.
RESTRICTIONS ON TRANSFER
------------------------
1.1 Restrictive Legend. Each certificate representing (i) the Investor
------------------
Stock, (ii) the Investor Stock issued upon exercise of the Warrants, (iii) the
Common Stock of the Company issued upon conversion of the Investor Stock or
exercise of the Warrants (the "Conversion Stock"), and (iv) any other securities
issued in respect of the Investor Stock or Conversion Stock or upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 1.2 below) be
stamped or otherwise imprinted with a legend in substantially the following form
(in addition to any legend required under applicable state securities laws).
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
2
<PAGE>
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR THE
AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
COPIES OF THE APPLICABLE AGREEMENT PROVIDING FOR RESTRICTIONS ON TRANSFER
OF THESE SECURITIES MAY BE OBTAINED UPON WRITTEN REQUEST BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Holder (as defined below) consents to the Company's making a notation
on its records and giving instructions to any transfer agent of the Investor
Stock or the Conversion Stock in order to implement the restrictions on transfer
established in this Section 1. Such legend shall be removed by the Company from
any certificate at such time as the holder of the shares represented by the
certificate satisfies the requirements of Rule 144(k) under the Securities Act
of 1933, as amended (the "1933 Act"), provided that Rule 144(k) as then in
effect does not differ substantially from Rule 144(k) as in effect as of the
date of this Agreement, and provided further that the Company has received from
the Holder a written representation that (i) such Holder is not an affiliate of
the Company and has not been an affiliate during the preceding three months,
(ii) such Holder has beneficially owned the shares represented by the
certificate for a period of at least two years, (iii) such Holder otherwise
satisfies the requirements of Rule 144(k) as then in effect with respect to such
shares, and (iv) such Holder will submit the certificate for any such shares to
the Company for reapplication of the legend at such time as the holder becomes
an affiliate of the Company or otherwise ceases to satisfy the requirements of
Rule 144(k) as then in effect.
1.2 Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Registrable Securities (as defined below) by acceptance thereof
agrees to comply in all respects with the provisions of this Section 1.2. Each
holder of Registrable Securities may transfer, sell, assign or pledge such
Registrable Securities only upon compliance with the terms of this Agreement and
only if the transferee has agreed in writing for the benefit of the Company to
be bound by this Agreement provided and to the extent this Agreement is then
applicable, and:
(a) there is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) such holder shall have notified the Company of the proposed
disposition, describing the manner and circumstances of the proposed transfer,
sale, assignment or pledge and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition; and (ii) if
reasonably requested by the Company, such holder shall have furnished to the
Company an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the 1933 Act. It
is agreed that the
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<PAGE>
Company will not require opinions of counsel for transaction made pursuant to
Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of subsections (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a holder that is a partnership to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner or the transfer by gift, will or
intestate succession of any partner to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or his or her spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he or she were a holder hereunder.
Each certificate evidencing the Registrable Securities transferred as above
provided shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legend set forth in Section 1.1 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for such holder and the Company such legend is not required in order to
establish compliance with any provisions of the 1933 Act.
Section 2.
REGISTRATION RIGHTS
-------------------
The Company hereby grants to each of the Holders (as defined below) the
registration rights set forth in this Section 2, with respect to the Registrable
Securities (as defined below) owned by such Holders. The Company and the Holders
agree that the registration rights provided herein set forth the sole and entire
agreement, and supersede any prior agreement, between the Company and the
Holders with respect to registration rights for the Company's securities.
2.1 Certain Definitions. As used in this Section 2:
-------------------
(a) The terms "register," "registered" and "registration" refer to a
registration effected by filing with the Securities and Exchange Commission (the
"SEC") a registration statement (the "Registration Statement") in compliance
with the 1933 Act, and the declaration or ordering by the SEC of the
effectiveness of such Registration Statement.
(b) The term "Registrable Securities" means (i) Common Stock and
Conversion Stock held by Stockholders or any transferee as permitted by Section
2.8 hereof, and (ii) any Common Stock issued as (or issuable upon the conversion
or exercise of any warrant, right or other security that is issued as) a
dividend or other distribution with respect to, or in exchange or in replacement
of, such Registrable Securities; provided, however, that with respect to Frank
-------- -------
A. Daniels, III and his transferees and assigns, the term "Registrable
Securities" shall only mean the shares of Conversion Stock of the Company
acquired upon conversion of the Investor Stock or exercise of the Warrants.
(c) The term "Holder" (collectively, "Holders") means each
Stockholder and any transferee, as permitted by Section 2.8 hereof, holding
Registrable Securities, securities
4
<PAGE>
exercisable or convertible into Registrable Securities or securities exercisable
for securities convertible into Registrable Securities.
(d) The term "Initiating Holders" means any Holder or Holders of at
least 35% of the Registrable Securities then outstanding and not registered at
the time of any request for registration made pursuant to Section 2.2 of this
Agreement.
2.2 Demand Registration.
-------------------
(a) Demand for Registration. If the Company shall receive from
-----------------------
Initiating Holders a written demand that the Company effect any registration (a
"Demand Registration") of the Registrable Securities then outstanding (other
than a registration on Form S-3 or any related form of registration statement,
such a request being provided for under Section 2.9 hereof) having an
anticipated net aggregate offering price (after deduction of underwriter
commissions and offering expenses) of at least $5,000,000, the Company will:
(i) promptly (but in any event within ten (10) days) give
written notice of the proposed registration to all other Holders; and
(ii) use its best efforts to effect such registration as soon as
practicable and as will permit or facilitate the sale and distribution of all or
such portion of such Initiating Holders' Registrable Securities as are specified
in such demand, together with all or such portion of the Registrable Securities
of any Holder or Holders joining in such demand as are specified in a written
demand received by the Company within twenty (20) days after such written notice
is given, provided that the Company shall not be obligated to take any action to
effect any such registration pursuant to this Section 2.2:
(A) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act;
(B) after the Company has effected one (1) such
registration pursuant to this Section 2.2 and the sales of the shares of Common
Stock under such registration has closed;
(C) if the Company shall furnish to such Holders a
certificate signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its stockholders for such Registration Statement
to be filed at the date filing would be required, in which case the Company
shall have an additional period or periods of not more than ninety (90) days
within which to file such Registration Statement; provided, however, that the
Company shall not use this right to delay the filing more than once in any 12-
month period; or
(D) prior to the earlier of: (1) the second anniversary
of the date of this Agreement or (2) the date six (6) months after the effective
date of the initial public offering of the Company's securities.
5
<PAGE>
(b) Underwriting. If reasonably required to maintain an orderly
------------
market in the Common Stock, the Holders shall distribute the Registrable
Securities covered by their demand by means of an underwriting. If the
Initiating Holders intend to distribute the Registrable Securities covered by
their demand by means of an underwriting, they shall so advise the Company as
part of their demand made pursuant to this Section 2.2, including the identity
of the managing underwriter; and the Company shall include such information in
the written notice referred to in Section 2.2(a)(i). In such event, the right of
any Holder to registration pursuant to this Section 2.2 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein.
The Company shall, together with all holders of capital stock of the
Company proposing to distribute their securities through such underwriting,
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected by a majority-in-interest of the Initiating Holders and
reasonably satisfactory to the Company. Notwithstanding any other provision of
this Section 2.2, if the underwriter shall advise the Company that marketing
factors (including, without limitation, an adverse effect on the per share
offering price) require a limitation of the number of shares to be underwritten,
then the Company shall so advise all Holders of Registrable Securities that have
requested to participate in such offering, and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated pro rata among such Holders thereof in proportion, as nearly
as practicable, to the amounts of Registrable Securities held by such Holders at
the time of filing the Registration Statement. No Registrable Securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration.
If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account (or for the account of other stockholders) in such registration if the
underwriter so agrees and if the number of Registrable Securities would not
thereby be limited.
2.3 Piggyback Registration.
----------------------
(a) Company Registration. If at any time or from time to time
--------------------
the Company shall determine to register any of its securities, either for its
own account or for the account of security holders, other than a registration
relating solely to employee benefit plans, a registration on Form S-4 relating
solely to an SEC Rule 145 transaction or a registration pursuant to Section 2.2
or 2.9 hereof, the Company will:
(i) promptly (but in any event within ten (10) days) give
to each Holder written notice thereof; and
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<PAGE>
(ii) include in such registration (and any related
qualification under state securities laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after receipt of such
written notice from the Company, by any Holder or Holders, except as set forth
in Section 2.3(b) below.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.3(a)(i). In such event the right of any Holder to
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their Registrable Securities
through such underwriting shall, together with the Company and the other parties
distributing their securities through such underwriting, enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 2.3, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the number of Registrable Securities to be included in the
registration and underwriting; provided, however, that in any offering other
-------- -------
than the initial public offering of the Company's Common Stock, the underwriter
shall not reduce the number of Registrable Securities proposed to be registered
by the Holders below 25% of the total number of securities sold in such
offering, subject to the terms of this Section 2.3. The Company shall so advise
all holders of the Company's securities that would otherwise be registered and
underwritten pursuant hereto, and the number of shares of such securities,
including Registrable Securities, that may be included in the registration and
underwriting shall be allocated in the following manner: shares, other than
Registrable Securities, requested to be included in such registration by
stockholders shall be excluded, and if a limitation on the number of shares
still is required, the number of Registrable Securities shall be allocated among
the Holders thereof in proportion, as nearly as practicable, to the amounts of
Registrable Securities held by each such Holder at the time of filing the
Registration Statement. For purposes of any such underwriter cutback, all
Registrable Securities held by any Holder that is a partnership, limited
liability company or corporation shall also include any Registrable Securities
held by the partners, retired partners, members, stockholders or affiliated
entities of such Holder, or the estates and family members of any such partners,
retired partners, members and any trusts for the benefit of any of the foregoing
persons, and such holder and other persons shall be deemed to be a single
"selling holder," and any pro rata reduction with respect to such "selling
holder" shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such "selling holder,"
as defined in this sentence. Nothing in this Section 2.3(b) is intended to
diminish the number of securities to be included by the Company in the
underwriting.
If any Holder disapproves of the terms of the underwriting, it may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities so withdrawn shall also be withdrawn
from registration.
7
<PAGE>
(c) Right to Terminate Registration. The Company shall have the right
-------------------------------
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
2.4 Expenses of Registration. All expenses incurred in connection with all
------------------------
registrations effected pursuant to Sections 2.2, 2.3 and 2.9, including without
limitation all registration, filing and qualification fees (including state
securities law fees and expenses), printing expenses, escrow fees, fees and
disbursements of counsel for the Company (and the reasonable fees and
disbursements of one separate special counsel for the participating Holders) and
expenses of any special audits incidental to or required by such registration
shall be borne by the Company; provided, however, that the Company shall not be
-------- -------
required to pay stock transfer taxes or underwriters' discounts or selling
commissions relating to Registrable Securities; and provided, further, that the
-------- -------
Company shall not be required to pay for any expenses of any registration
pursuant to Section 2.9 after the Company has effected four (4) registrations
pursuant to Section 2.9, in which event the Holders of Registrable Securities to
be registered shall bear all such expenses pro rata on the basis of Registrable
Securities to be registered. Notwithstanding anything to the contrary above, the
Company shall not be required to pay for any expenses of any registration
proceeding under Section 2.2 if the registration request is subsequently
withdrawn at the request of the Holders of the Registrable Securities to have
been registered, in which event the Holders of Registrable Securities to have
been registered shall bear all such expenses pro rata on the basis of the
Registrable Securities to have been registered. Notwithstanding the preceding
sentence, however, if at the time of the withdrawal, the Holders have learned of
a materially adverse change in the condition, business or prospects of the
Company from that known to the Holders at the time of their request, then the
Holders shall not be required to pay any of said expenses and shall retain their
rights pursuant to Section 2.2.
2.5 Obligations of the Company. Whenever required under this Section 2 to
--------------------------
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible :
(a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its diligent efforts to cause
such Registration Statement to become effective, and keep such Registration
Statement effective for the lesser of 180 days or until the Holder or Holders
have completed the distribution relating thereto;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement;
(c) furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
8
<PAGE>
(d) use its diligent efforts to register or otherwise qualify the
securities covered by such Registration Statement under such other securities
laws of such states and other jurisdictions as shall be reasonably requested by
the Holders or the managing underwriter, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions;
(e) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
(f) notify each Holder of Registrable Securities covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) use its diligent efforts to list the Registrable Securities
covered by such Registration Statement with any securities exchange on which the
Common Stock is then listed;
(h) make available for inspection by each Holder including
Registrable Securities in such registration, any underwriter participating in
any distribution pursuant to such registration, and any attorney, accountant or
other agent retained by such Holder or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, as such
parties may reasonably request, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Holder,
underwriter, attorney, accountant or agent in connection with such Registration
Statement; and
(i) cooperate with Holders including Registrable Securities in such
registration and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, such certificates to be in such denominations and registered in such
names as such Holders or the managing underwriters may request at least two (2)
business days prior to any sale of Registrable Securities.
2.6 Indemnification.
---------------
(a) The Company will, and does hereby undertake to, indemnify and
hold harmless each Holder of Registrable Securities, each of such Holder's
officers, directors, managers, partners, members and agents, and each person
controlling such Holder, with respect to any registration, qualification or
compliance effected pursuant to this Section 2, and each underwriter, if any,
and each person who controls any underwriter, of the Registrable Securities held
by or issuable to such Holder, against all claims, losses, damages and
liabilities (or actions in respect thereto) to which they may become subject
under the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), or other federal or state law arising out of
9
<PAGE>
or based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other similar document
(including any related Registration Statement, notification, or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made, (ii) any violation or
alleged violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such registration,
qualification or compliance, or (iii) any failure to register or qualify
Registrable Securities in any state where the Company or its agents have
affirmatively undertaken or agreed in writing that the Company (th e undertaking
of any underwriter chosen by the Company being attributed to the Company) will
undertake such registration or qualification on behalf of the Holders of such
Registrable Securities (provided that in such instance the Company shall not be
so liable if it has undertaken its best efforts to so register or qualify such
Registrable Securities) and will reimburse, as incurred, each such Holder, each
such underwriter and each such director, manager, officer, partner, member,
agent and controlling person, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission made in conformity
with written information furnished to the Company by an instrument duly executed
by such Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, and if Registrable Securities held by or
issuable to such Holder are included in such registration, qualification or
compliance pursuant to this Section 2, does hereby undertake to indemnify and
hold harmless the Company, each of its directors and officers, and each person
controlling the Company, each underwriter, if any, and each person who controls
any underwriter, of the Company's securities covered by such a Registration
Statement, and each other Holder, each of such other Holder's officers,
directors, managers, partners, members and agents and each person controlling
such other Holder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on (i) any failure of such
Holder or its agents or representatives to comply with the prospectus delivery
requirements of the 1933 Act or any other applicable securities or Blue Sky law,
or (ii) any untrue statement (or alleged untrue statement) of a material fact
contained in any such Registration Statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they were made,
and will reimburse, as incurred, the Company, each such underwriter, each such
other Holder, and each such director, officer, manager, partner, member, agent
and controlling person of the foregoing, for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) was made in such Registration Statement,
prospectus, offering circular or other document, in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that the liability of each Holder hereunder (unless such
Holder's liability hereunder is based upon such Holder's willful misconduct as
10
<PAGE>
determined by the nonappealable final decision of a court) shall be limited to
the proportion of any such claim, loss, damage or liability that is equal to the
proportion that the public offering price of the shares sold by such Holder
under such Registration Statement bears to the total public offering price of
all securities sold thereunder, provided, however, that the indemnity
-------- -------
obligations of this Section 2.6(b) shall not apply to amounts paid in settlement
of any such claim or action if such settlement is effected without the consent
of the Holder, such consent not to be unreasonably withheld, but in any event
not to exceed the net proceeds received by such Holder from the sale of
securities under such Registration Statement. It is understood and agreed that
the indemnification obligations of each Holder pursuant to any underwriting
agreement entered into in connection with any Registration Statement shall be
limited to the obligations contained in this subsection 2.6(b).
(c) Each party entitled to indemnification under this Section 2.6
(the "Indemnified Party") shall give notice to the party required to provide
such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 2, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
An Indemnifying Party, in the defense of any such claim or litigation, may,
without the consent of each Indemnified Party, consent to entry of any judgment
or enter into any settlement that includes as an unconditional term thereof the
giving by the claimant or plaintiff therein, to such Indemnified Party, of a
release from all liability with respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the 1933 Act in any case in which either (i) any Holder
exercising rights under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to this Section 2.6 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 2.6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of any such Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 2.6; then, and in each such case,
the Company and such Holder will contribute to the aggregate claims, losses,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of the securities
offered by such Holder pursuant to the Registration Statement bears to the
public offering price of all securities offered by such Registration Statement,
and the Company will be responsible for the remaining portion (without
11
<PAGE>
prejudice as to the Company's right to contributions from any other responsible
parties); provided, however, that, in any case, (A) no such Holder will be
required to contribute any amount in excess of the public offering price of all
securities offered by it pursuant to such Registration Statement, after
deduction of underwriting discounts and commissions (unless such Holder's
liability hereunder is based upon such Holder's willful misconduct as determined
by the nonappealable final decision of a court); and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) will be entitled to contribution from any person or entity who was
not guilty of such fraudulent misrepresentation.
(e) The indemnities provided in this Section 2.6 shall survive the
transfer of any Registrable Securities by such Holder and any offering of
Registrable Securities in a registration statement under this Section 2, and
otherwise.
2.7 Information by Holder. The Holder or Holders of Registrable Securities
---------------------
included in any registration shall furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 2.
2.8 Transfer of Rights.
------------------
(a) The rights contained in Sections 2 and 3 hereof may be assigned
or otherwise conveyed to transferees or assignees of Registrable Securities, who
shall be considered a "Holder" for purposes hereof, provided that (i) such
transfer is effected in compliance with Section 1.2 hereof, and (ii) such
transfer is a "Permitted Transfer" as defined herein.
(b) For purposes of this Agreement, a "Permitted Transfer" shall
mean: (i) a transaction not involving a change in beneficial ownership; (ii) a
transaction involving distribution without consideration by a stockholder that
is a partnership or limited liability company to any of its partners, members,
retired partners, retired members or to the estate of any of its partners or
members or to any affiliate of such stockholder; (iii) a transaction involving
distribution without consideration by a stockholder that is a corporation to any
of its stockholders; (iv) a transfer by any stockholder who is an individual to
a trust for the benefit of such stockholder or his or her family; (v) a transfer
in which the transferee acquires at least 50,000 shares of Registrable
Securities, subject to adjustment for combinations, consolidations,
recapitalizations, stock splits, stock dividends and the like; or (vi) a
transfer by gift, will or intestate succession to the spouse, lineal descendants
or ancestors of any stockholder or spouse of a stockholder; provided that in
each case the Company is given written notice thereof and the transferee or
assignee of Registrable Securities enters into a joinder agreement accepting the
terms of this Agreement. For purposes of this Section 2.8, shares held by
affiliates shall be aggregated for purposes of satisfying any such minimum share
requirement to effectuate a Permitted Transfer.
2.9 Form S-3. For so long as the Company has qualified for the use of Form
--------
S-3 (or any successor form), the Holders of Registrable Securities shall have
the right to request registrations on Form S-3 thereafter under this Section
2.9. The Company shall give notice to all
12
<PAGE>
Holders of Registrable Securities of the receipt of a request for registration
pursuant to this Section 2.9 and shall provide a reasonable opportunity for
other Holders to participate in the registration. Subject to the foregoing, the
Company will use its best efforts to effect as soon as practicable the
registration of all shares of Registrable Securities on Form S-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition;
provided, however, that the Company shall not be obligated to effect any such
- -------- -------
registration (A) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $2,500,000 or (B) at any time when the Company
has effected an aggregate of four (4) registrations pursuant to this Section 2.9
or one (1) registration pursuant to this Section 2.9 during the preceding 12-
month period. Notwithstanding the foregoing, nothing herein shall restrict,
prohibit or limit in any way a Holder's ability to exercise its registration
rights under Sections 2.2 or 2.3 hereof. The Company shall have no obligation to
take any action to effect any registration pursuant to this Section 2.9 for any
of the reasons set forth in Section 2.2(a)(ii)(A) or (C) (which shall be deemed
to apply to the obligations under this Section 2.9 with equal force). In
addition, any registration pursuant to this Section 2.9 shall be subject to the
provisions of Section 2.2(b), which shall be deemed to apply to the obligations
under this Section 2.9 with equal force, except that any reference therein to
Section 2.2 or a subsection thereof shall, for these purposes only, be deemed to
be a reference to this Section 2.9.
2.10 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.11 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least a majority of the Registrable Securities then
outstanding and not registered, enter into any agreement with any holder or
prospective holder of any securities of the Company that would allow such holder
or prospective holder to (a) require the Company to effect a registration or (b)
include any securities in any registration filed under Section 2.2, 2.3 or 2.9
hereof, unless, under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of such securities will not diminish the amount of
Registrable Securities that are included in such registration.
2.12 Rule 144 Reporting. With a view to making available to the Holders
------------------
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its diligent efforts to:
(a) make and keep current public information available, within the
meaning of SEC Rule 144 or any similar or analogous rule promulgated under the
1933 Act, at all times after it has become subject to the reporting requirements
of the 1934 Act;
(b) file with the SEC, in a timely manner, all reports and other
documents required of the Company under the 1933 Act and 1934 Act (after it has
become subject to such reporting requirements); and
13
<PAGE>
(c) so long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time commencing ninety (90) days after the effective date of the first
registration filed by the Company for an offering of its securities to the
general public), the 1933 Act and the 1934 Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
2.13 "Market Stand-Off" Agreement. Each Holder hereby agrees that
---------------------------
during a period, not to exceed 180 days, following the effective date of the
initial, effective registration statement of the Company filed under the 1933
Act, it shall not, to the extent requested by the Company and any underwriter,
sell, pledge, transfer, make any sort sale of, loan, grant any option for the
purchase of, or otherwise transfer of dispose of (other than to donees who agree
to be similarly bound) any Registrable Securities held by it at any time during
such period except Common Stock included in such registration, provided,
however, that (i) all "One Percent Stockholders" (as defined below) and all
officers and directors of the Company enter into similar agreements, and (ii)
such agreement provides that a discretionary waiver or termination of such
restrictions by the Company or underwriter (except a waiver or termination of
such restrictions for financial hardship or amounts less than an aggregate
$50,000 per stockholder) shall apply to the Holders pro rata based on the number
of shares of Common Stock held by such Holder. The Company hereby covenants and
agrees to use its best efforts to limit the restrictions imposed on the
Investors by the underwriters (except restrictions imposed by J.P. Morgan & Co.,
as lead underwriter for the Company, in connection with the initial, effective
registration statement of the Company filed on or before June 30, 2000) to a
period not to exceed 120 days from the effective date of such offering.
In connection with the Company's initial public offering of its
securities to the public, the Company hereby covenants and agrees to use its
reasonable efforts to ensure that all shares of its capital stock, including all
shares of capital stock issued subsequent to the date hereof, other than shares
sold pursuant to a registration statement under the 1933 Act, shall be subject
to a market stand-off provision with the same terms of this Section 2.13.
For purposes of this Section 2.13, the term "One Percent Stockholder"
shall mean a stockholder of the Company who holds at least 1% of the outstanding
Common Stock of the Company (assuming conversion of all outstanding capital
stock and exercise of all Warrants to purchase Common Stock or Investor Stock of
the Company) prior to such offering of securities by the Company.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
2.14 Termination of Rights. The rights of any particular Holder under
---------------------
Section 2 hereof shall terminate as to any Holder who holds Registrable
Securities on the earlier to occur of (a) the date seven (7) years following the
effective date of the initial, effective registration statement
14
<PAGE>
of the Company filed with the SEC under the 1933 Act or (b) the date such Holder
is able to dispose of all of its Registrable Securities in any 90-day period
pursuant to SEC Rule 144 (or any similar or analogous rule promulgated under the
1933 Act).
Section 3.
RIGHTS OF FIRST REFUSAL
-----------------------
3.1 Certain Definitions. As used in this Section 3:
-------------------
(a) The term "Holder" shall have the meaning set forth in Section
2.1(c).
(b) The term "New Securities" shall mean any capital stock of the
Company, whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided that the term "New Securities"
does not include: (i) the Investor Stock; (ii) the Conversion Stock; (iii)
shares of Common Stock or Investor Stock issued upon exercise of the Warrants or
other options or warrants outstanding as of November 12, 1999; (iv) securities
issued to NBC Sports pursuant to the terms of the NBC Sports Transaction; (v)
securities issued to guarantors of the Company's line of credit with First Union
National Bank, N.A., as approved by the Board of Directors of the Company; (vi)
securities issued to shareholders of Long Distance Technologies, Inc. pursuant
to Articles of Merger filed with the North Carolina Secretary of State on June
18, 1999; (vii) securities issued pursuant to the acquisition of another
corporation or business entity by the Company or one or more of its wholly owned
subsidiaries by merger, consolidation, share exchange, purchase of substantially
all the assets or other reorganization whereby the stockholders of the Company
immediately prior to the transaction own in the aggregate more than 50% of the
voting power of the Company or other surviving entity after the transaction, as
approved by the Board of Directors of the Company; (viii) securities issued in
connection with strategic or collaborative relationships or for lending
transactions, with other than primarily equity financing purposes, as approved
by the Board of Directors of the Company; (ix) shares of Common Stock and
options, warrants or rights convertible into such Common Stock, issued to
employees, consultants or directors of the Company pursuant to any incentive
agreement or arrangement, as approved by the Board of Directors of the Company;
(x) securities issued pursuant to any stock dividend, stock split, combination
or other reclassification by the Company of any of its capital stock; or (xi)
securities approved by the disinterested outside members of the Board of
Directors of the Company and each stockholder of the Company that has the power
to designate a member of the Board of Directors of the Company.
(c) The term "Pro Rata Share" means the ratio (i) the numerator of
which is the number of shares of Common Stock held by such Holder, or issuable
to such Holder upon the conversion of shares of Investor Stock or exercise of
Warrants held by such Holder, on the date of the Company's written notice
pursuant to Section 3.4 hereof, and (ii) the denominator of which is the number
of shares of Common Stock outstanding, assuming for this purpose conversion or
exercise of all securities then issued and outstanding which are convertible
into or exercisable for Common Stock of the Company.
15
<PAGE>
3.2 Right of First Refusal. The Company hereby grants to each Holder,
----------------------
subject to the terms and conditions specified in this Section 3, the right of
first refusal to purchase, on the terms and conditions set forth in the
Company's notice pursuant to Section 3.3 hereof, up to its Pro Rata Share of all
New Securities that the Company may, from time to time, propose to sell and
issue.
3.3 Required Notices. In the event the Company proposes to undertake
----------------
an issuance of New Securities, it shall give each Holder written notice prior to
such issuance of its intention, describing the type of New Securities, the price
and the general terms upon which the Company proposes to issue the same. Each
Holder shall have thirty (30) days from the date of any such notice to exercise
its right of first refusal under Section 3.2 hereof for the price and upon the
general terms specified in the notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased. After such
initial 30-day period, for an additional period of fifteen (15) days, each
Holder may also exercise its right of overallotment such that if any Holder
fails to exercise its right hereunder to purchase its Pro Rata Share of the New
Securities proposed to be sold by the Company, each other Holder may, by
notifying the Company of such Holder's desire to acquire more than its Pro Rata
Share as part of its exercise notice pursuant to this Section 3.3, purchase the
nonpurchasing Holders portion on a pro rata basis.
3.4 Company's Right to Sell. The Company shall have ninety (90) days
-----------------------
after the 30-day period described in Section 3.3 hereof to sell all such New
Securities respecting which the Holders' rights of first refusal hereunder were
not exercised, at a price and upon terms no more favorable in any material
respect to the purchasers thereof than specified in the Company's notice. In the
event the Company has not sold all such New Securities within such 90-day
period, the Company shall not thereafter issue or sell any New Securities
without first notifying the Holders in the manner provided in Section 3.3 above.
3.5 Expiration of Right. The rights of first refusal granted under
-------------------
this Section 3 shall not apply to, and shall expire upon, the effectiveness of a
registration statement for the sale of the Company's shares of Common Stock in a
firm commitment underwritten public offering registered under the 1933 Act for a
total offering of not less than $30 million, and with a price per share of not
less than $20.737, subject to adjustment in the event of a recapitalization,
stock dividend, stock split or the like (a "Qualified Public Offering").
16
<PAGE>
Section 4.
COMPANY COVENANTS
-----------------
The Company hereby covenants and agrees on behalf of itself and its
subsidiaries to the following.
4.1 Financial Statements and Information. The Company will keep books
------------------------------------
of account and prepare financial statements and will cause to be furnished to
each Holder (all of the foregoing and following to be kept and prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis) :
(a) As soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the financial
statements of the Company for such fiscal year containing a consolidated and
consolidating balance sheet, statement of income, statement of stockholders'
equity, and statement of cash flows, each as at the end of such fiscal year and
for the period then ended and in each case setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable detail and audited and
certified by independent certified public accountants of recognized standing
selected by the Company's Board of Directors.
(b) As soon as practicable after the end of each of the first three
quarters of the fiscal year, but in any event within thirty (30) days after the
end of each such quarter, the unaudited consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such quarter, and its
unaudited consolidated statements of income and losses, stockholders' equity and
cash flows for such quarter, setting forth in each case in comparative form the
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail.
(c) As soon as practicable after the end of each month, but in any
event within thirty (30) business days thereafter, the unaudited consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of such
month and its unaudited statement of income and losses, stockholders' equity and
cash flows for such month, indicating actual results versus the Company's plan
for such month.
(d) As soon as available, a copy of each (1) financial statement,
report, notice, or proxy statement sent by the Company to its stockholders; (2)
regular, periodic, or special report, registration statement, or prospectus
filed by the Company with any securities exchange, state securities regulator,
or the Commission; (3) material order issued by any court, governmental
authority, or arbitrator in any material proceeding to which the Company is a
party or to which any of its assets is subject; (4) press release or other
statement made available generally by the Company or its officers to the public
generally concerning material developments in the business of the Company; and
(5) item of correspondence, report, or other information sent by the Company to
any holder of any indebtedness, including, without limitation, the Stockholders.
17
<PAGE>
(e) Prompt notice of any default of the Company under any bond, note,
indenture or other debt instrument representing indebtedness for borrowed money
and of any acceleration of indebtedness which may result therefrom.
(f) With reasonable promptness, such other information respecting the
business, properties or the condition or operations, financial or other, of the
Company or any subsidiary as any Holder may from time to time reasonably
request.
4.2 Inspection. The Company shall permit each Stockholder and each
----------
transferee (provided such transfer is effected in compliance with Section 1.2
hereof) who holds no less than 500,000 shares of Common Stock issued or issuable
upon conversion of the Investor Stock or exercise of the Warrants, its attorney
or its other representative to visit and inspect the Company's properties, to
examine the Company's books of account and other records, to make copies or
extracts therefrom and to discuss the Company's affairs, finances and accounts
with its officers, management, employees and independent auditors all at such
reasonable times and as often as such Stockholder or transferee may reasonably
request; provided, however, that the Company shall not be obligated pursuant to
-------- -------
this Section 4.1(b) to provide trade secrets or confidential information or to
provide information to any person whom the Company reasonably believes is a
competitor of the Company; provided, further, that such Stockholder shall bear
-------- -------
any costs or expenses of such investigations or inquiries.
4.3 Budget. With respect to each fiscal year of the Company, the Company
------
agrees to prepare and submit to the Board of Directors and to each Stockholder
who holds no less than 500,000 shares of Common Stock issued or issuable upon
conversion of the Investor Stock or exercise of the Warrants, an operating plan
(the "Budget") with monthly breakdowns for such fiscal years substantially in
the form of previously prepared budgets and in accordance with the line items
(outlined in the financial statements required in 4.1(a)) for each fiscal year
at least thirty (30) days prior to the beginning of such fiscal year of the
Company. The Budget shall be accepted as the Budget for such fiscal year when it
has been approved by a majority of the Board of Directors. The Budget shall be
reviewed by the Company periodically and all changes therein and all material
deviations therefrom shall be resubmitted to the Board of Directors in advance
and shall be accepted when approved by a majority of, and the Company shall not
make any such changes or material deviations to or from the Budget without such
prior approval of a majority of the entire Board of Directors.
4.4 Use of Proceeds. The Company shall expend the proceeds from the sale
---------------
of Series D Stock for working capital purposes.
4.5 Stock Option Plan. Each option granted pursuant to the Company's 1997
-----------------
Stock Plan (the "Plan") shall contain a three year vesting schedule, with 1/48th
of the shares vesting monthly during the first two years and 1/24th of the
shares vesting monthly during the third year, until all shares are vested. At
the option of the Board of Directors of the Company, certain options granted
pursuant to the Plan may contain a yearly vesting requirement for the first year
of vesting.
18
<PAGE>
4.6 Compensation Committee. The Company shall appoint and maintain a
----------------------
compensation committee of the Board of Directors.
4.7 Expiration of Covenants. The covenants set forth in this Section 4
-----------------------
shall expire and be of no further force or effect upon the effectiveness of the
initial public offering of the Company's Common Stock under the 1933 Act. After
such time, the Stockholders shall be entitled to receive such annual and
quarterly reports as the Company shall distribute to its stockholders generally.
Section 5.
PARTICIPATION RIGHTS
--------------------
5.1 Series D Right to Participate in Initial Public Offering. In
--------------------------------------------------------
connection with the Company's initial firm commitment underwritten public
offering (the "IPO"), the Company shall use its best efforts to cause the
managing underwriter or underwriters of such IPO to establish a program (the
"Program") whereby such managing underwriter or underwriters would offer the
Series D Holders (each, an "IPO Holder") priority as to the participation in
such Program on the terms as described herein.
Subject to the terms hereof, the Company shall use its best efforts to
cause the number of shares of Common Stock to be offered to the IPO Holders
pursuant to the Program (the "Program Shares") to equal no less than the
quotient obtained by dividing (i) the greater of (A) five million dollars
($5,000,000), or (B) ten percent (10%) of the aggregate gross proceeds to the
Company from the IPO, by (ii) the mid-point of the first filing range the
Company sets forth in the registration statement for the IPO or an amendment
thereto; provided, however, that such number of Program Shares shall be subject
-------- -------
to reasonable reduction by the Company if the Company's Board of Directors
determines in good faith, by a duly adopted resolution (based in part on the
advice of the managing underwriter or underwriters), that the purchase by the
IPO Holders of the number of Program Shares determined in accordance with the
provisions hereof would be materially detrimental to the success of the IPO.
The managing underwriter or underwriters shall offer to each IPO Holder the
right to purchase its Pro-Rata Share of the Program Shares. Each IPO Holder's
"Pro-Rata Share" shall equal the quotient obtained by dividing (i) the number of
shares of Common Stock issuable or issued upon conversion of shares of Series D
Stock then held by such IPO Holder, by (ii) the number of shares of Common Stock
issuable or issued upon conversion of shares of Series D Stock then held by all
IPO Holders, provided, however, that the pro-rata share of each IPO Holder other
than the funds affiliated with TCV III (Q), L.P. shall be proportionately
reduced so that the funds affiliated with TCV III (Q), L.P. shall in aggregate
be offered that number of Program Shares that, when multiplied by the mid-point
of the first filing range the Company sets forth in a registration statement for
the IPO or an amendment thereto, equals $3,000,000. All Program Shares as to
which IPO Holders do not indicate an interest in purchasing shall be reallocated
on a pro-rata basis among the IPO Holders who indicate an interest in purchasing
more than their pro-rata share.
19
<PAGE>
5.2 Compliance. The Program and all offers to be made to the IPO Holders
----------
shall be conducted in compliance with all federal and state securities laws and
regulations, including, without limitation, Rule 134 of the Securities Act of
1933, as amended, and all applicable rules and regulations promulgated by the
National Association of Securities Dealers, Inc. and other such self-regulating
or quasi-public regulatory organizations.
Notwithstanding the foregoing, the IPO Holders participating in the Program
shall comply with all requirements and procedures required by the managing
underwriter or underwriters of the IPO of all purchasers participating in a
directed share program, if any, or of purchasers in the IPO generally.
Furthermore, the IPO Holders agree to furnish upon request to the Company and
the managing underwriter or underwriters of the IPO such further information, to
execute and deliver to the Company and the managing underwriter or underwriters
of the IPO such other documents, and to do such other acts and things, all as
the Company and the managing underwriter or underwriters of the IPO may
reasonably request and which are consistent with the intent of this Section 5
for the purpose of carrying out the intent of this Section 5 .
5.3 Notices. All notices and time periods for response to such notices by
-------
the IPO Holders shall be as outlined in Section 3 hereof.
Section 6.
MISCELLANEOUS
-------------
6.1 Governing Law. This Agreement shall be governed by, and construed and
-------------
interpreted in accordance with the laws of the State of North Carolina as
applied to agreements among North Carolina residents made and to be performed
entirely within the State of North Carolina.
6.2 Successors and Assigns. Except as otherwise expressly provided herein,
----------------------
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6.3 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement among the parties with regard to the subjects
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto and their successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
6.4 Severability. Any invalidity, illegality or limitation of the
------------
enforceability with respect to any Holder of any one or more of the provisions
of this Agreement, or any part thereof, whether arising by reason of the law of
any such person's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of this Agreement with respect to any other
Holder. In case any provision of this Agreement shall be invalid, illegal or
20
<PAGE>
unenforceable, it shall to the extent practicable, be modified so as to make it
valid, legal and enforceable and to retain as nearly as practicable the intent
of the parties, and the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
6.5 Amendment and Waiver. Except as otherwise expressly provided herein,
--------------------
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) with the written consent of the Company, the Stockholders, or
their transferees, holding at least a majority of the shares of Investor Stock
and Conversion Stock and voting together as a single group (treated as if
converted at the conversion rate then in effect and including, for such
purposes, shares of Common Stock into which any shares of Investor Stock shall
have been converted and for which any Warrants shall have been exercised that
are held by a Holder); provided, however, that the Company may add new Series D
-------- -------
Holders as parties to this Agreement pursuant to subsequent sales and purchases
of Series D Stock pursuant to the terms of the Series D Private Placement, which
additions are hereby consented to by all Stockholders. Any amendment or waiver
effected in accordance with this Section 6.5 shall be binding upon each
Stockholder and each transferee of the Registrable Securities. Upon the
effectuation of each such amendment or waiver, the Company shall promptly give
written notice thereof to the Stockholders who have not previously consented
thereto in writing.
6.6 Delays or Omissions. No delay or omission to exercise any right, power
-------------------
or remedy accruing to the Company, the Stockholders, or any transferees upon any
breach, default or noncompliance of the Stockholders or any transferee or the
Company under this Agreement, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any waiver,
permit, consent or approval of any kind or character on the part of the Company
or the Stockholders of any breach, default or noncompliance under this Agreement
or any waiver on the Company's or the Stockholders' part of any provisions or
conditions of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing and that all remedies, either
under this Agreement, by law, or otherwise afforded to the Company and the
Stockholders, shall be cumulative and not alternative.
6.7 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or upon confirmed delivery by facsimile or telecopy, or
on the fifth day (or the tenth day if to a party with an address outside of the
United States) following mailing by registered or certified mail, return receipt
requested, postage prepaid, addressed:
21
<PAGE>
(a) if to the Company, at:
Total Sports, Inc.
234 Fayetteville Street Mall,
2/nd/ Floor
Raleigh, NC 27601
Attn: Chief Executive Officer
Telephone: [________]
Telecopier: 919-573-8156
With a copy to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, NC 27607
Attn: Larry E. Robbins
Telephone: 919-781-4000
Telecopier: 919-781-4865
or at such other address as the Company shall have furnished to the Stockholders
in writing;
(b) if to the Stockholders, at the addresses of such Stockholders
specified on Exhibit A hereto, or at such other addresses as the Stockholders
shall have furnished to the Company in writing; and
(c) if to a Holder other than the Stockholders, at such Holder's address
as shall have been furnished to the Company in writing.
6.8 Titles and Subtitles. The titles of the sections and subsections of
--------------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
22
<PAGE>
IN WITNESS WHEREOF, this Investor Rights Agreement has been duly executed
and delivered by the parties as of the date first above written.
COMPANY: TOTAL SPORTS INC.
/s/ Frank Daniels, III
By:_____________________________________
Frank Daniels, III
Name:___________________________________
Chief Executive Officer
Title:__________________________________
STOCKHOLDERS: By:_____________________________________
(Printed Name)
/s/ Stockholders Named on Exhibit A
________________________________________
(Signature)
if an entity:
Name:__________________________________
Title:__________________________________
23
<PAGE>
EXHIBIT A
---------
STOCKHOLDERS
(as of November 12, 1999)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of No. of No. of No. of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares Shares Shares Shares Shares Shares
----------- ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 Champion Ventures-Angel
Investments, L.L.C. 6,026 2,711
1031 Middlefield Rd
Redwood City, CA 94063
- ------------------------------------------------------------------------------------------------------------------------------------
Abdulkadir, Abdulaziz
AMA Group 28,145
Tahlia Street, P.O. Box 2468,
Riyadh 11451 Saudi Arabia
- ------------------------------------------------------------------------------------------------------------------------------------
Access Technology Partners
Brokers Fund, L.P. 1,928 868
Attn: Alex Sloan
1 Bush Street, Floor 12
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------------------------------------------------
Access Technology Partners, L.P.
Attn: Alex Sloan 96,419 43,389
1 Bush Street, Floor 12
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------------------------------------------------
Adriatic Holdings Limited
Shirley and Charlotte Streets 18,078 8,135
PO Box N4899
Nassau, Bahamas
- ------------------------------------------------------------------------------------------------------------------------------------
Allen & Company, Inc.
711 Fifth Avenue Warrants:
New York, NY 10022 318,500
- ------------------------------------------------------------------------------------------------------------------------------------
Almalik, Ahmed Hamad
c/o Mosa Almalik Rakaa 3,011 1,354
Trading Co.
Khayyriah Bldg., 10th floor
(King Faisal Foundation)
P.O. Box 16010
Riyadh 11464
Saudi Arabia
- ------------------------------------------------------------------------------------------------------------------------------------
Almalik, Mosa H.
Rakaa Trading Co. 3,013 1,355
Khayyriah Bldg., 10th floor
(King Faisal Foundation)
P.O. Box 16010
Riyadh 11464
Saudi Arabia
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of No. of No. of No. of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares Shares Shares Shares Shares Shares
----------- ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alrajhi, Mansour A.
c/o Fahad A. Alrajhi 3,012 1,355
Rajhi Bank Head office, Olaya
Road
New Akkariya Bldg., 4th Floor
PO Box 28
Riyadh 11411
Saudi Arabia
- ------------------------------------------------------------------------------------------------------------------------------------
Asdale Limited
Les Vardes House
La Charrloterie, St. Peter Port 52,687 75,326 33,896
Guernsey C.I. GYI 4LG
Attn: Martin Mellish
44 Loundes Street
London, England SW1X 9HX
- ------------------------------------------------------------------------------------------------------------------------------------
Baca, Michael L.
808 Silverstone Way 527
Holly Springs, NC 27540
- ------------------------------------------------------------------------------------------------------------------------------------
Batcho, Ron
617 Cumberlain Street 703 673
Raleigh, NC 27607
- ------------------------------------------------------------------------------------------------------------------------------------
Boatwright, Colin Byrn
4101 Darlington Place 3,525
Raleigh, NC 27612
- ------------------------------------------------------------------------------------------------------------------------------------
Bonnelly, Rafael
Calle Jose Lazaro Galdiano #2, 7A
28036 Madrid, Spain 2,634
- ------------------------------------------------------------------------------------------------------------------------------------
Boswell, Stewart M.
4925 Gorham Drive 5,268
Charlotte, NC 28226
- ------------------------------------------------------------------------------------------------------------------------------------
Bull Run Corporation
4370 Peachtree Road, NE
Atlanta, GA 30319-3099 351,815 105,374
- ------------------------------------------------------------------------------------------------------------------------------------
CG Asian-American Fund, L.P.
c/o Sycamore Venture 37,361 16,812
Attn: Simon Wong
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
- ------------------------------------------------------------------------------------------------------------------------------------
Coltrane, Kevin
5501 Tryon Road 1,407 211
Raleigh, NC 27606
- ------------------------------------------------------------------------------------------------------------------------------------
Connors, John J.
3 Stonemeadow Drive 10,537 3,254 1,464
Westwood, MA 02090
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of No. of No. of No. of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares Shares Shares Shares Shares Shares
----------- ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Copia Capital, LLC
c/o David Beck
W3542930 Manor House Court 5,268
Oconomowoc, WI 53066
- ------------------------------------------------------------------------------------------------------------------------------------
Cross, James R.
1 Cedar Hill 3,000
Greenwich, CT 06830
- ------------------------------------------------------------------------------------------------------------------------------------
Cuthberson, Patrick
9021 Ransdell Road 2,110 1,054
Raleigh, NC 27603
- ------------------------------------------------------------------------------------------------------------------------------------
Daniels, Frank A., III 44,526
234 Fayetteville Street Mall
2/nd/ Floor Warrants:
Raleigh, NC 27601 10,161 72,571 52,687
- ------------------------------------------------------------------------------------------------------------------------------------
Daniels, Frank A., Jr.
234 Fayetteville Street Mall Warrants:
2/nd/ Floor 83,840 25,000 44,526 31,612
Raleigh, NC 27601
- ------------------------------------------------------------------------------------------------------------------------------------
Davidson, Simon
202 Old Kings Highway North 2,634
Darien, CT 06820
- ------------------------------------------------------------------------------------------------------------------------------------
Dixon, Bradford N.
1290 Beethoven Common 800
Suite 19301
Freemont, CA 94538
- ------------------------------------------------------------------------------------------------------------------------------------
Dodson, Andrew
302 Longwoods 3,518
Houston, TX 77024
- ------------------------------------------------------------------------------------------------------------------------------------
Donaldson, Lufkin and Jenrette
SEC Corp (TIN 13-2741729)
custodian F/B/O Thomas W. Tice,
IRA
200 West Madison Street 2,634
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Eagan, Marie
309 Bebington Drive 703
Cary, NC 27513
- ------------------------------------------------------------------------------------------------------------------------------------
EGL Equity Offshore Partners
III, L.P. 48,329 21,748
Attn: Sal Massaro
3495 Piedmont Rd
Ten Piedmont Center, Suite 412
Atlanta, GA 30305
- ------------------------------------------------------------------------------------------------------------------------------------
EGL Equity Partners III, L.P.
Attn: Sal Massaro 23,738 10,682
3495 Piedmont Rd
Ten Piedmont Center, Suite 412
Atlanta, GA 30305
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of No. of No. of No. of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares Shares Shares Shares Shares Shares
----------- ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EGL NatWest Ventures USA, L.P.
Attn: Sal Massaro 33,377 15,019
3495 Piedmont Rd
Ten Piedmont Center, Suite 412
Atlanta, GA 30305
- ------------------------------------------------------------------------------------------------------------------------------------
Elliot, Peter
544 St. Claire Avenue, W. #2
Toronto, Ontario 948
Canada M6A 1A5
- ------------------------------------------------------------------------------------------------------------------------------------
El-Ramly, Ahmed
132 Shady Springs Place 703 146
Durham, NC 27713
- ------------------------------------------------------------------------------------------------------------------------------------
Evans, Robert L.
C/o 75 State Street
18/th/ Floor 5,268
Boston, MA 02109
- ------------------------------------------------------------------------------------------------------------------------------------
Fahad FAR Ventures
c/o Carolina Financial Group 6,026 2,711
206 North Caldwell Street
Brevard, NC 28712
- ------------------------------------------------------------------------------------------------------------------------------------
Forlines, John A., III
129 Wood Road 2,634
Locust Valley, NY 11560
- ------------------------------------------------------------------------------------------------------------------------------------
Geisler, Meredith Krugman
8003 Inspection House Road 527
Potomac, MD 20854
- ------------------------------------------------------------------------------------------------------------------------------------
Gerry, Peter G.
c/o Sycamore Venture 602 270
Attn: Simon Wong
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
- ------------------------------------------------------------------------------------------------------------------------------------
Golson, Dr. James P.
202 Mary Martin Hall 7,036 1,458
Auburn University, AL 36849
- ------------------------------------------------------------------------------------------------------------------------------------
Goodwyn, Richard, Jr.
c/o Sycamore Venture 301 135
Attn: Simon Wong
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
- ------------------------------------------------------------------------------------------------------------------------------------
Green, Stephen M.
9 Old Parish Road 7,036
Darien, CT 06820
- ------------------------------------------------------------------------------------------------------------------------------------
H&Q Total Sports Investors, LP
Attn: Alex Sloan 10,124 4,556
1 Bush Street, Floor 12
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of No. of No. of No. of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares Shares Shares Shares Shares Shares
----------- ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Hambrecht & Quist California 6,026 2,712
Attn: Alex Sloan
1 Bush Street, Floor 12
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------------------------------------------------
Hambrecht & Quist Employee
Venture Fund, L.P. II 6,026 2,712
Attn: Alex Sloan
1 Bush Street, Floor 12
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------------------------------------------------
Hamel, George F., Jr.
c/o Richard C. Blum Assoc. 2,634 813 365
909 Montgomery Street
Suite 400
San Francisco, CA 94133
- ------------------------------------------------------------------------------------------------------------------------------------
Harrelson, Joyce
700 Little Leaf Court 703
Holly Springs, NC 27540
- ------------------------------------------------------------------------------------------------------------------------------------
Hasnain, Marie
4008 Lantern Lane
Burlington, Ontario 1,054
Canada L7L 5Z2
- ------------------------------------------------------------------------------------------------------------------------------------
Hibbs, David
255 Half Mile Road 2,634
Southport, CT 06490
- ------------------------------------------------------------------------------------------------------------------------------------
Horowitz, Jamie
3301-203 Cotton Mill Drive 527
Raleigh, NC 27612
- ------------------------------------------------------------------------------------------------------------------------------------
Host Communications, Inc. 418,971
- ------------------------------------------------------------------------------------------------------------------------------------
James N. Gray Company
10 Quality Street 35,180
Lexington, KY 40507-1450
- ------------------------------------------------------------------------------------------------------------------------------------
Johnson, Jennifer J.
1415 Nottingham Road 1,159
Raleigh, NC 27607
- ------------------------------------------------------------------------------------------------------------------------------------
Juffali, Khalid
P.O. Box 1049
Jeddah 21431 7,036
Saudi Arabia
- ------------------------------------------------------------------------------------------------------------------------------------
Kendall, Donald R., Jr.
720 Kuhlman Road 5,268 1,506 677
Houston, TX 77024
Pennzoil Place
711 Lousiana, Suite 2323
Houston, TX 77002-2232
- ------------------------------------------------------------------------------------------------------------------------------------
Kern, John M.
285 Musketaquid Road 10,537
Concord, MA 01742
- ------------------------------------------------------------------------------------------------------------------------------------
KOJUCO Investments Ltd.
P.O. Box N4859 14,995 6,747
Nassau, Bahamas
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No.of No.of No.of No.of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares shares Shares Shares Shares Shares
----------- ------ ------ ------ ------- ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Labatt Brewing Company
Limited 241,043 108,469
Labatt House
181 Bay Street, Suite 200
Toronto, Ontario M5J 2J3
- ------------------------------------------------------------------------------------------------------------------------------------
Lane, Daniel J.
768 Holly Drive North 7,903
Annapolis, MD 21401
- ------------------------------------------------------------------------------------------------------------------------------------
Langtry Trust NV re 7089
c/o Langtry House 5,268 4,218 1,898
Lamotte Street
St. Helier, Jersey, C.I. JE4 8QR
- ------------------------------------------------------------------------------------------------------------------------------------
MacDougall, Sarah
1200-24 Mayruth Drive 1,316
Raleigh, NC 27713
- ------------------------------------------------------------------------------------------------------------------------------------
Mario, Greg
318 University Drive 7,036
Durham, NC 27516
- ------------------------------------------------------------------------------------------------------------------------------------
Mario, Jeremy
19 Winfield Drive 7,036
Princeton, NJ 08540
- ------------------------------------------------------------------------------------------------------------------------------------
McConnell Venture Partners
Fund, LLC 60,260 27,117
3305 Ridgecrest Court
Raleigh, NC 27607
- ------------------------------------------------------------------------------------------------------------------------------------
McGuirk, Gary
103 Simonds Road 7,903
Lexington, MA 02420
- ------------------------------------------------------------------------------------------------------------------------------------
Mellish, Martin
44 Lowndes Street 3,582
London England SWIX 9HX
- ------------------------------------------------------------------------------------------------------------------------------------
Morano, Bill
52 Station Drive 703 146
Durham, NC 27516
- ------------------------------------------------------------------------------------------------------------------------------------
Mowry, Ken
6504 Lord Britton Place 2,814 3,161
Raleigh, NC 27603
- ------------------------------------------------------------------------------------------------------------------------------------
Musallam, Musallam A., Ph.D.
King Fahad Road, behind Saudia 12,052 5,463
Airlines Headoffice
SKAB Commerce & Industry
P.O. Box 7226
Jeddah 21462
Saudi Arabia
- ------------------------------------------------------------------------------------------------------------------------------------
NBC Sports 811,423
- ------------------------------------------------------------------------------------------------------------------------------------
Nowell, Julie
1113 Hymettus Court 22,263 21,074
Raleigh, NC 27601
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No.of No.of No.of No.of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares shares Shares Shares Shares Shares
----------- ------ ------ ------ ------- ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nuray Telluride Properties
Limited Partnership 222,632 201,132 105,374 120,521 54,234
c/o Nuray Holdings, LLC Warrants:
Attn: William E. Ray 20,322
801 East Trade Street
Charlotte, NC 28202
- ------------------------------------------------------------------------------------------------------------------------------------
Papadoupulos, John M.
5033 Gorham Drive 5,268
Charlotte, NC 28226
- ------------------------------------------------------------------------------------------------------------------------------------
Parvez, Mohsan
E.A. Juffali 9,850 3,013 1,355
P.O. Box 1049
Jeddah 21431, Saudi Arabia
- ------------------------------------------------------------------------------------------------------------------------------------
Patel, Pratik
5117 Torrey Pine Lane
Durham, NC 27713 (check) 1,802
- ------------------------------------------------------------------------------------------------------------------------------------
Phillips, Courtney D.
c/o Earl N. Phillips, Jr. 6,026 2,711
GE Capital First Factors
101 South Main Street
High Point, NC 27261
- ------------------------------------------------------------------------------------------------------------------------------------
Phillips, Earl N., Jr.
GE Capital First Factors 18,078 8,135
101 South Main Street
High Point, NC 27261
- ------------------------------------------------------------------------------------------------------------------------------------
Phillips, Jordan N.
c/o Earl N. Phillips, Jr. 6,026 2,711
GE Capital First Factors
101 South Main Street
High Point, NC 27261
- ------------------------------------------------------------------------------------------------------------------------------------
Piedmont Venture Partners II,
L.P. 105,374 30,130 13,558
One Morrocroft Centre, Suite 380
6805 Morrison Boulevard
Charlotte, NC 28211
- ------------------------------------------------------------------------------------------------------------------------------------
Piedmont Venture Partners
Limited Partnership 111,316
One Morrocroft Centre
Suite 380 Warrants: Warrants:
6805 Morrison Boulevard 292,178 100,000 41,025 290,794
Charlotte, NC 28211
- ------------------------------------------------------------------------------------------------------------------------------------
Plank, Jeffrey O.
16 Viles Street 5,268
Weston, MA 02493
- ------------------------------------------------------------------------------------------------------------------------------------
Princeton Global Fund, L.P.
c/o Sycamore Venture 18,078 8,135
Attn: Simon Wong
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No.of No.of No.of No.of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares shares Shares Shares Shares Shares
----------- ------ ------ ------ ------- ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ray, Subir
c/o Sycamore Venture 301 135
Attn: Simon Wong
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
- ------------------------------------------------------------------------------------------------------------------------------------
Richardson, Kevin
c/o Richard Blum Associates 2,634 1,506 677
909 Montgomery Street
San Francisco, CA 94133
- ------------------------------------------------------------------------------------------------------------------------------------
Seward Family Trust, 8/25/94
2730 Pierce Street 5,268
San Francisco, CA 94123
- ------------------------------------------------------------------------------------------------------------------------------------
Silverman, Eric S.
28 South State Street 3,582
11/th/ Floor
Boston, MA 02109
- ------------------------------------------------------------------------------------------------------------------------------------
Silverman, Matt
310 North Cedar Road 1,055
Fairfield, CT 06430
- ------------------------------------------------------------------------------------------------------------------------------------
Skattum, Dag J. and Julie G.
305 Riverside Drive, #8B 2,634
New York, NY 10025
- ------------------------------------------------------------------------------------------------------------------------------------
Smith, Theodore B., III
37 Piping Rock Road 2,634 4,519 2,033
Locust Valley, NY 11560
- ------------------------------------------------------------------------------------------------------------------------------------
Stevenson, Gary R.
3917 White Chapel Way 14,073 7,903 3,013 1,355
Raleigh, NC 27615
- ------------------------------------------------------------------------------------------------------------------------------------
Sutton, C. Blair
3281-F Walnut Creek Parkway 527
Raleigh, NC 27606
- ------------------------------------------------------------------------------------------------------------------------------------
TCV III (GP)
Attn: Tom Newby 4,375 1,968
575 High Street, Suite 400
Palo Alto, CA 94301
- ------------------------------------------------------------------------------------------------------------------------------------
TCV III (Q), L.P.
Attn: Tom Newby 552,432 248,594
575 High Street, Suite 400
Palo Alto, CA 94301
- ------------------------------------------------------------------------------------------------------------------------------------
TCV III Strategic Partners,
L.P.
Attn: Tom Newby 25,017 11,257
575 High Street, Suite 400
Palo Alto, CA 94301
- ------------------------------------------------------------------------------------------------------------------------------------
TCV III, L.P.
Attn: Tom Newby 20,784 9,352
575 High Street, Suite 400
Palo Alto, CA 94301
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of No. of No. of No. of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares Shares Shares Shares Shares Shares
----------- ------ ------ ------ ------ ------ ------ ------
- ----------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Roger and Sue Stevenson
Family Trust UAD 7/29/98
3635 Cashill Boulevard 5,268
Reno, NV 89509
- ----------------------------------------------------------------------------------------------------------------------------------
Thompson, W. Michael, Jr.
1160 Peachtree Battle
Avenue, N.W. 5,268
Atlanta, GA 30327
- ----------------------------------------------------------------------------------------------------------------------------------
To, Kilin
c/o Sycamore Venture 3,013 1,355
Attn: Simon Wong
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
- ----------------------------------------------------------------------------------------------------------------------------------
Trans Cosmos USA
Attn: Yasuki Matsumoto, 120,521 54,234
President
777 108th Ave NE, Suite 2300
Bellevue, WA 98004
- ----------------------------------------------------------------------------------------------------------------------------------
Tratner, David
4510 Mimosa Tree Lane, #902 527
Raleigh, NC 27612
- ----------------------------------------------------------------------------------------------------------------------------------
Trust Agreement for Gregory Lee
Collins Warrants: 14,240
7102 LaVista Place 2,070
Suite 201
Niwot, CO 80503
- ----------------------------------------------------------------------------------------------------------------------------------
Watson, Jason Edgar
902 Park Ridge Road, Apt. B7 632
Durham, NC 27713
- ----------------------------------------------------------------------------------------------------------------------------------
Weishaupt, Petra
4917 Royal Adelaide Way 703
Raleigh, NC 27604
- ----------------------------------------------------------------------------------------------------------------------------------
White Crystals Ltd.
Attn: Ziad N. Baya'a 30,121 13,554
PO Box 54308
Riyadh 11514
Saudi Arabia
- ----------------------------------------------------------------------------------------------------------------------------------
Whitman, John R.
c/o Sycamore Venture 602 270
Attn: Simon Wong
989 Lenox Drive, Suite 208
Lawrenceville, NJ 08648
- ----------------------------------------------------------------------------------------------------------------------------------
WinStar Interactive Venture I,
Inc. 351,815 150,652 67,793
Attn: John Goldman
230 Park Avenue
Suite 2700
New York, NY 10169
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
No. of No. of No. of No. of No. of No. of No. of
Stockholder Name Common Series A Series B Series C Series C1 Series D Series D1
and Address Shares Shares Shares Shares Shares Shares Shares
----------- ------ ------ ------ ------ ------ ------ ------
- ----------------------------------------------------------------------------------------------------------------------------------
(warrants)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wolff, Bruce
4450 South Park Avenue
Suite 2700 527
New York, NY 10169
- ----------------------------------------------------------------------------------------------------------------------------------
Wood, Leslie
4575 Bonney Road 7,036
Virginia Beach, VA 23462
- ----------------------------------------------------------------------------------------------------------------------------------
WRYP 98
4101 Lake Boone Trail 3,518
Suite 300
Raleigh, NC 27607
- ----------------------------------------------------------------------------------------------------------------------------------
WRYP 99
4101 Lake Boone Trail 2,635 3,013 1,355
Suite 300
Raleigh, NC 27607
- ----------------------------------------------------------------------------------------------------------------------------------
Young, Thomas M.
c/o Deutsche Bank 3,161 964 433
31 West 52/nd/ Street, 4/th/ Floor
New York, NY 10019
- ----------------------------------------------------------------------------------------------------------------------------------
Zilkha Capital Partners, L.P.
Attn: John Rigas 149,067 67,080
767 Fifth Avenue
New York, NY 10153
- ----------------------------------------------------------------------------------------------------------------------------------
Zilkha Guernsey Capital
Partners, L.P. 152,237 68,506
Attn: John Rigas
767 Fifth Avenue
New York, NY 10153
- ----------------------------------------------------------------------------------------------------------------------------------
2,533,731 445,263
TOTALS: Warrants: 125,000 Warrants: 1,418,200 630,756 2,140,873 963,370
707,186 73,578
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
EXHIBIT 10.14
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
TRANSFERRED UNLESS THE COMPANY HAS RECEIVED A WRITTEN OPINION FROM COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSFER IS
BEING MADE IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO
TRANSFER RESTRICTIONS, OBLIGATIONS AND OTHER CONDITIONS SPECIFIED IN THE AMENDED
AND RESTATED SHAREHOLDER AGREEMENT DATED AS OF JUNE 2, 1997, AND AS AMENDED FROM
TIME TO TIME, AMONG THE COMPANY AND ITS SHAREHOLDERS.
No. W-__
COMMON STOCK PURCHASE WARRANT
To Subscribe for and Purchase Common Stock of
TOTAL LTD.
THIS CERTIFIES that, for value received, [_________________], or registered
permitted assigns, is the owner of _______ Warrants (subject to adjustment in
accordance with the provisions hereof), each of such Warrants entitling such
Holders to subscribe for and purchase from TOTAL LTD., a North Carolina
corporation (the "Company"), at the price of $0.01 per share (the "Exercise
------- --------
Price"), at any time commencing on the date determined under Section 2(a) until
- -----
5:00 p.m., Charlotte, North Carolina, time, on June 2, 2007, one fully paid and
nonassessable share (the "Exercise Rate") of the Company's Common Stock, par
---------------
value $.001 per share (the "Common Stock") (subject to adjustment as noted
------------
below) per each Warrant. This Common Stock Purchase Warrant shall be referred to
herein as the "Common Stock Purchase Warrant," and the Warrants represented by
-----------------------------
this Common Stock Purchase Warrant shall be referred to herein as "Warrants."
This Common Stock Purchase Warrant is subject to the following provisions, terms
and conditions:
Section 1. Definitions. Unless otherwise defined herein, capitalized terms
used herein shall have the meaning given such terms below. Capitalized terms
used herein and not defined shall have the meanings set forth in the Investment
Agreement (as defined below).
"Additional Shares of Common Stock" shall mean the following but shall not
---------------------------------
include the Excluded Shares: (i) all Common Stock of the Company, (ii) any
additional class of stock having the right to dividends or distributions on
liquidation (other than preferred stock the redemption right of which is limited
to the repayment of the purchase price therefor and reasonable dividends
thereon), which may be authorized in the future by amendment to the Company's
articles of incorporation, (iii) any debt or equity security which has or may be
issued in lieu of or in substitution or exchange for any of the foregoing or
which has or may be issued upon the exercise, exchange or conversion of any of
the foregoing by its terms, and (iv) any debt or equity security which has or
may be issued by a third party in lieu of or in substitution for any of the
foregoing as a result of any merger of the Company into such third party.
"Convertible Securities" shall mean evidences of indebtedness, shares of
----------------------
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration, for Additional Shares of Common
Stock.
<PAGE>
"Excluded Shares" shall mean shares of Common Stock issued or to be issued
---------------
upon exercise of the Warrants issued to each of the Holders and represented by a
Common Stock Purchase Warrant and shares of Common Stock issued or to be issued
upon exercise of options issued pursuant to the option plan in existence on the
date of closing or approved by the Board of Directors at any time subsequent
thereto.
"Extraordinary Event" shall mean a reorganization, initial public offering,
-------------------
merger, sale of all assets, or sale of substantially all assets of the Company.
"Holder" or "Holders" shall mean Daniels and Piedmont and any registered
------ -------
permitted assignee thereof.
"Investment Agreement" shall mean that certain Investment Agreement by and
--------------------
among the Company, Piedmont and Daniels dated as of June 2, 1997.
"Market Price" shall mean $3.42 per share as adjusted equitably by the
------------
Board of Directors in the event of a recapitalization, reclassification,
reorganization, consolidation, merger, split or comparable transaction.
"Notice of Exercise" shall mean a notice which states (i) the number of
------------------
Warrants a Holder intends to exercise, (ii) the persons (who must be permitted
assigns) (the "Recipients") who shall receive the shares of stock represented by
----------
the Warrants to be exercised, (iii) the addresses of Recipients, and (iv) the
number of certificates to be issued to represent the shares of stock issued as a
result of the exercise of Warrants.
"Person" shall mean an individual, a trust, an estate, a domestic
------
corporation, a foreign corporation, a partnership, a limited partnership, a
limited liability company, a foreign limited liability company, an
unincorporated association, or other entity.
"Securities Act" shall mean the Securities Act of 1933, as amend the
--------------
regulations promulgated thereunder.
Section 2. Exercise of Warrants.
(a) The Warrants may be exercised by the Holders, in whole or in part from
time to time after the Closing but not prior to the occurrence of an
Extraordinary Event nor subsequent to 5:00 P.M. ET, June 2, 2007 (the "Exercise
--------
Period") and during the Exercise Period by the surrender of this Common Stock
- ------
Purchase Warrant at, and delivery of a Notice of Exercise to, the offices of the
Company at the address set forth in the Investment Agreement, or such other
office or agency of the Company in the United States as the Company may
designate by notice in writing at any time during the Exercise Period,
accompanied by payment to the Company of the Exercise Price for the number of
shares for which the Warrants are then being exercised. The Exercise Price shall
be payable, at the option of the Holder, (i) by certified or bank check, or (ii)
by the surrender of that certain number of Warrants having a Market Price equal
to the Exercise Price. The Company agrees that the shares so purchased shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date of exercise of the Warrants. Duly executed
certificates for the shares of stock so purchased shall be delivered to the
Holder hereof within five business days after such exercise. Unless this Common
Stock Purchase Warrant has expired or been exercised in full, a
2
<PAGE>
notation on this Common Stock Purchase Warrant stating the number of shares
exercised shall be made by the Company and this Common Stock Purchase Warrant
shall then be returned to the Holder within five business days. The issuance of
certificates for shares of Common Stock upon the exercise of this Warrant shall
be made without charge to the Holder for any cost or expense (including any
original issue or transfer tax).
(b) The Exercise Price and Exercise Rate shall be subject to the following
adjustments:
(i) If, at any time during the Exercise Period, the Company
shall declare and pay on the Common Stock a dividend or other
distribution payable in shares of Common Stock, the Exercise Rate in
effect at the time of taking of a record for such dividend shall be
proportionately increased so that the Holder shall be entitled to
receive the number of shares of Common Stock which such Holder would
have owned or been entitled to receive after the declaration and
payment of such dividend or other distribution if the Warrants had
been exercised immediately prior to the record date for the
determination of stockholders entitled to receive such dividend or
other distribution, and the Exercise Price shall be proportionately
decreased so that the aggregate Exercise Price payable upon exercise
in full of the Warrants shall remain the same.
(ii) If the Company shall subdivide the outstanding shares of
Common Stock into a greater number of shares, or combine the
outstanding shares of Common Stock into a lesser number of shares, or
issue by reclassification of its shares of Common Stock any other
shares of the Company's capital stock, the Exercise Rate in effect
immediately prior thereto shall be proportionately adjusted so that
the Holder shall be entitled to receive the number of shares of Common
Stock or such other shares which such Holder would have owned or been
entitled to receive after the happening of any of the events described
above if the Warrants had been exercised immediately prior to the
happening of such event on the day upon which such subdivision,
combination or reclassification, as the case may be, becomes
effective, and the Exercise Price shall be proportionately adjusted so
that the aggregate Exercise Price payable upon exercise in full of the
Warrants represented by this Common Stock Purchase Warrant shall
remain the same.
(iii) If the Company shall issue (other than as provided in
subparagraph 2(b)(i) or 2(b)(ii) and other than Excluded Shares) or
sell any Additional Shares of Common Stock for a consideration per
share less than the Market Price, then at the time of such issuance or
sale the Exercise Rate shall be adjusted to the number determined by
multiplying the Exercise Rate in effect immediately prior to such
issuance or sale by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding (including Excluded
Shares), whether issued or issuable upon conversion or exercise,
immediately prior to the issuance or sale of such Additional Shares of
Common Stock plus the number of such Additional Shares of Common Stock
so issued or sold, and the denominator of which shall be the number of
shares of Common Stock outstanding (including Excluded Shares),
whether issued or issuable upon conversion or exercise, immediately
prior to the issuance or sale of such Additional Shares of Common
Stock plus the number of shares of Common Stock which the aggregate
consideration for such Additional Shares of Common Stock so issued or
sold would purchase at a consideration per
3
<PAGE>
share equal to the Market Price. The Exercise Price shall be
appropriately adjusted by multiplying the Exercise Price at the close
of business on the date of such issuance or sale by the reciprocal of
the fraction described above.
(iv) If the Company shall issue (other than as provided in
subparagraph 2(b)(i) or 2(b)(ii) and other than Excluded Shares) or
sell any warrants, options or other rights entitling the Holders
thereof to subscribe for or purchase either Additional Shares of
Common Stock or Convertible Securities, and the consideration per
share for which Additional Shares of Common Stock may at any time
thereafter be issuable pursuant to such warrants, options or other
rights or such Convertible Securities (when added to the consideration
per share of Common Stock, if any, received for such warrants, options
or other rights), shall be less than the Market Price then in effect,
then the Exercise Rate shall be adjusted to the number determined by
multiplying the Exercise Rate in effect immediately prior to such
issuance or sale by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding (including Excluded
Shares), whether issued or issuable upon conversion or exercise,
immediately prior to the issuance or sale of such warrants, options or
other rights plus the number of additional shares of Common Stock
issuable upon the exercise of such warrants, options or other rights,
and of which the denominator shall be the number of shares of Common
Stock outstanding (including Excluded Shares), whether issued or
issuable upon conversion or exercise, immediately prior to the
issuance or sale of such warrants, options or other rights plus the
number of shares which the aggregate offering price of the total
number of Additional Shares of Common Stock so offered (when added to
the consideration per share of Common Stock, if any, received for such
warrants, options or other rights) would purchase at the Market Price
then in effect. The Exercise Price shall be appropriately adjusted by
multiplying the Exercise Price at the close of business on the date of
such issuance or sale by the reciprocal of the fraction described
above.
(v) If the Company shall issue (other than as provided in
subparagraph 2(b)(i) or 2(b)(ii) and other than Excluded Shares) or
sell Convertible Securities and the consideration per share for which
Additional Shares of Common Stock may at any time thereafter be
issuable pursuant to the terms of such Convertible Securities shall be
less than the Market Price then in effect, then the Exercise Rate
shall be adjusted to the number determined by multiplying the Exercise
Rate in effect immediately prior to such issuance or sale by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding (including Excluded Shares), whether issued
or issuable upon conversion or exercise, immediately prior to the
issuance or sale of such Convertible Securities plus the number of
Additional Shares of Common Stock issuable upon the exercise of such
Convertible Securities, and of which the denominator shall be the
number of shares of Common Stock outstanding (including Excluded
Shares), whether issued or issuable upon conversion or exercise,
immediately prior to the issuance or sale of such Convertible
Securities plus the number of shares which the aggregate conversion or
exercise price of the total number of Additional Shares of Common
Stock so offered would purchase at the Market Price then in effect.
The Exercise Price shall he appropriately adjusted by multiplying the
Exercise Price at the close of business on the date of such issuance
or sale by the reciprocal of the fraction described above. No
adjustment of the Exercise
4
<PAGE>
Rate shall be made under this subparagraph 2(b)(v) upon the issuance
of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other rights, if such adjustment
shall previously have been made upon the issuance of such warrants,
options or other rights pursuant to subparagraph 2(b)(iv).
(vi) For the purposes of subparagraphs 2(b)(iii), 2(b)(iv) and
2(b)(v), the date as of which the Market Price shall be computed shall
be the earlier of (x) the date on which the Company shall enter into a
firm contract for the issuance of such Additional Shares of Common
Stock, warrants, options or other rights or Convertible Securities,
and (y) the date of the actual issuance of such Additional Shares of
Common Stock, warrants, options or other rights or Convertible
Securities.
(vii) No adjustment of the Exercise Rate shall be made under
subparagraph 2(b)(iii) upon the issuance of any Additional Shares of
Common Stock which are issued pursuant to the exercise of any
warrants, options or other rights or pursuant to the conversion of
Convertible Securities, if such adjustment shall previously have been
made upon the issuance of such warrants, options or other rights or
Convertible Securities, pursuant to subparagraphs 2(b)(iv) or 2(b)(v).
(viii) If any warrants, options or other rights (or any portion
thereof) which shall have given rise to an adjustment pursuant to
subparagraph 2(b)(iv) or conversion or exchange rights pursuant to
Convertible Securities which shall have given rise to an adjustment
pursuant to subparagraph 2(b)(v) shall have expired or terminated
without the exercise thereof, or if by reason of the terms of such
warrants, options or other rights or Convertible Securities there
shall have been an increase or increases, with the passage of time or
otherwise, in the exercise or conversion price thereof, then the
Exercise Rate hereunder shall be readjusted (but to no greater extent
than originally adjusted) on the basis of (x) eliminating from the
computation of any Additional Shares of Common Stock shares of Common
Stock attributable to such warrants, options or other rights or
conversion or exchange rights as shall have expired or terminated, and
(y) treating the Additional Shares of Common Stock, if any, actually
issued pursuant to the previous exercise of such warrants, options or
other rights or conversion or exchange rights pursuant to any
Convertible Securities as having been issued for the consideration
actually received and receivable therefor. In the event of any such
readjustment, an appropriate adjustment shall be made to the Exercise
Price.
(ix) (A) In any such case covered by this paragraph 2(b), in
determining the amount of consideration received by the Company as a
result of the issuance of Additional Shares of Common Stock,
Convertible Securities or warrants, options or other rights to
purchase any such Additional Shares of Common Stock, if the
consideration is in whole or in part consideration other than cash,
the amount of the consideration shall be deemed to be the fair value
of such consideration as reasonably determined by the board of
directors of the Company. If Additional Shares of Common Stock shall
be issued as part of a unit with warrants, options or other rights,
then the amount of consideration for the warrants, options or other
rights shall be deemed to be the amount reasonably determined by the
board of directors of the Company.
5
<PAGE>
(B) In case any Additional Shares of Common Stock, Convertible
Securities or any options, warrants or other rights to purchase such
Additional Shares of Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value, as reasonably
determined by the board of directors of the Company, of such portion
of the assets and business of the nonsurviving corporation or
corporations as the board shall determine to be attributable to such
Additional Shares of Common Stock, Convertible Securities or warrants,
options or other rights to purchase such Additional Shares of Common
Stock or Convertible Securities.
(x) In case the Company shall effect a reorganization, an
initial public offering, shall merge with or consolidate into another
corporation, or shall sell, transfer or otherwise dispose of all or
substantially all its property, assets or business (an "Extraordinary
Event") and, pursuant to the terms of such Extraordinary Event the
-------------------
Holders shall have the right thereafter to receive, upon subsequent
exercise of the Warrants the number of shares of stock or other
securities, property or assets of the Company, successor or transferee
or other third party thereof or cash receivable upon or as a result of
such Extraordinary Event equal to the number of shares of Common Stock
issuable to each of the Holders as if the Warrants had been exercised
immediately prior to such event. The provisions of this subparagraph
2(b)(x) shall similarly apply to successive reorganizations, mergers,
consolidations or dispositions of assets.
(xi) If a purchase, tender or exchange offer is made to and
accepted by a majority of the outstanding shares of Common Stock, the
Company shall not effect any consolidation, merger or sale with the
Person having made such offer or with any affiliate of such Person,
unless prior to the consummation thereof the Holders shall have been
given a reasonable opportunity to elect to receive, upon exercise or
exchange of the Warrants either the stock, securities, cash or assets
then issuable with respect to the Common Stock or the stock,
securities, cash or assets issued to previous Holders of the Common
Stock in accordance with such offer, or the equivalent thereof.
(xii) If a state of facts shall occur which, without being
specifically controlled by the provisions of this paragraph 2(b),
would not fairly protect the exercise rights of the Holders in
accordance with the essential intent and principles of such
provisions, then the board of directors of the Company shall make an
adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect those Warrant
rights.
(xiii) Whenever the Exercise Rate and Exercise Price shall be
adjusted pursuant to this paragraph 2(b), the Company shall deliver to
each Holder a written notice setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment
was calculated (including a description of the basis on which the
board of directors of the Company determined the fair value of any
consideration other than cash pursuant to subparagraph 2(b)(ix)) and
specifying the new Exercise Rate and Exercise Price. All calculations
under this paragraph 2(b) shall be made to the nearest one-one
hundredth of a share. In the case referred to in
6
<PAGE>
subparagraph 2(b)(x), such notice shall be issued describing the
amount and kind of stock, securities, property or assets or cash which
shall be receivable upon exercise of this Warrant.
(xiv) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the exercise of
the Warrants, the full number of shares of Common Stock then
deliverable upon the exercise of the Warrants. The Company shall take
at all times such corporate action as shall be necessary in order that
the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of the Warrants in accordance
with the provisions hereof, free from all taxes, liens, charges and
security interests. The Company represents to the Holders that the
shares of Common Stock issuable upon the exercise of the Warrants
will, when issued, be duly authorized, validly issued, fully paid and
nonassessable. The Company will, at its expense, use its best efforts
to cause such shares to be listed (subject to issuance or notice of
issuance) on all stock exchanges, if any, on which the Company's
Common Stock may become listed.
Section 3. Dividends and Distributions. For so long as any part of this
Common Stock Purchase Warrant remains outstanding and unexercised, the Company
will, upon the declaration of a cash dividend upon its Common Stock or other
distribution to the Holders of its Common Stock (except distributions pursuant
to subparagraph 2(b)(x) hereof) and at least 30 days prior to the record date,
notify the Holder hereof of such declaration, which notice will contain, at a
minimum, the following information: (a) the date of the declaration of the
dividend or distribution, (b) the amount of such dividend or distribution, (c)
the record date of such dividend or distribution, (d) the payment date or
distribution date of such dividend or distribution, and (e) the Company's best
estimate of the frequency and amount of cash dividends or other distributions to
be paid or made in each of the succeeding three years.
Section 4. Transfer of Warrants. This Common Stock Purchase Warrant and all
rights hereunder are transferable to permitted assigns pursuant to the Amended
and Restated Shareholder Agreement and the Amended and Restated Articles of
Incorporation, in whole or in part, at the office or agency of the Company
referred to in paragraph 8 hereof, by the Holder hereof in person or his duly
authorized attorney, upon surrender of this Common Stock Purchase Warrant
properly endorsed.
Section 5. Exchanges of Warrants. This Common Stock Purchase Warrant is
exchangeable, upon the surrender hereof by the Holder hereof at the office of
the Company, for new Common Stock Purchase Warrants of like tenor representing
in the aggregate the right to subscribe for and purchase the number of shares
which may be subscribed for and purchased hereunder.
Section 6. Expiration and Redemption of Warrants. This Common Stock
Purchase Warrant shall expire upon the occurrence of a Liquidating Event (as
defined in the Amended and Restated Articles of Incorporation of Total Ltd.
dated June 2, 1997). This Common Stock Purchase Warrant is subject to redemption
pursuant to the Amended and Restated Articles of Incorporation of Total Ltd.
dated June 2, 1997.
Section 7. Remedies. In the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Common Stock Purchase Warrant
7
<PAGE>
remedies at law are not and will not be adequate for the Holders, and that such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
Section 8. Notices. Except as otherwise provided herein, any notices
hereunder shall be deemed to have been received (a) when delivered, if
personally delivered or sent via facsimile, or (b) one day following delivery to
a nationally recognized overnight courier or (c) on the third business day
following the date on which the piece of mail containing such communication is
posted, if sent by certified or registered mail, return receipt requested, in
each case addressed, if given to the Company, to the principal office of the
Company, Attention: President, or, if given to a Holder, addressed to such
Holder at his address as the same shall appear on the books of the Company.
Section 9. Governing Law. This Common Stock Purchase Warrant shall be
governed by and construed in accordance with the laws of the State of North
Carolina.
Section 10. Headings. The headings of the Sections of this Common Stock
Purchase Warrant are inserted for convenience only and shall not be deemed to
constitute a part hereof.
Section 11. Severability. If any provision or any portion of any provision
of this Common Stock Purchase Warrant shall be held to be void or unenforceable,
the remaining portions of this Common Stock Purchase Warrant shall continue in
full force and effect.
[Remainder of this page intentionally left blank.]
8
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase
Warrant to be signed by one of its duly authorized officers under its corporate
seal and attested, and this Common Stock Purchase Warrant to be dated as of June
2, 1997.
COMPANY:
ATTEST: TOTAL LTD.
A North Carolina corporation
By:
_______________________ ____________________________________
Larry E. Robbins Frank A. Daniels, III
Assistant Secretary Chief Executive Officer
(Corporate Seal)
9
<PAGE>
PURCHASE FORM
-------------
Dated _________, 19___
The undersigned hereby irrevocably elects to exercise the within Warrant in
order to purchase _____ shares of Common Stock issuable hereunder and hereby
(circle one):
1. makes payment of $ ____ in payment of the Exercise Price thereof;
2. elects to surrender the number of Warrants having a Market Price equal
to the Exercise Price.
__________
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto
Name:___________________________________________________________________________
(please type or print in block letters)
Address:________________________________________________________________________
its rights to purchase ____ shares of Common Stock as represented by this
Warrant and does hereby irrevocably constitute and appoint _____________,
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Date__________ , 19___
Signature___________________________________
10
<PAGE>
EXHIBIT 10.15
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITY ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
TRANSFERRED UNLESS THE COMPANY HAS RECEIVED A WRITTEN OPINION FROM COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSFER IS
BEING MADE IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO
TRANSFER RESTRICTIONS, OBLIGATIONS AND OTHER CONDITIONS SPECIFIED IN THE SECOND
AMENDED AND RESTATED SHAREHOLDER AGREEMENT DATED AS OF NOVEMBER 4, 1997, AND AS
AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND ITS SHAREHOLDERS.
NO. WB-__
SERIES B PREFERRED STOCK PURCHASE WARRANT
To Subscribe for and Purchase Series B Preferred Stock of
TOTAL SPORTS INC.
THIS CERTIFIES that, for value received, [___________________], or
registered permitted assigns, is the owner of ______ Warrants (subject to
adjustment in accordance with the provisions hereof), each of such Warrants
entitling such Holders to subscribe for and purchase from TOTAL SPORTS INC., a
Delaware corporation (the "Company"), at the price of $4.492 per share (the
-------
"Exercise Price"), at any time commencing on the date hereof until 5:00 p.m.,
- ---------------
Charlotte, North Carolina time, on [10 years from date of grant] (the "Exercise
--------
Period"), one fully paid and nonassessable share (the "Exercise Rate") of the
- ------ -------------
Company's Series B Convertible Preferred Stock, par value $4.492 per share (the
"Series B Preferred Stock") (subject to adjustment as noted below) per each
------------------------
Warrant. This Series B Preferred Stock Purchase Warrant shall be referred to
herein as the "Series B Preferred Stock Purchase Warrant," and the Warrants
-----------------------------------------
represented by this Series B Preferred Stock Purchase Warrant shall be referred
to herein as "Warrants." This Series B Preferred Stock Purchase Warrant is
--------
subject to the following provisions, terms and conditions.
Section 1. Definitions. Unless otherwise defined herein, capitalized terms
used herein shall have the meaning given such terms below. Capitalized terms
used herein and not defined shall have the meanings set forth in the Note and
Warrant Purchase Agreement (as defined below).
"Additional Shares of Common Stock" shall mean the following but shall
---------------------------------
not include the Excluded Shares: (i) all Common Stock of the Company, (ii)
all Series B Preferred Stock, (iii) any additional class of stock having
the right to dividends, preferences or distributions on liquidation, which
may be authorized in the future by
<PAGE>
amendment to the Company's articles of incorporation, (iv) any debt or
equity security which has or may be issued in lieu of or in substitution or
exchange for any of the foregoing or which has or may be issued upon the
exercise, exchange or conversion of any of the foregoing by its terms, and
(v) any debt or equity security which has or may be issued by a third party
in lieu of or in substitution for any of the foregoing as a result of any
merger of the Company into such third party.
"Appraised Market Value" shall mean the market value of the Common
----------------------
Stock as agreed by the Company and the Holder hereof, or if the Company and
the Holder cannot agree, as determined by a valuation by an investment
banking company suitable to the Company and the Holder. In the event the
parties cannot agree on an investment banking company to perform the
valuation described above, the Company and the Holder shall each select an
investment banking company and the two investment banking companies so
selected shall select a third investment banking company which shall
determine the market value. In determining the Appraised Market Value of
the Common Stock, no discount shall be applied because the shares of Common
Stock held by the Holders (i) have not been registered under the Securities
Act, or (ii) represent a minority interest in the Company. The fees and
expenses of the investment banking companies shall be borne by the Company.
"Convertible Securities" shall mean evidences of indebtedness, shares
----------------------
of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration, for Additional Shares
of Common Stock.
"Excluded Shares" shall mean shares of Series B Preferred Stock or
---------------
Common Stock (as applicable) issued or to be issued upon exercise of any
warrants issued by the Company for Series B Preferred Stock and shares of
Common Stock issued or to be issued upon exercise of options issued
pursuant to the option plan in existence on the date of closing or approved
by the Board of Directors at any time subsequent thereto.
"Holder" or "Holders" shall mean [____________] and any registered
------ -------
permitted assignee thereof.
"Market Price" of a share of Series B Preferred Stock or Common Stock
------------
(as applicable) on any day shall mean the average closing price of a share
of Series B Preferred Stock or Common Stock (as applicable) for the 30
consecutive trading days preceding such day on the principal national
securities exchange or NASDAQ National Market System on which the shares of
Common Stock are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, the average of the
reported closing bid and asked prices during such 30 trading day period in
the over-the-counter market as furnished by the national Quotation Bureau,
Inc., or, if the shares of Series B Preferred Stock or Common Stock (as
applicable) are not publicly traded, the Appraised Market Value; provided,
--------
however, that the "Market Price" for a share of Series B Preferred Stock of
-------
Common Stock (as applicable) sold pursuant to a public offering by
2
<PAGE>
the Company shall be deemed to be the price received by the Company for
such share; and provided further that in no event shall "Market Price" be
-------- -------
deemed to be less than $4.492 per share (subject to proportional adjustment
upon the occurrence of any event specified in subparagraph 2(b)(i) or
2(b)(ii)).
"Note and Warrant Purchase Agreement" shall mean that certain Note and
-----------------------------------
Warrant Purchase Agreement by and among the Company and the purchasers
listed therein dated as of the date hereof.
"Notice of Exercise" shall mean a notice which states (i) the number
------------------
of Warrants a Holder intends to exercise, (ii) the persons (who must be
permitted assigns) (the "Recipients") who shall receive the shares of stock
-----------
and by the Warrants to be exercised, (iii) the addresses of Recipients, and
(iv) the number of certificates to be issued to represent the shares of
stock issued as a result of the exercise of Warrants.
"Person" shall mean an individual, a trust, an estate, a domestic
------
corporation, a foreign corporation, a partnership, a limited partnership, a
limited liability company, a foreign limited liability company, an
unincorporated association, or other entity.
"Securities Act" shall mean the Securities Act of 1933, as amended and
--------------
the regulations promulgated thereunder.
Section 2. Exercise of Warrants.
(a) The Warrants may be exercised by the Holders, in whole or in part
from time to time after the Closing (the "Exercise Period") and during the
---------------
Exercise Period by the surrender of this Series B Preferred Stock Purchase
Warrant at, and delivery of a Notice of Exercise to, the offices of the
Company at the address set forth in the Note and Warrant Purchase
Agreement, or such other office or agency of the Company in the United
States as the Company may designate by notice in writing at any time during
the Exercise Period, accompanied by payment to the Company of the Exercise
Price for the number of shares for which the Warrants are then being
exercised. The Exercise Price shall be payable, at the option of the
Holder, (i) by certified or bank check, (ii) by cancellation of
indebtedness owed by the Company to the Holders in an amount equal to the
Exercise Price or (iii) by the surrender of that certain number of Warrants
having a Market Price equal to the Exercise Price. The Company agrees that
the shares so purchased shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date of
exercise of the Warrants. Duly executed certificates for the shares of
stock so purchased shall be delivered to the Holder hereof within five
business days after such exercise. Unless this Series B Preferred Stock
Purchase Warrant has expired or been exercised in full, a notation on this
Series B Preferred Stock Purchase Warrant stating the number of shares
exercised shall be made by the Company and this Series B Preferred Stock
Purchase Warrant shall then be returned to the Holder within five business
days. The issuance of certificates for shares of Series B
3
<PAGE>
Preferred Stock upon the exercise of this Warrant shall be made without
charge to the Holder for any cost or expense (including any original issue
or transfer tax and excluding any income taxes of the Holder).
(b) The Exercise Price and Exercise Rate shall be subject to the
following adjustments:
(i) If, at any time during the Exercise Period, the Company
shall declare and pay on the Series B Preferred Stock or the Common
Stock (as applicable) a dividend or other distribution payable in
shares of Series B Preferred Stock or the Common Stock (as
applicable), the Exercise Rate in effect at the time of taking of a
record for such dividend shall be proportionately increased so that
the Holder shall be entitled to receive the number of shares of Series
B Preferred Stock or the Common Stock (as applicable) which such
Holder would have owned or been entitled to receive after the
declaration and payment of such dividend or other distribution if the
Warrants had been exercised immediately prior to the record date for
the determination of shareholders entitled to receive such dividend or
other distribution, and the Exercise Price shall be proportionately
decreased so that the aggregate Exercise Price payable upon exercise
in full of the Warrants shall remain the same.
(ii) If the Company shall subdivide the outstanding shares of
Series B Preferred Stock or the Common Stock (as applicable) into a
greater number of shares, or combine the outstanding shares of Series
B Preferred Stock or the Common Stock (as applicable) into a lesser
number of shares, or issue by reclassification of its shares of Series
B Preferred Stock (as applicable) or the Common Stock, any other
shares of the Company's capital stock, the Exercise Rate in effect
immediately prior thereto shall be proportionately adjusted so that
the Holder shall be entitled to receive the number of shares of Series
B Preferred Stock or the Common Stock (as applicable) or such other
shares which such Holder would have owned or been entitled to receive
after the happening of any of the events described above if the
Warrants had been exercised immediately prior to the happening of such
event on the day upon which such subdivision, combination or
reclassification, as the case may be, becomes effective, and the
Exercise Price shall be proportionately adjusted so that the aggregate
Exercise Price payable upon exercise in full of the Warrants
represented by this Series B Preferred Stock or the Common Stock
Purchase Warrant (as applicable) shall remain the same.
(iii) If the Company shall issue (other than as provided in
subparagraph 2(b)(i) or 2(b)(ii) and other than Excluded Shares) or
sell any Additional Shares of Common Stock for a consideration per
share less than the Market Price, then at the time of such issuance or
sale the Exercise Rate shall be adjusted to the number determined by
multiplying the Exercise Rate in effect immediately prior to such
issuance or sale by a fraction, the numerator of which shall be the
number of
4
<PAGE>
shares of Common Stock outstanding (including Excluded Shares),
whether issued or issuable upon conversion or exercise, immediately
prior to the issuance or sale of such Additional Shares of Common
Stock plus the number of such Additional Shares of Common Stock so
issued or sold, and the denominator of which shall be the number of
shares of Common Stock outstanding (including Excluded Shares),
whether issued or issuable upon conversion or exercise, immediately
prior to the issuance or sale of such Additional Shares of Common
Stock plus the number of shares of Common Stock which the aggregate
consideration for such Additional Shares of Common Stock so issued or
sold would purchase at a consideration per share equal to the Market
Price. The Exercise Price shall be appropriately adjusted by
multiplying the Exercise Price at the close of business on the date of
such issuance or sale by the reciprocal of the fraction described
above.
(iv) If the Company shall issue (other than as provided in
paragraph 2(b)(i) or 2(b)(ii) and other than Excluded Shares) or sell
any warrants, options or other rights entitling the Holders thereof to
subscribe for or purchase either Additional Shares of Common Stock or
Convertible Securities, and the consideration per share for which
Additional Shares of Common Stock may at any time thereafter be
issuable pursuant to such warrants, options or other rights or such
Convertible Securities (when added to the consideration per share of
Series B Preferred Stock or Common Stock (as applicable), if any,
received for such warrants, options or other rights), shall be less
than the Market Price then in effect, then the Exercise Rate shall be
adjusted to the number determined by multiplying the Exercise Rate in
effect immediately prior to such issuance or sale by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding (including Excluded Shares), whether issued or issuable
upon conversion or exercise, immediately prior to the issuance or sale
of such warrants, options or other rights plus the number of
additional shares of Series B Preferred Stock or Common Stock (as
applicable) issuable upon the exercise of such warrants, options or
other rights, and of which the denominator shall be the number of
shares of Common Stock outstanding (including Excluded Shares),
whether issued or issuable upon conversion or exercise, immediately
prior to the issuance or sale of such warrants, options or other
rights plus the number of shares which the aggregate offering price of
the total number of Additional Shares of Common Stock so offered (when
added to the consideration per share of Common Stock, if any, received
for such warrants, options or other rights) would purchase at the
Market Price then in effect. The Exercise Price shall be
appropriately adjusted by multiplying the Exercise Price at the close
of business on the date of such issuance or sale by the reciprocal of
the fraction described above.
(v) If the Company shall issue (other than as provided in
subparagraph 2(b)(i) or 2(b)(ii) and other than Excluded Shares) or
sell Convertible Securities and the consideration per share for which
Additional Shares of Common Stock may at any time thereafter be
issuable pursuant to the terms of such Convertible
5
<PAGE>
Securities shall be less than the Market Price then in effect, then
the Exercise Rate shall be adjusted to the number determined by
multiplying the Exercise Rate in effect immediately prior to such
issuance or sale by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding (including Excluded
Shares), whether issued or issuable upon conversion or exercise,
immediately prior to the issuance or sale of such Convertible
Securities plus the number of Additional Shares of Series B Preferred
Stock or Common Stock (as applicable) issuable upon the exercise of
such Convertible Securities, and of which the denominator shall be the
number of shares of Common Stock outstanding (including Excluded
Shares), whether issued or issuable upon conversion or exercise,
immediately prior to the issuance or sale of such Convertible
Securities plus the number of shares which the aggregate conversion or
exercise price of the total number of Additional Shares of Common
Stock so offered would purchase at the Market Price then in effect.
The Exercise Price shall be appropriately adjusted by multiplying the
Exercise Price at the close of business on the date of such issuance
or sale by the reciprocal of the fraction described above. No
adjustment of the Exercise Rate shall be made under this subparagraph
2(b)(v) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants, options or other
rights, if such adjustment shall previously have been made upon the
issuance of such warrants, options or other rights pursuant to
subparagraph 2(b)(iv).
(vi) For the purposes of subparagraphs 2(b)(iii), 2(b)(iv) and
2(b)(v), the date as of which the Market Price shall be computed shall
be the earlier of (c) the date on which the Company shall enter into a
firm contract for the issuance of such Additional Shares of Common
Stock, warrants, options or other rights or Convertible Securities,
and (y) the date of the actual issuance of such Additional Shares of
Common Stock, warrants, options or other rights or Convertible
Securities.
(vii) No adjustment of the Exercise Rate shall be made under
subparagraph 2(b)(iii) upon the issuance of any Additional Shares of
Common Stock which are issued pursuant to the exercise of any
warrants, options or other rights or pursuant to the conversion of
Convertible Securities, if such adjustment shall previously have been
made upon the issuance of such warrants, options or other rights or
Convertible Securities, pursuant to subparagraphs 2(b)(iv) or 2(b)(v).
(viii) If any warrants, options or other rights (or any portion
thereof) which shall have given rise to an adjustment pursuant to
subparagraph 2(b)(iv) or conversion or exchange rights pursuant to
Convertible Securities which shall have given rise to an adjustment
pursuant to subparagraph 2(b)(v) shall have expired or terminated
without the exercise thereof, or if by reason of the terms of such
warrants, options or other rights or Convertible Securities there
shall have been an
6
<PAGE>
increase or increases, with the passage of time or otherwise, in the
exercise or conversion price thereof, then the Exercise Rate hereunder
shall be readjusted (but to no greater extent than originally
adjusted) on the basis of (x) eliminating from the computation of any
Additional Shares of Common Stock shares of Series B Preferred Stock
or Common Stock (as applicable) attributable to such warrants, options
or other rights or conversion or exchange rights as shall have expired
or terminated, and (y) treating the Additional Shares of Common Stock,
if any, actually issued pursuant to the previous exercise of such
warrants, options or other rights or conversion or exchange rights
pursuant to any Convertible Securities as having been issued for the
consideration actually received and receivable therefor. In the event
of any such readjustment, an appropriate adjustment shall be made to
the Exercise Price.
(ix) (A) In any such case covered by this paragraph 2(b), in
determining the amount of consideration received by the Company as a
result of the issuance of Additional Shares of Common Stock,
Convertible Securities or warrants, options or other rights to
purchase any such Additional Shares of Common Stock, if the
consideration is in whole or in part consideration other than cash,
the amount of the consideration shall be deemed to be the fair value
of such consideration as reasonably determined by the board of
directors of the Company. If Additional Shares of Common Stock shall
be issued as part of a unit with warrants, options or other rights,
then the amount of consideration for the warrants, options or other
rights shall be deemed to be the amount reasonably determined by the
board of directors of the Company.
(B) In case any Additional Shares of Common Stock,
Convertible Securities or any options, warrants or other rights to
purchase such Additional Shares of Common Stock or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value,
as reasonably determined by the board of directors of the Company, of
such portion of the assets and business of the nonsurviving
corporation or corporations as the board shall determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities or warrants, options or other rights to purchase such
Additional Shares of Common Stock or Convertible Securities.
(x) If a purchase, tender or exchange offer is made to and
accepted by a majority of the outstanding shares of Common Stock, the
Company shall not effect any consolidation, merger or sale with the
Person having made such offer or with any affiliate of such Person,
unless prior to the consummation thereof the Holders shall have been
given a reasonable opportunity to elect to receive, upon exercise or
exchange of the Warrants either the stock, securities, cash or assets
then issuable with respect to the Series B Preferred Stock or Common
Stock (as
7
<PAGE>
applicable) or the stock, Securities, cash or assets issued to
previous Holders of the Series B Preferred Stock or Common Stock (as
applicable) in accordance with such offer, or the equivalent thereof.
(xi) If a state of facts shall occur which, without being
specifically controlled by the provisions of this paragraph 2(b),
would not fairly protect the exercise rights of the Holders in
accordance with the essential intent and principles of such
provisions, then the board of directors of the Company shall make an
adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect those Warrant
rights.
(xii) Whenever the Exercise Rate and Exercise Price shall be
adjusted pursuant to this paragraph 2(b), the Company shall deliver to
each Holder a written notice setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment
was calculated (including a description of the basis on which the
board of directors of the Company determined the fair value of any
consideration other than cash pursuant to subparagraph 2(b)(ix)) and
specifying the new Exercise Rate and Exercise Price. All calculations
under this paragraph 2(b) shall be made to the nearest one-one
hundredth of a share.
(xiii) The Company shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but
unissued shares of Series B Preferred Stock or Common Stock (as
applicable), solely for the purpose of effecting the exercise of the
Warrants, the full number of shares of Series B Preferred Stock or
Common Stock (as applicable) then deliverable upon the exercise of the
Warrants. The Company shall take at all times such corporate action
as shall be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Series B
Preferred Stock or Common Stock (as applicable) upon the exercise of
the Warrants in accordance with the provisions hereof, free from all
taxes, liens, charges and security interests. The Company represents
and warrants to the Holders that the shares of Series B Preferred
Stock or Common Stock (as applicable) issuable upon the exercise of
the Warrants will, when issued, be duly authorized, validly issued,
fully paid and nonassessable. The Company will, at its expense, use
its best efforts to cause such shares to be listed (subject to
issuance or notice of issuance) on all stock exchanges, if any, on
which the Company's Series B Preferred Stock or Common Stock (as
applicable) may become listed.
(xiv) In case the Company shall effect a reorganization, shall
merge with or consolidate into another corporation, or shall sell,
transfer or otherwise dispose of all or substantially all its
property, assets or business and, pursuant to the terms of such
reorganization, merger, consolidation or disposition of assets, shares
of stock or other securities, property or assets of the Company,
successor or transferee or other third party or cash are to be
received by or distributed to the
8
<PAGE>
holders of Series B Preferred Stock or Common Stock (as applicable),
then the Holder of this Series B Preferred Stock Purchase Warrant
shall have the right thereafter to receive, upon subsequent exercise
of the Warrants by this Series B Preferred Stock Purchase Warrant, the
number of shares of stock or other securities, property or assets of
the Company, successor or transferee or other third party thereof or
cash receivable upon or as a result of such reorganization, merger,
consolidation or disposition of assets by a holder of the number of
shares of Series B Preferred Stock or Common Stock (as applicable)
equal to the number of shares of Series B Preferred Stock or Common
Stock (as applicable) issuable to the Holder of this Series B
Preferred Stock Purchase Warrant, if the Warrants represented by this
Series B Preferred Stock Purchase Warrant had been exercised
immediately prior to such event. The provisions of this subparagraph
2(b)(xiv) shall similarly apply to successive reorganizations,
mergers, consolidations or dispositions of assets.
(xv) No fractional shares of Series B Preferred Stock or
Common Stock (as applicable) or scrip representing fractional shares
of Series B Preferred Stock or Common Stock (as applicable) shall be
issued upon any exercise of this Series B Preferred Stock Purchase
Warrant, but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the Market Price of a whole share of
Series B Preferred Stock or Common Stock (as applicable) on the
business day preceding the day of exercise.
(xvi) The Exercise Rate shall be adjusted so that this Warrant
shall be exercisable in an amount equal to that number of Series B
Preferred Stock or Common Stock (as applicable) equal to the quotient
of 15% of the principal and interest due under the Company's 10%
Convertible Promissory Note dated the date hereof payable to the
Holder thereof (the "Note") on the earlier of the date the Note is due
and payable or the date of conversion (as provided therein) divided by
the price per share in the next Venture Capital Financing (as defined
below); provided, however, that such adjustment shall not reduce the
-------- -------
amount of Warrants hereunder to less than __________ shares (subject
to adjustment for stock splits, stock dividends and the like). For
purposes of this Warrant, a "Venture Capital Financing" shall mean (i)
-------------------------
the Company's sale of Securities to venture capital, institutional or
private investors in which at least $3,000,000 in gross cash proceeds
are received by the Company (including proceeds resulting from the
conversion of the Note) and (ii) the terms and conditions of such sale
of Securities being reasonably satisfactory to the Holder.
(xvii) Notwithstanding any other provision of this Section 2(b),
the provisions of paragraphs 2(b)(iii), 2(b)(iv), 2(b)(v), 2(b)(vi),
2(b)(vii), 2(b)(viii) and 2(b)(ix) shall only apply to adjustments of
the Exercise Price and Exercise Rate in connection with the exercise
of this Series B Preferred Stock Purchase Warrant for Common Stock;
provided, however, that such subparagraphs
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9
<PAGE>
described above shall also apply to an exercise of this Series B
Preferred Stock Purchase Warrant for Series B Preferred Stock if the
Holder is not afforded the anti-dilution protections attributable to
such Series B Preferred Stock set forth in the Company's articles of
incorporation.
Section 3. Dividends and Distributions. For so long as any part of this
Series B Preferred Stock Purchase Warrant remains outstanding and unexercised,
the Company will, upon the declaration of a cash dividend upon its Series B
Preferred Stock or Common Stock (as applicable) or other distribution to the
Holders of its Series B Preferred Stock or Common Stock (as applicable) and at
least 30 days prior to the record date, notify the Holder hereof of such
declaration, which notice will contain, at a minimum, the following information:
(a) the date of the declaration of the dividend or distribution, (b) the amount
of such dividend or distribution, (c) the record date of such dividend or
distribution, (d) the payment date or distribution date of such dividend or
distribution, and (e) the Company's best estimate of the frequency and amount of
cash dividends or other distributions to be paid or made in each of the
succeeding three years. The Holders shall, upon the exercise hereof, be entitled
to receive, in addition to the number of shares of Series B Preferred Stock or
Common Stock (as applicable) receivable thereupon, and without payment of any
additional consideration therefor, the amount of such other or additional
securities or other property (other than cash) of the Company which such Holders
would hold on the date of such exercise had it been the holder of record of such
Series B Preferred Stock or Common Stock (as applicable) on the date hereof and
had thereafter, during the period from the date hereof to and including the date
of such exercise, retained such shares and/or all other additional securities or
other property receivable by it as aforesaid during such period, giving effect
to all adjustments pursuant to Section 2.
Section 4. Conversion or Redemption of Series B Preferred Stock. If
at the time of any exercise of this Warrant there are no other shares of Series
B Preferred Stock outstanding (such shares having been converted), this Warrant
shall be exercisable for Common Stock of the Company instead of Series B
Preferred Stock in the same amounts, for the same prices and on the same terms,
and all references herein to "Series B Preferred Stock" shall be changed to
refer to "Common Stock."
Section 5. Reservation of Stock. The Company agrees that its issuance
of this Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Series B Preferred Stock (or Common Stock, in the
event the Company's articles of incorporation do not authorize sufficient shares
of Series B Stock) upon the exercise of this Warrant.
Section 6. Transfer of Warrants. This Series B Preferred Stock Purchase
Warrant and all rights hereunder are transferable to permitted assigns pursuant
to the Second Amended and Restated Shareholder Agreement, in whole or in part,
at the office or agency of the Company referred to in paragraph 7 hereof, by the
Holder hereof in person or his duly authorized attorney, upon surrender of this
Series B Preferred Stock Purchase Warrant properly endorsed.
10
<PAGE>
Section 7. Exercise of Warrants. This Series B Preferred Stock
Purchase Warrant is exchangeable, upon the surrender hereof by the Holder hereof
at the office of the Company, for new Series B Preferred Stock Purchase Warrants
of like tenor representing in the aggregate the right to subscribe for and
purchase the number of shares which may be subscribed for and purchased
hereunder.
Section 8. Remedies. In the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Series B Preferred Stock Purchase Warrant remedies at law are not and will not
be adequate for the Holders, and that such terms may be specifically enforced by
a decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 9. Notices. Except as otherwise provided herein, any notices
hereunder shall be deemed to have been received (a) when delivered, if
personally delivered or sent via facsimile, or (b) one day following delivery to
a nationally recognized overnight courier or (c) on the third business day
following the date on which the piece of mail containing such communication is
posted, if sent by certified or registered mail, return receipt requested, in
each case addressed, if given to the Company, to the principal office of the
Company, Attention: President, or, if given to a Holder, addressed to such
Holder at his address as the same shall appear on the books of the Company.
Section 10. Governing Law. This Series B Preferred Stock Purchase
Warrant shall be governed by and construed in accordance with the laws of the
State of North Carolina.
Section 11. Headings. The headings of the Sections of this Series B
Preferred Stock Purchase Warrant are inserted for convenience only and shall not
be deemed to constitute a part hereof.
Section 12. Severability. If any provision or any portion of any provision
of this Series B Preferred Stock Purchase Warrant shall be held to be void or
unenforceable, the remaining portions of this Series B Preferred Stock Purchase
Warrant shall continue in full force and effect.
Section 13. Amendments. This Series B Preferred Stock Purchase Warrant and
any term or provision hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by both the Company and the Holder
hereof.
[Remainder of this page intentionally left blank.]
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Series B Preferred Stock
Purchase Warrant to be signed by one of its duly authorized officers under its
corporate seal and attested, and this Series B Preferred Stock Purchase Warrant
to be dated as of June ____, 1998.
COMPANY:
ATTEST: TOTAL SPORTS INC.,
a Delaware corporation
_________________________ By:___________________________
Name:____________________ Name:_________________________
Title:___________________ Title:________________________
(Corporate Seal)
12
<PAGE>
PURCHASE FORM
-------------
Dated _____, 19___
The undersigned hereby irrevocably elects to exercise the within Warrant in
order to purchase shares of Series B Preferred Stock or Common Stock (as
applicable) issuable hereunder and hereby (circle one):
1. makes payment of $______________ in payment of the Exercise Price
thereof;
2. elects to surrender the number of Warrants having a Market Price equal
to the Exercise Price.
_________
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _____________________________________ hereby
sells, assigns and transfers unto
Name:________________________________________________________________
(please type or print in block letters)
Address:_____________________________________________________________
its rights to purchase __________ shares of Series B Preferred Stock or Common
Stock (as applicable) as represented by this Warrant and does hereby irrevocably
constitute and appoint ______________________________, Attorney, to transfer the
same on the books of the Company, with full power of substitution in the
premises.
Date _____________,19___
Signature_______________________________
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<PAGE>
EXHIBIT 10.16
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS WARRANT AND SUCH UNDERLYING SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IN NOT REQUIRED AND SUCH
FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.
TOTAL SPORTS INC.
STOCK PURCHASE WARRANT
No. W-____ 318,500 Shares
1. Number and Price of Shares Subject to Warrant. Subject to the terms
---------------------------------------------
and conditions herein set forth, ALLEN & COMPANY INCORPORATED or permitted
assigns (the "Holder"), is entitled to purchase from Total Sports Inc., a
Delaware corporation (the "Company"), at any time on or before the earliest to
occur of the following: (i) June 30, 2005, or (ii) the closing of the Company's
sale of all or substantially all of its assets or the acquisition of the Company
by another entity by means of merger or other transaction as a result of which
shareholders of the Company immediately prior to such acquisition dispose of at
least ninety percent (90%) of their voting power of the Company as a part of
such acquisition (the "Acquisition"), three hundred eighteen thousand five
hundred (318,500) Shares (which number of shares is subject to adjustment as
described below) of fully paid and nonassessable Common Stock of the Company
(the "Shares") upon surrender hereof at the principal office of the Company and,
at the election of the Holder hereof, upon either payment of the purchase price
at said office in cash or by check or by the cancellation of any present or
future indebtedness from the Company to the Holder hereof in a dollar amount
equal to the purchase price of the Common Stock for which the consideration is
being given, or by converting this Warrant as provided in Section 6.1 hereof.
The Company shall give notice to the Holder of an Acquisition at least thirty
(30) days prior to the closing of such Acquisition. Subject to adjustment as
hereinafter provided, the exercise price for one share of Common Stock (or such
securities as may be substituted for one share of Common Stock pursuant to the
provisions hereinafter set forth) shall be equal to $7.106. The exercise price
for one share of Common Stock (or such securities as may be substituted for one
share of Common Stock pursuant to the provisions hereinafter set forth) payable
from time to time upon the exercise of this Warrant (whether such price be the
price specified above or an adjusted price determined as hereinafter provided)
is referred to herein as the "Warrant Price."
2. Adjustment of Warrant Price, Number and Kind of Shares. The Warrant
------------------------------------------------------
Price and the number and kind of securities issuable upon the exercise of this
Warrant shall be subject
<PAGE>
to adjustment from time to time and the Company agrees to provide notice upon
the happening of certain events as follows:
2.1 Dividends in Stock Adjustment. In case at any time or from time
-----------------------------
to time on or after the date hereof the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible shareholders, shall have become
entitled to receive, without payment therefor, other or additional securities or
other property (other than cash) of the Company by way of dividend or
distribution, then and in each case, the holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of shares of
Common Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of such other or additional securities or
other property (other than cash) of the Company which such holder would hold on
the date of such exercise had it been the holder of record of such Common Stock
on the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all other
additional securities or other property receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
this subsection 2.1 and subsections 2.2, 2.3, 2.4 and 2.5 of this Section 2.
2.2 Reclassification, Reorganization and Other Adjustment. In case of
-----------------------------------------------------
any reclassification or change of the outstanding securities of the Company or
of any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) or in the event of a consolidation or merger of the Company with
another corporation, or a sale, transfer or other disposition to another
corporation of the properties and assets of the Company, which does not
constitute an Acquisition or other transaction pursuant to which the Common
Stock is automatically or mandatorily converted, retired or otherwise eliminated
(any such event, other than an Acquisition, is referred to herein as an
"Adjustment Event") on or after the date hereof, then and in each such case the
Company shall give the holder of this Warrant at least thirty (30) days notice
of the proposed effective date of such Adjustment Event, and the holder of this
Warrant, upon the exercise hereof at any time after the consummation of such
Adjustment Event, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in subsections 2.1, 2.2, 2.3, 2.4 and 2.5 of this Section 2.
2.3 Stock Splits and Reverse Stock Splits. If at any time on or after
-------------------------------------
the date hereof the Company shall subdivide its outstanding shares of Common
Stock into a greater number of shares, the Warrant Price in effect immediately
prior to such subdivision shall thereby be proportionately reduced and the
number of shares receivable upon exercise of this Warrant shall thereby be
proportionately increased; and, conversely, if at any time on or after the date
hereof the outstanding number of shares of Common Stock shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall thereby be proportionately increased and the number of shares
receivable upon exercise of this Warrant shall thereby be proportionately
decreased.
2
<PAGE>
2.4 Common Stock Distribution.
-------------------------
(a) If and whenever the Company issues or sells, or in
accordance with Section 2.5 below is deemed to have issued or sold, any shares
of Common Stock for a consideration per share less than the Warrant Price in
effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale or deemed issue or sale the Warrant Price shall be
reduced to a price determined by dividing (i) the sum of (1) the product derived
by multiplying the Warrant Price in effect immediately prior to such issue or
sale by the number of shares of Common Stock Deemed Outstanding (as defined
below) immediately prior to such issue or sale, plus (2) the consideration, if
any, received by the Corporation upon such issue or sale, by (ii) the number of
shares of Common Stock Deemed Outstanding immediately after such issue or sale.
"Common Stock Deemed Outstanding" means, at any given time, the number of shares
of Common Stock actually outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding assuming exercise and/or conversion of the
Corporation's Options and Convertible Securities (as defined below), whether or
not such Options or Convertible Securities are actually exercisable at such
time.
(b) Notwithstanding any provision in this Section 2, pursuant to
the closing of a Qualified Public Offering (as defined below) in which the price
per share at which shares of the Company's Common Stock are initially sold to
the public is less than the Warrant Price, then, upon the written consent of the
Holder, the Warrant Price in effect immediately prior to the closing of the
Qualified Public Offering shall be reduced to such price per share at which
shares of the Corporation's Common Stock are initially sold to the public in
such Qualified Public Offering.
(c) Notwithstanding any provision in this Section 2, there shall
be no adjustment to the Warrant Price hereunder with respect to (i) the issuance
or sale of up to that number of shares or options to purchase shares of the
Corporation's Capital Stock (subject to adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization) as are
specified in Section 4(E)(2)(c) of the Company's Certificate of Incorporation,
as it may be amended from time to time, at a price per share less than such
Warrant Price, to officers, directors or employees of or consultants to the
Company pursuant to plans or arrangements approved by the Company's Board of
Directors; provided that such number of shares shall be increased by the number
of shares that are subject to options outstanding on the date specified in
Section 4(E)(2)(c) of the Company's Certificate of Incorporation, as it may be
amended from time to time, or granted thereafter, that expire unexercised; (ii)
the exercise of the Company's Options outstanding as of the date hereof and
(iii) the issuance of Common Stock upon conversion of the Preferred Stock of the
Company.
2.5 Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Warrant Price under Section 2.4 above, the following
shall be applicable:
(a) Issuance of Rights or Options. If the Company in any manner
----------------------------
grants or sells any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities (as defined below)
("Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options, or upon conversion or
3
<PAGE>
exchange of any stock or securities directly or indirectly convertible into
or exchangeable for Common Stock ("Convertible Securities") issuable upon
exercise of such Options, is less than the Warrant Price in effect
immediately prior to the time of the granting or sale of such Options, then
the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Options for
such price per share. For purposes of this paragraph, the "price per share
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Company as
consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Company upon
exercise of all such Options, plus in the case of such Options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Warrant Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when
Common Stock is actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. If the Company in any manner
----------------------------------
issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less
than the Warrant Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be deemed
to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (A) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) the total maximum number of shares
of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment of the Warrant Price shall be
made when Common Stock is actually issued upon the conversion or exchange
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Warrant Price had been or are to be made pursuant to
other provisions of this Section 2, no further adjustment of the Warrant
Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. If the purchase price
-----------------------------------------
provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities or the rate
at which any Convertible Securities are convertible into or exchangeable
for Common Stock is reduced at any time, the applicable Warrant Price in
effect at the time of such change shall be
4
<PAGE>
immediately adjusted to the Warrant Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued
or sold.
(d) Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. Upon the expiration of any Option or the termination of any
----------
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Warrant Price then in effect hereunder
shall be adjusted immediately to the Warrant Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
(e) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company
shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Market Price (as defined
below) thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the
fair value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any
consideration other than cash and securities shall be determined in good
faith by the Company's Board of Directors. "Market Price" of any security
means the average of the closing prices of such security's sales on the
principal securities exchanges on which such security may at the time be
listed, or, if there has been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day such security is not so listed, the
average of the last sale prices quoted in the NASDAQ System, or if on any
day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau, Incorporated,
or any similar successor organization, in each such case averaged over a
period of five days consisting of the day prior to the day as of which
"Market Price" is being determined and the five consecutive business days
prior to such day.
(f) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for such consideration as shall
be determined in good faith by the Company's Board of Directors.
5
<PAGE>
(g) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or
for the account of the Company or any subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(h) Record Date. If the Company takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or upon the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(i) Notwithstanding anything to the contrary contained herein,
there shall be no adjustment pursuant to this Section 2.5:
(i) if prior to the issuance of Common Stock, Options or
Convertible Securities, the Company receives written
notice from the Holder of the Warrant, agreeing that no
such adjustment shall be made as the result of such
issuance; or
(ii) with respect to shares of Common Stock issued or
issuable (1) as a dividend or distribution on Preferred
Stock of the Company or (2) by reason of a dividend,
stock split, split-up or other distribution on shares
of Common Stock issued pursuant to this clause (ii).
2.6 Special Reduction in Absence of Strategic Partnership. If the
-----------------------------------------------------
Company fails to enter into a Strategic Partnership by the date twelve (12)
months after the date of this Warrant, on such date the number of shares for
which this Warrant may be exercised shall automatically be reduced by the number
of shares equal to 28.57% of the shares for which it may be exercised
immediately prior to such adjustment. For purposes of this Warrant, "Strategic
Partnership" shall mean an acquisition, investment, business combination,
merger, sale of stock or assets, joint venture, or any similar transaction,
whereby shares of the Company's stock constituting at least 15% of the total
voting power of the Company or of any existing or newly-formed subsidiaries of
the Company, are transferred to a third party, where the third party's primary
business is as an operator or manager of broadcasting, media or entertainment
assets, such as broadcast television, radio or cable television networks or
stations.
3. No Fractional Shares. No fractional shares of Common Stock will be
--------------------
issued in connection with any subscription hereunder. In lieu of any fractional
shares that would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
6
<PAGE>
4. No Shareholder Rights. This Warrant as such shall not entitle its
---------------------
holder to any of the rights of a shareholder of the Company until the holder has
exercised this Warrant in accordance with Section 6 hereof.
5. Reservation of Stock. The Company covenants that during the period
--------------------
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant. The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
6. Exercise of Warrant.
-------------------
6.1 Procedure for Exercise; Closing. This Warrant may be exercised,
-------------------------------
in whole or in part, by Holder by the surrender of this Warrant at the principal
office of the Company, accompanied by payment in full of the exercise price of
the shares purchased thereby or accompanied by a duly completed notice of the
Holder of its intent to convert this Warrant (or any portion thereof) as
provided below. The exercise price shall be payable, at the option of the
Holder, (i) by certified or bank check, or (ii) by cancellation of indebtedness
owed by the Company to the Holder in an amount equal to the exercise price. In
lieu of exercise of any portion of this Warrant as provided by items (i) and
(ii) above, this Warrant (or any portion thereof) may, at the election of the
Holder, be converted into the nearest whole number of Shares equal to: (1) the
product of (a) the number of Shares then issuable upon the exercise of the
portion of the Warrant being converted and (b) the excess, if any, of (I) the
Market Price with respect to the date of conversion over (II) the Warrant Price
in effect on the date of conversion, divided by (2) the Market Price with
respect to the date of conversion. This Warrant shall be deemed to have been
exercised (or converted, as the case may be) immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person or entity entitled to receive the shares or other securities issuable
upon such exercise or conversion shall be treated for all purposes as the holder
of such shares of record as of the close of business on such date. As promptly
as practicable, the Company shall issue and deliver to the person or entity
entitled to receive the same a certificate or certificates for the number of
full shares of Common Stock issuable upon such exercise or conversion, together
with cash in lieu of any fraction of a share as provided above. The shares of
Common Stock issuable upon exercise or conversion hereof shall, upon their
issuance, be fully paid and nonassessable. Unless this Warrant has expired or
been exercised (and/or converted) in full, a notation on this Warrant stating
the number of shares exercised shall be made by the Company and this Warrant
shall then be returned to the Holder within five business days.
6.2 Determination of Appraised Market Value for Conversion of
---------------------------------------------------------
Warrant. If at any time the shares of Common Stock are not publicly traded, the
- -------
Market Price shall mean the "Appraised Market Value;" provided, however, that
the Market Price for a share of Common Stock sold pursuant to a public offering
by the Company shall be deemed to be the price received by the Company for such
share. The "Appraised Market Value" shall mean the market value of the Common
Stock as agreed by the Company and the Holder hereof or, if the Company and the
Holder cannot agree, as determined by a valuation by an investment banking
company suitable to
7
<PAGE>
the Company and the Holder. In the event the parties cannot agree on an
investment banking company to perform the valuation described above, the Company
and the Holder shall each select an investment banking company and the two
investment banking companies so selected shall select a third investment banking
company that shall determine the market value. In determining the Appraised
Market Value of the Common Stock, no discount shall be applied because the
shares held by the Holder (i) have not been registered under the Securities Act,
or (ii) represent a minority interest in the Company. The fees and expenses of
the investment banking companies shall be borne by the Company.
7. Certificate of Adjustment. Whenever the Warrant Price or number or
-------------------------
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
8. Notice of Proposed Transfers. Prior to any proposed transfer of this
----------------------------
Warrant, the shares of Common Stock received on the exercise or conversion of
this Warrant (the "Securities"), unless there is in effect a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the proposed transfer, the Holder thereof shall give written notice to
the Company of such Holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall, if the Company so requests, be accompanied (except
in transactions in compliance with Rule 144) by either (i) an unqualified
written opinion of legal counsel who shall be reasonably satisfactory to the
Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Securities may be effected without registration under the Securities Act, or
(ii) a "no action" letter from the Securities Exchange Commission (the
"Commission") to the effect that the transfer of such Securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of the
Securities shall be entitled to transfer the Securities in accordance with the
terms of the notice delivered by the Holder to the Company; provided, however,
-----------------
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder to any affiliate of such Holder, or a transfer by a Holder
which is a partnership to a partner of such partnership or a retired partner of
such partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original Holder hereunder. Each
certificate evidencing the Securities transferred as above provided shall bear
the appropriate restrictive legend set forth above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for the
Company such legend is not required in order to establish compliance with any
provisions of the Securities Act.
9. Replacement of Warrants. Upon receipt by the Company of evidence
-----------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant, and in the case of any such loss, theft or
destruction of the Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company, and reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation
8
<PAGE>
of the Warrant if mutilated, the Company will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
10. Registration Rights. The Company agrees to extend to the Shares
-------------------
certain registration rights on the same terms and conditions as such rights
shall be extended to purchasers of the Company's shares of Series C Preferred
Stock and, to that end, the Company shall ensure that the definition of
"Registrable Securities" included in such agreement between the Company and the
holders of its Series C Preferred Stock providing for such registration rights
shall include the Shares.
11. Miscellaneous. This Warrant shall be governed by the laws of the
-------------
State of North Carolina. The headings in this Warrant are for purposes of
convenience of reference only, and shall not be deemed to constitute a part
hereof. The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provisions. All notices
and other communications from the Company to the holder of this Warrant shall be
delivered personally or mailed by first class mail, postage prepaid, to the
address furnished to the Company in writing by the last holder of this Warrant
who shall have furnished an address to the Company in writing, and if mailed
shall be deemed given three days after deposit in the U.S. Mail.
12. Taxes. The Company shall pay all taxes and other governmental charges
-----
that may be imposed in respect of the issuance or delivery of the Shares or any
portion thereof.
13. Amendment. Any term of this Warrant may be amended with the written
---------
consent of the Company and the warrant holder. Any amendment effected in
accordance with this Section 13 shall be binding upon the Holder of this
Warrant, each future holder of such Warrant, and the Company.
ISSUED this 22/nd/ day of September 1998.
TOTAL SPORTS INC.
a Delaware corporation
By:_________________________________
Title:______________________________
9
<PAGE>
EXHIBIT 10.17
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVETHIS WARRANT
AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), APPLICABLE STATE
SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION. THIS WARRANT
AND SUCH UNDERLYING SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY
FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY,
ACTING REASONABLY, THAT SUCH REGISTRATION IN NOT REQUIRED AND SUCH FOREIGN
JURISDICTION LAWS HAVE BEEN SATISFIED.
TOTAL SPORTS INC.
COMMON STOCK PURCHASE WARRANT
________ Shares
This Warrant is issued as of this 4th day of June 1999, by TOTAL SPORTS
INC., a Delaware corporation (the "Company"), to [________________] or permitted
-------
successors or assigns (the "Holder").
------
1. Issuance of Warrant; Term; Price.
--------------------------------
1.1 Issuance. The Holder is making a loan to the Company in the
--------
amount of US$_______ (the "Loan"). The Loan is evidenced by a Convertible
----
Promissory Note dated as of the date hereof, in the original principal amount of
US$__________ payable to the order of the Holder, by the Company (together with
any and all extensions, replacements and renewals thereof, the "Note"). In
----
consideration of the funding of the Loan, the receipt and sufficiency of which
are hereby acknowledged, the Company hereby grants to Holder the right to
purchase [____________] shares of Common Stock of the Company (the "Warrant
-------
Stock").
- -----
1.2 Term. The shares of Warrant Stock issuable upon exercise of this
----
Warrant are hereinafter referred to as the "Shares." This Warrant shall be
------
exercisable at any time and from time to time in whole or in part from the date
hereof until May 31, 2009.
1.3. Exercise Price. Subject to adjustment as hereinafter provided,
--------------
the exercise price (the "Warrant Price") per share for which all or any of the
-------------
Shares may be purchased pursuant to the terms of this Warrant shall be equal to
Twenty-five Dollars and Seven Cents ($25.07).
2. Adjustment of Warrant Price, Number and Kind of Shares. The Warrant
------------------------------------------------------
Price and the number and kind of securities issuable upon the exercise of this
Warrant shall be subject to adjustment from time to time, and the Company agrees
to provide ten (10) days prior written notice of the happening of any of the
following events, together with a certificate of adjustment executed
<PAGE>
by an officer of the Company setting forth the nature of the adjustment and a
brief description of such event triggering adjustment.
2.1 Dividends in Stock Adjustment. In case at any time and from time
-----------------------------
to time on or after the date hereof the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other additional securities or
other property (other than cash) of the Company by way of dividend or
distribution, then and in each case, the holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Shares
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional securities or other property
(other than cash) of the Company which such holder would hold on the date of
such exercise had it been the holder of record of such Shares on the date hereof
and had thereafter, during the period from the date hereof to and including the
date of such exercise, retained such Shares and/or all other additional
securities or other property receivable by it as aforesaid during such period,
giving effect to all adjustments called for during such period by this Section
2.
2.2 Reclassification or Reorganization Adjustment. In case of any
---------------------------------------------
reclassification or change of the outstanding securities of the Company or of
any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) at any time and from time to time on or after the date hereof, and the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change or reorganization, shall be
entitled to receive, in lieu of the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities or property to which such holder would have been entitled upon
such consummation if such holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in this Section 2.
2.3 Stock Splits and Reverse Stock Splits. If at any time and from
-------------------------------------
time to time on or after the date hereof the Company shall subdivide or
otherwise change its outstanding shares of Common Stock into a greater number of
shares, the Warrant Price in effect immediately prior to such subdivision shall
thereby be proportionately reduced and the number of shares receivable upon
exercise of this Warrant shall thereby be proportionately increased; and,
conversely, if at any time and from time to time on or after the date hereof the
outstanding number of shares of Common Stock shall be combined or otherwise
changed into a smaller number of shares, the Warrant Price in effect immediately
prior to such combination shall thereby be proportionately increased and the
number of shares receivable upon exercise of this Warrant shall thereby be
proportionately decreased.
2.4 Anti-Dilution Adjustment. In case the Company's next sale of
------------------------
equity securities to venture capital, institutional or private investors (the
"Venture Capital Financing") provides for the issuance of shares of the
Company's capital stock (the "New Securities") for less than $25.07 per share,
subject to adjustment for stock splits, stock dividends, reorganizations and the
like (such lower price per share referred to hereinafter as the "New Price"),
then the Warrant Price in effect immediately prior to such Venture Capital
Financing shall be reduced to the New
2
<PAGE>
Price and the number of shares receivable upon exercise of this Warrant shall be
adjusted by multiplying such number by a fraction equal to $25.07 divided by the
New Price, in each case subject to further adjustment as herein provided.
2.5 Other Impairment. The Company will not, by amendment of its
----------------
Certificate of Incorporation or Bylaws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and conditions and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder against impairment.
3. No Fractional Shares. No fractional shares of Common Stock will be
--------------------
issued in connection with any subscription hereunder. In lieu of any fractional
shares that would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
4. No Shareholder Rights. This Warrant as such shall not entitle Holder
---------------------
to any of the rights of a shareholder of the Company until the Holder has
exercised this Warrant in accordance with Section 6 hereof.
5. Reservation of Stock. The Company covenants that during the period
--------------------
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares thereof to provide for the
issuance of Shares or other securities upon the exercise of this Warrant. The
Company agrees that its issuance of this Warrant shall constitute full authority
to its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for Shares or other securities upon
the exercise of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised by Holder by the
-------------------
surrender of this Warrant at the principal office of the Company, accompanied by
notice of and payment in full of the purchase price of the Shares the Holder
elects to purchase hereunder. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
Shares or other securities and/or property issuable upon such exercise shall be
treated for all purposes as the holder of such Shares or other securities of
record as of the close of business on such date. As promptly as practicable,
the Company shall issue and deliver (or, if so requested at the time of
surrender of this Warrant, hold for pick-up at its principal office by) to the
person or persons entitled to receive the same a certificate or certificates for
the number of full Shares or other securities issuable upon such exercise,
together with cash in lieu of any fraction of a share as provided above. The
Shares or other securities issuable upon exercise hereof shall, upon their
issuance, be fully paid and nonassessable. If this Warrant shall be exercised
in part only, the Company shall, at the time of delivery of the certificate
representing the Shares or other securities in respect of which this Warrant has
been exercised, deliver to the Holder a new Warrant evidencing the right to
purchase the remaining Shares or other securities purchasable under this
Warrant, which new warrant shall, in all other respects, be identical to this
Warrant.
3
<PAGE>
7. Right to Convert Warrant for Common Stock.
-----------------------------------------
7.1 Right to Convert. In addition to and without limiting the rights
----------------
of the Holder under the terms of this Warrant, the Holder shall have the right
to convert this Warrant or any portion hereof (the "Conversion Right") into
----------------
shares of Common Stock as provided in this Section 7. Upon exercise of the
Conversion Right with respect to a particular number of shares subject to this
Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
------------------------
Holder (without payment by the Holder of any cash or other consideration) that
number of shares of Common Stock equal to the quotient obtained by dividing (x)
the value of this Warrant (or the specified portion hereof) on the Conversion
Date (as defined in subsection 7.2 hereof ), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (y) the fair market value of one share of Common Stock on the
Conversion Date (as herein defined). No fractional shares shall be issuable
upon exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Holder an amount in cash equal to the fair
market value of the resulting fractional share on the Conversion Date (as herein
defined).
7.2 Method of Exercise. The Conversion Right may be exercised by the
------------------
Holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the Holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant that are being surrendered (referred to in subsection 7.1 hereof as
the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon such surrender of this Warrant (the
"Conversion Date"). Certificates for the shares of Common Stock issuable upon
- ----------------
exercise of the Conversion Right (or any other securities deliverable in lieu
thereof under Section 2) shall be issued as of the Conversion Date and shall be
delivered to the Holder immediately following the Conversion Date, or, if
requested at the time of surrender of this Warrant, held for pick-up by the
Holder at the Company's principal office.
7.3 Determination of Fair Market Value. For purposes of this Section
----------------------------------
7, fair market value of a share of Common Stock as of a particular date (the
"Determination Date") shall mean:
- -------------------
(a) In the case of an Initial Public Offering, the initial
"Price to Public" specified in the final prospectus with respect to such
offering;
(b) In the case of an Acquisition, the effective per share
consideration to be received in an Acquisition by holders of the Common Stock,
which price shall be as specified in the agreement entered into with respect to
such Acquisition and determined assuming receipt of the aggregate exercise price
of all outstanding warrants to purchase Common Stock (the "Outstanding
-----------
Warrants"), or if no such price is set forth in the agreement concerning the
- --------
Acquisition, then as determined in good faith by the Company's Board of
Directors upon a
4
<PAGE>
review of relevant factors, including the aggregate exercise price of all
outstanding warrants that could reasonably be expected to be exercised prior to
the completion of such Acquisition; or
(c) In any other case, the price determined in good faith by the
Company's Board of Directors.
8. Certificate of Adjustment. Whenever the Warrant Price or number or
-------------------------
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
9. Notice of Proposed Transfers. This Warrant is transferable by the
----------------------------
Holder hereof subject to compliance with this Section 9. Prior to any proposed
transfer of this Warrant or the Shares received on the exercise of this Warrant
(the "Securities"), unless there is in effect a registration statement under the
----------
Securities Act of 1933, as amended (the "Securities Act"), covering the proposed
--------------
transfer, the Holder thereof shall give written notice to the Company of such
Holder's intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall, if the Company so requests, be accompanied (except in transactions in
compliance with Rule 144) by either (i) an unqualified written opinion of legal
counsel who shall be satisfactory to the Company acting reasonably addressed to
the Company and satisfactory in form and substance to the Company's counsel
acting reasonably, to the effect that the proposed transfer of the Securities
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Securities Exchange Commission (the "Commission") to the
----------
effect that the transfer of such Securities without registration will not result
in a recommendation by the staff of the Commission that action be taken with
respect thereto, whereupon the Holder of the Securities shall be entitled to
transfer the Securities in accordance with the terms of the notice delivered by
the Holder to the Company; provided, however, no such registration statement or
-------- -------
opinion of counsel shall be necessary for a transfer by a Holder to any
affiliate of such Holder, or a transfer by a Holder which is a partnership to a
partner of such partnership or a retired partner of such partnership who retires
after the date hereof, or to the estate of any such partner or retired partner
or the transfer by gift, will or intestate succession of any partner to his
spouse or lineal descendants or ancestors, if the transferee agrees in writing
to be subject to the terms hereof to the same extent as if such transferee were
the original Holder hereunder. Each certificate evidencing the Securities
transferred as above provided shall bear the appropriate restrictive legend set
forth above, except that such certificate shall not bear such restrictive legend
if in the opinion of counsel for the Company acting reasonably such legend is
not required in order to establish compliance with any provisions of the
Securities Act.
10. Replacement of Warrants. Upon receipt by the Company of evidence
-----------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant, and in the case of any such loss, theft or
destruction of the Warrant, on delivery of an indemnity agreement or security
satisfactory in form and amount to the Company acting reasonably, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Warrant if mutilated, the Company will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
5
<PAGE>
11. Dividends and Distributions. For so long as any part of this Warrant
---------------------------
remains outstanding and unexercised, the Company will, upon the declaration of a
cash dividend upon its Common Stock or other distribution to the Holders of its
Common Stock and at least ten (10) days prior to the record date, notify the
Holder hereof of such declaration, which notice will contain, at a minimum, the
following information: (a) the date of the declaration of the dividend or
distribution, (b) the amount of such dividend or distribution, (c) the record
date of such dividend or distribution, and (d) the payment date or distribution
date of such dividend or distribution. The Holder shall, upon the exercise
hereof, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional securities or other property
(other than cash) of the Company which such Holder would hold on the date of
such exercise had it been the holder of record of such Common Stock on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional securities or other property receivable by it as aforesaid during
such period, giving effect to all adjustments pursuant to Section 2.
12. Miscellaneous. This Warrant shall be governed by the laws of the
-------------
State of North Carolina. The headings in this Warrant are for purposes of
convenience of reference only, and shall not be deemed to constitute a part
hereof. The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provisions. All notices
and other communications from the Company to the holder of this Warrant shall be
delivered personally or mailed by first class mail, postage prepaid, or by
facsimile to the address or facsimile number furnished to the Company in writing
by the last holder of this Warrant who shall have furnished an address and
facsimile number to the Company in writing, and if mailed shall be deemed given
three days after deposit in the U.S. Mail.
13. Taxes. The Company shall pay all issue taxes and other governmental
-----
charges (but not including any income taxes of a Holder) that may be imposed in
respect of the issuance or delivery of the Shares or any portion thereof.
14. Amendment. Any term of this Warrant may be amended with the written
---------
consent of the Company and the Holder. Any amendment effected in accordance
with this Section 14 shall be binding upon the Holder of this Warrant, each
future holder of such Warrant, and the Company.
15. Remedies. In the event of any default or threatened default by the
--------
Company in the performance of or observance with any of the terms of this
Warrant, it is agreed that remedies at law are not and will not be adequate for
the Holder and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. Facsimile Signature. This Warrant may be executed by the Company in
-------------------
facsimile form and upon receipt by the Holder of such faxed executed copy of
this Warrant, this Warrant shall be binding upon and enforceable against the
Company in accordance with its terms. The Company shall promptly forward to the
Holder an original of the facsimile signed copy of this Warrant previously
delivered to Holder.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned officer of the Company has executed
this Common Stock Purchase Warrant as of the date first above written.
TOTAL SPORTS INC.
By:_____________________________
Name:___________________________
Title:__________________________
7
<PAGE>
EXHIBIT 10.18
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS WARRANT AND SUCH UNDERLYING SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, ACTING REASONABLY, THAT SUCH REGISTRATION IN NOT
REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.
TOTAL SPORTS INC.
SERIES D1 PREFERRED STOCK PURCHASE WARRANT
This Warrant is issued as of this 12/th/ day of November 1999, by TOTAL
SPORTS INC., a Delaware corporation (the "Company"), to [_____________________]
-------
or permitted successors or assigns (the "Holder").
------
1. Issuance of Warrant; Term; Price.
--------------------------------
1.1 Issuance. Subject to the terms and conditions herein set forth,
--------
the Holder is entitled to purchase from the Company, at any time on or before
the expiration of the term of this Warrant as set forth below, ________________
(_______) shares (which number of shares is subject to adjustment as described
below) of fully paid and nonassessable Series D1 Preferred Stock of the Company,
par value $0.001 per share (the "Warrant Stock") upon surrender hereof at the
-------------
principal office of the Company and, at the election of the Holder hereof, upon
either payment of the purchase price at said office in cash or by check or by
the cancellation of any present or future indebtedness from the Company to the
Holder hereof in a dollar amount equal to the purchase price of the Warrant
Stock for which the consideration is being given, or by surrendering for
cancellation shares of capital stock of the Company which shares have a fair
market value equal to the purchase price of the Warrant Stock for which the
consideration is being given.
1.2 Term. The shares of Warrant Stock issuable upon exercise of this
----
Warrant are hereinafter referred to as the "Shares." This Warrant shall be
------
exercisable at any time and from time to time in whole or in part from the date
hereof until November 1, 2004.
1.3. Exercise Price. Subject to adjustment as hereinafter provided,
--------------
the exercise price (the "Warrant Price") per share for which all or any of the
-------------
Shares may be purchased pursuant to the terms of this Warrant shall be equal to
Sixteen Dollars and Fifty-nine Cents ($16.59).
<PAGE>
2. Adjustment of Warrant Price, Number and Kind of Shares. The Warrant
------------------------------------------------------
Price and the number and kind of securities issuable upon the exercise of this
Warrant shall be subject to adjustment from time to time and the Company agrees
to provide notice upon the happening of certain events as follows.
2.1 Dividends in Stock Adjustment. In case at any time and from time
-----------------------------
to time on or after the date hereof the holders of the Common Stock or Warrant
Stock of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor, other
additional securities or other property (other than cash) of the Company by way
of dividend or distribution, then and in each case, the holder of this Warrant
shall, upon the exercise hereof, be entitled to receive, in addition to the
number of Shares receivable thereupon, and without payment of any additional
consideration therefor, the amount of such other or additional securities or
other property (other than cash) of the Company which such holder would hold on
the date of such exercise had it been the holder of record of such Shares on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such Shares and/or all other
additional securities or other property receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
this Section 2.
2.2 Reclassification or Reorganization Adjustment. In case of any
---------------------------------------------
reclassification or change of the outstanding securities of the Company or of
any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) at any time and from time to time on or after the date hereof, and the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change or reorganization, shall be
entitled to receive, in lieu of the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities or property to which such holder would have been entitled upon
such consummation if such holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in this Section 2.
2.3 Stock Splits and Reverse Stock Splits. If at any time and from
-------------------------------------
time to time on or after the date hereof the Company shall subdivide or
otherwise change its outstanding shares of Common Stock or Warrant Stock into a
greater number of shares, the Warrant Price in effect immediately prior to such
subdivision shall thereby be proportionately reduced and the number of shares
receivable upon exercise of this Warrant shall thereby be proportionately
increased; and, conversely, if at any time and from time to time on or after the
date hereof the outstanding number of shares of Common Stock or Warrant Stock
shall be combined or otherwise changed into a smaller number of shares, the
Warrant Price in effect immediately prior to such combination shall thereby be
proportionately increased and the number of shares receivable upon exercise of
this Warrant shall thereby be proportionately decreased.
2.4 Conversion or Redemption of Series D1 Preferred Stock. If at the
-----------------------------------------------------
time of any exercise of this Warrant there are no other shares of Series D1
Preferred Stock outstanding (such shares having been converted), this Warrant
shall be exercisable for Common Stock of the Company instead of Series D1
Preferred Stock in the amounts and upon the same terms as if such
2
<PAGE>
holder had exercised this Warrant immediately prior to conversion of the Series
D1 Preferred Stock, and all references herein to "Warrant Stock" or "Series D1
Preferred Stock" shall be deemed to refer to the Common Stock of the Company.
2.5 Other Impairment. The Company will not, by amendment of its
----------------
Certificate of Incorporation or Bylaws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and conditions and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder against impairment.
3. No Fractional Shares. No fractional shares of Common Stock will be
--------------------
issued in connection with any subscription hereunder. In lieu of any fractional
shares that would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock or Warrant Stock on the date of exercise, as determined in good
faith by the Company's Board of Directors.
4. No Shareholder Rights. This Warrant as such shall not entitle Holder
---------------------
to any of the rights of a shareholder of the Company until the Holder has
exercised this Warrant in accordance with Section 6 hereof.
5. Reservation of Stock. The Company covenants that during the period
--------------------
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Series D1 Preferred Stock and Common Stock a sufficient number of
shares thereof to provide for the issuance of Shares or other securities upon
the exercise of this Warrant. The Company agrees that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for Shares or other securities upon the exercise of this Warrant.
6. Exercise of Warrant. This Warrant may be exercised by Holder by the
-------------------
surrender of this Warrant at the principal office of the Company, accompanied by
notice of and payment in full of the purchase price of the Shares the Holder
elects to purchase hereunder. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
Shares or other securities and/or property issuable upon such exercise shall be
treated for all purposes as the holder of such Shares or other securities of
record as of the close of business on such date. As promptly as practicable, the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full Shares or other
securities issuable upon such exercise, together with cash in lieu of any
fraction of a share as provided above. The Shares or other securities issuable
upon exercise hereof shall, upon their issuance, be fully paid and
nonassessable.
7. Net Issue Election.
------------------
7.1 Right to Convert. In addition to and without limiting the rights
----------------
of the Holder under the terms of this Warrant, the Holder shall have the right
to convert this Warrant or any portion hereof (the "Conversion Right") into
----------------
shares of Common Stock or Warrant Stock as
3
<PAGE>
provided in this Section 7. Upon exercise of the Conversion Right with respect
to a particular number of shares subject to this Warrant (the "Converted Warrant
-----------------
Shares"), the Company shall deliver to the Holder (without payment by the Holder
- ------
of any cash or other consideration) that number of shares of Common Stock or
Warrant Stock equal to the quotient obtained by dividing (x) the value of this
Warrant (or the specified portion hereof) on the Conversion Date (as defined in
subsection 7.2 hereof ), which value shall be determined by subtracting (A) the
aggregate Warrant Price of the Converted Warrant Shares immediately prior to the
exercise of the Conversion Right from (B) the aggregate fair market value of the
Converted Warrant Shares issuable upon exercise of this Warrant (or the
specified portion hereof) on the Conversion Date (as herein defined) by (y) the
fair market value of one share of Common Stock or Warrant Stock on the
Conversion Date (as herein defined). No fractional shares shall be issuable upon
exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Holder an amount in cash equal to the fair
market value of the resulting fractional share on the Conversion Date (as herein
defined).
7.2 Method of Exercise. The Conversion Right may be exercised by the
------------------
Holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the Holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant that are being surrendered (referred to in subsection 7.1 hereof as
the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon such surrender of this Warrant (the
"Conversion Date"). Certificates for the shares of Common Stock or Warrant
---------------
Stock issuable upon exercise of the Conversion Right (or any other securities
deliverable in lieu thereof under Section 2) shall be issued as of the
Conversion Date and shall be delivered to the Holder immediately following the
Conversion Date, or, if requested at the time of surrender of this Warrant, held
for pick-up by the Holder at the Company's principal office.
7.3 Determination of Fair Market Value. For purposes of this Section
----------------------------------
7, fair market value (the "Market Price") of a share of Common Stock or Warrant
------------
Stock as of a particular date (the "Determination Date") shall mean the average
------------------
of the closing prices of such security's sales on the principal securities
exchanges on which such security may at the time be listed, or, if there has
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the last sale prices
quoted in the NASDAQ System, or if on any day such security is not quoted in the
NASDAQ System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of five days consisting of the day prior to the
day as of which "Market Price" is being determined and the five consecutive
business days prior to such day. If at any time such security is not listed on
any securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the "Market Price" shall be the fair value thereof as determined in good
faith by the Company's Board of Directors.
8. Certificate of Adjustment. Whenever the Warrant Price or number or
-------------------------
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall
4
<PAGE>
promptly deliver to the record holder of this Warrant a certificate of an
officer of the Company setting forth the nature of such adjustment and a brief
statement of the facts requiring such adjustment.
9. Notice of Proposed Transfers. This Warrant is transferable by the
----------------------------
Holder hereof subject to compliance with this Section 9. Prior to any proposed
transfer of this Warrant or the Shares received on the exercise of this Warrant
(the "Securities"), unless there is in effect a registration statement under the
----------
Securities Act of 1933, as amended (the "Securities Act"), covering the proposed
--------------
transfer, the Holder thereof shall give written notice to the Company of such
Holder's intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall, if the Company so requests, be accompanied (except in transactions in
compliance with Rule 144) by either (a) a written opinion of legal counsel who
shall be satisfactory to the Company acting reasonably addressed to the Company
and satisfactory in form and substance to the Company's counsel acting
reasonably, to the effect that the proposed transfer of the Securities may be
effected without registration under the Securities Act, or (b) a "no action"
letter from the Securities Exchange Commission (the "Commission") to the effect
----------
that the transfer of such Securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the Holder of the Securities shall be entitled to transfer
the Securities in accordance with the terms of the notice delivered by the
Holder to the Company; provided, however, no such registration statement or
-------- -------
opinion of counsel shall be necessary for a transfer by a Holder to any
affiliate of such Holder, or a transfer by a Holder which is a partnership to a
partner of such partnership or a retired partner of such partnership who retires
after the date hereof, or to the estate of any such partner or retired partner
or the transfer by gift, will or intestate succession of any partner to his
spouse or lineal descendants or ancestors, if the transferee agrees in writing
to be subject to the terms hereof to the same extent as if such transferee were
the original Holder hereunder. Each certificate evidencing the Securities
transferred as above provided shall bear the appropriate restrictive legend set
forth above, except that such certificate shall not bear such restrictive legend
if in the opinion of counsel for the Company acting reasonably such legend is
not required in order to establish compliance with any provisions of the
Securities Act.
10. Replacement of Warrants. Upon receipt by the Company of evidence
-----------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant, and in the case of any such loss, theft or
destruction of the Warrant, on delivery of an indemnity agreement or security
satisfactory in form and amount to the Company acting reasonably, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Warrant if mutilated, the Company will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Dividends and Distributions. For so long as any part of this Warrant
---------------------------
remains outstanding and unexercised, the Company will, upon the declaration of a
cash dividend upon its Common Stock or Warrant Stock or other distribution to
the Holders of its Common Stock and at least ten (10) days prior to the record
date, notify the Holder hereof of such declaration, which notice will contain,
at a minimum, the following information: (a) the date of the declaration of the
dividend or distribution, (b) the amount of such dividend or distribution, (c)
the record date of such dividend or
5
<PAGE>
distribution, and (d) the payment date or distribution date of such dividend or
distribution. The Holder shall, upon the exercise hereof, be entitled to
receive, in addition to the number of shares of Common Stock or Warrant Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional securities or other property
(other than cash) of the Company which such Holder would hold on the date of
such exercise had it been the holder of record of such Common Stock or Warrant
Stock on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and/or
all other additional securities or other property receivable by it as aforesaid
during such period, giving effect to all adjustments pursuant to Section 2.
12. Miscellaneous. This Warrant shall be governed by the laws of the State
-------------
of North Carolina. The headings in this Warrant are for purposes of convenience
of reference only, and shall not be deemed to constitute a part hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provisions. All notices and other
communications from the Company to the holder of this Warrant shall be delivered
personally or mailed by first class mail, postage prepaid, or by facsimile to
the address or facsimile number furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address and facsimile number
to the Company in writing, and if mailed shall be deemed given three days after
deposit in the U.S. Mail.
13. Taxes. The Company shall pay all issue taxes and other governmental
-----
charges (but not including any income taxes of a Holder) that may be imposed in
respect of the issuance or delivery of the Shares or any portion thereof.
14. Amendment. Any term of this Warrant may be amended with the written
---------
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 14 shall be binding upon the Holder of this Warrant, each future
holder of such Warrant, and the Company.
15. Remedies. In the event of any default or threatened default by the
--------
Company in the performance of or observance with any of the terms of this
Warrant, it is agreed that remedies at law are not and will not be adequate for
the Holder and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. Facsimile Signature. This Warrant may be executed by the Company in
-------------------
facsimile form and upon receipt by the Holder of such faxed executed copy of
this Warrant, this Warrant shall be binding upon and enforceable against the
Company in accordance with its terms. The Company shall promptly forward to the
Holder an original of the facsimile signed copy of this Warrant previously
delivered to Holder.
[The next page is the signature page.]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned officer of the Company has executed
this Series D1 Preferred Stock Purchase Warrant as of the date first above
written.
TOTAL SPORTS INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
7
<PAGE>
EXHIBIT 10.19
FORM OF INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of
November ____, 1999 between Total Sports Inc., a Delaware corporation ("the
Company"), and ________________ ("Indemnitee").
WITNESSETH THAT:
WHEREAS, Indemnitee performs a valuable service for the Company; and
WHEREAS, the Board of Directors of the Company has adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers and directors of the
Company to the maximum extent authorized by Section 145 of the Delaware General
Corporation Law, as amended ("Law"); and
WHEREAS, the Bylaws and the Law, by their nonexclusive nature, permit
contracts between the Company and the officers or directors of the Company with
respect to indemnification of such officers or directors; and
WHEREAS, in accordance with the authorization as provided by the Law,
the Company may purchase and maintain a policy or policies of directors' and
officers' liability insurance ("D & O Insurance"), covering certain liabilities
which may be incurred by its officers or directors in the performance of their
obligations to the Company; and
WHEREAS, in order to induce Indemnitee to continue to serve as an
officer or director of the Company, the Company has determined and agreed to
enter into this contract with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's service as an officer
or director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Indemnitee. The Company hereby agrees to hold
-----------------------
harmless and indemnify Indemnitee to the full extent authorized or permitted by
the provisions of the Law, as such may be amended from time to time, and Article
VII, Section 6 of the Bylaws, as such may be amended. In furtherance of the
foregoing indemnification, and without limiting the generality thereof:
(a) Proceedings Other Than Proceedings by or in the Right of the
------------------------------------------------------------
Company. Indemnitee shall be entitled to the rights of indemnification provided
- -------
in this Section 1(a) if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to or participant in any
Proceeding (as hereinafter defined) other than a Proceeding by or in the right
of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified
against all Expenses (as hereinafter defined), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding or any claim, issue or matter therein,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the
<PAGE>
Company and, with respect to any criminal Proceeding, had no reasonable cause to
believe his conduct was unlawful.
(b) Proceedings by or in the Right of the Company. Indemnitee shall
---------------------------------------------
be entitled to the rights of indemnification provided in this Section 1(b) if,
by reason of his Corporate Status, he is, or is threatened to be made, a party
to or participant in any Proceeding brought by or in the right of the Company.
Pursuant to this Section 1(b), Indemnitee shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in connection
with such Proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company; provided,
however, that, if applicable law so provides, no indemnification against such
Expenses shall be made in respect of any claim, issue or matter in such
Proceeding as to which Indemnitee shall have been adjudged to be liable to the
Company unless and to the extent that the Court of Chancery of the State of
Delaware shall determine that such indemnification may be made.
(c) Indemnification for Expenses of a Party Who is Wholly or Partly
---------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the
- ----------
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified to the maximum extent permitted by law against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to be
a successful result as to such claim, issue or matter.
2. Additional Indemnity. In addition to, and without regard to any
--------------------
limitations on, the indemnification provided for in Section 1, the Company shall
and hereby does indemnify and hold harmless Indemnitee against all Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the Company),
including, without limitation, all liability arising out of the negligence or
active or passive wrongdoing of Indemnitee. The only limitation that shall
exist upon the Company's obligations pursuant to this Agreement shall be that
the Company shall not be obligated to make any payment to Indemnitee that is
finally determined (under the procedures, and subject to the presumptions, set
forth in Sections 6 and 7 hereof) to be unlawful under Delaware law.
3. Contribution in the Event of Joint Liability.
--------------------------------------------
(a) Whether or not the indemnification provided in Sections 1 and
2 hereof is available, in respect of any threatened, pending or completed
action, suit or proceeding in which Company is jointly liable with Indemnitee
(or would be if joined in such action, suit or proceeding), Company shall pay,
in the first instance, the entire amount of any judgment or settlement of such
action, suit or proceeding without requiring Indemnitee to contribute to such
2
<PAGE>
payment and Company hereby waives and relinquishes any right of contribution it
may have against Indemnitee. Company shall not enter into any settlement of any
action, suit or proceeding in which Company is jointly liable with Indemnitee
(or would be if joined in such action, suit or proceeding) unless such
settlement provides for a full and final release of all claims asserted against
Indemnitee.
(b) Without diminishing or impairing the obligations of the
Company set forth in the preceding subparagraph, if, for any reason, Indemnitee
shall elect or be required to pay all or any portion of any judgment or
settlement in any threatened, pending or completed action, suit or proceeding in
which Company is jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), Company shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by Indemnitee in proportion
to the relative benefits received by the Company and all officers, directors or
employees of the Company other than Indemnitee who are jointly liable with
Indemnitee (or would be if joined in such action, suit or proceeding), on the
one hand, and Indemnitee, on the other hand, from the transaction from which
such action, suit or proceeding arose; provided, however, that the proportion
determined on the basis of relative benefit may, to the extent necessary to
conform to law, be further adjusted by reference to the relative fault of
Company and all officers, directors or employees of the Company other than
Indemnitee who are jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), on the one hand, and Indemnitee, on the other hand,
in connection with the events that resulted in such expenses, judgments, fines
or settlement amounts, as well as any other equitable considerations which the
law may require to be considered. The relative fault of Company and all
officers, directors or employees of the Company other than Indemnitee who are
jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand, shall be
determined by reference to, among other things, the degree to which their
actions were motivated by intent to gain personal profit or advantage, the
degree to which their liability is primary or secondary, and the degree to which
their conduct is active or passive.
(c) Company hereby agrees to fully indemnify and hold Indemnitee
harmless from any claims of contribution which may be brought by officers,
directors or employees of the Company other than Indemnitee who may be jointly
liable with Indemnitee.
4. Indemnification for Expenses of a Witness. Notwithstanding any
-----------------------------------------
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
5. Advancement of Expenses. Notwithstanding any other provision of
-----------------------
this Agreement, the Company shall advance all Expenses incurred by or on behalf
of Indemnitee in connection with any Proceeding by reason of Indemnitee's
Corporate Status within ten (10) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that
3
<PAGE>
Indemnitee is not entitled to be indemnified against such Expenses. Any advances
and undertakings to repay pursuant to this Section 5 shall be unsecured and
interest free. Notwithstanding the foregoing, the obligation of the Company to
advance Expenses pursuant to this Section 5 shall be subject to the condition
that, if, when and to the extent that the Company determines that Indemnitee
would not be permitted to be indemnified under applicable law, the Company shall
be entitled to be reimbursed, within thirty (30) days of such determination, by
Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under applicable
law, any determination made by the Company that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any advance of
Expenses until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
6. Procedures and Presumptions for Determination of Entitlement to
---------------------------------------------------------------
Indemnification. It is the intent of this Agreement to secure for Indemnitee
- ---------------
rights of indemnity that are as favorable as may be permitted under the law and
public policy of the State of Delaware. Accordingly, the parties agree that the
following procedures and presumptions shall apply in the event of any question
as to whether Indemnitee is entitled to indemnification under this Agreement:
(a) To obtain indemnification (including, but not limited to, the
advancement of Expenses and contribution by the Company) under this Agreement,
Indemnitee shall submit to the Company a written request, including therein or
therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Secretary of the Company shall,
promptly upon receipt of such a request for indemnification, advise the Board of
Directors in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 6(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case by one of the following three methods, which
shall be at the election of Indemnitee: (1) by a majority vote of the
disinterested directors, even though less than a quorum, or (2) by independent
legal counsel in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent
Counsel shall be selected as provided in this Section 6(c). The Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board of Directors). Indemnitee or the Company, as
the case may be, may, within 10 days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case may
be, a written objection to such selection; provided, however, that such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 13 of this Agreement, and the
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<PAGE>
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person so selected shall
act as Independent Counsel. If a written objection is made and substantiated,
the Independent Counsel selected may not serve as Independent Counsel unless and
until such objection is withdrawn or a court has determined that such objection
is without merit. If, within 20 days after submission by Indemnitee of a written
request for indemnification pursuant to Section 6(a) hereof, no Independent
Counsel shall have been selected and not objected to, either the Company or
Indemnitee may petition the Court of Chancery of the State of Delaware or other
court of competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the court or by such other person as the court shall designate, and the
person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 6(b) hereof. The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting pursuant
to Section 6(b) hereof, and the Company shall pay all reasonable fees and
expenses incident to the procedures of this Section 6(c), regardless of the
manner in which such Independent Counsel was selected or appointed.
(d) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(e) Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise. In addition, the knowledge and/or actions, or failure to act,
of any director, officer, agent or employee of the Enterprise shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement. Whether or not the foregoing provisions of this Section
6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all
times acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(f) If the person, persons or entity empowered or selected under
Section 6 to determine whether Indemnitee is entitled to indemnification shall
not have made a determination within thirty (30) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 30 day period may be
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<PAGE>
extended for a reasonable time, not to exceed an additional fifteen (15) days,
if the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating documentation and/or information relating thereto;
and provided, further, that the foregoing provisions of this Section 6(g) shall
not apply if the determination of entitlement to indemnification is to be made
by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors or the Disinterested Directors, if
appropriate, resolve to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within seventy five (75)
days after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within fifteen (15) days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within sixty (60) days after having been so called and such
determination is made thereat.
(g) Indemnitee shall cooperate with the person, persons or entity
making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Independent Counsel, member of the Board of Directors, or stockholder of the
Company shall act reasonably and in good faith in making a determination under
the Agreement of the Indemnitee's entitlement to indemnification. Any costs or
expenses (including attorneys' fees and disbursements) incurred by Indemnitee in
so cooperating with the person, persons or entity making such determination
shall be borne by the Company (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the Company hereby indemnifies
and agrees to hold Indemnitee harmless therefrom.
(h) The Company acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which Indemnitee is a party is resolved in
any manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have the burden of
proof and the burden of persuasion, by clear and convincing evidence.
7. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to
Section 6 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made pursuant
to Section 5 of this Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 6(b) of this Agreement
within 90 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to this Agreement within
ten (10) days after receipt by the Company of a written request therefor, or (v)
payment of indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to
6
<PAGE>
indemnification or such determination is deemed to have been made pursuant to
Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in
an appropriate court of the State of Delaware, or in any other court of
competent jurisdiction, of his entitlement to such indemnification. Indemnitee
shall commence such proceeding seeking an adjudication within 180 days following
the date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 7(a). The Company shall not oppose Indemnitee's right
to seek any such adjudication.
(b) In the event that a determination shall have been made
pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding commenced pursuant to this Section 7
shall be conducted in all respects as a de novo trial, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination under
Section 6(b).
(c) If a determination shall have been made pursuant to Section
6(b) of this Agreement that Indemnitee is entitled to indemnification, the
Company shall be bound by such determination in any judicial proceeding
commenced pursuant to this Section 7, absent a prohibition of such
indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section 7,
seeks a judicial adjudication of his rights under, or to recover damages for
breach of, this Agreement, or to recover under any directors' and officers'
liability insurance policies maintained by the Company the Company shall pay on
his behalf, in advance, any and all expenses (of the types described in the
definition of Expenses in Section 13 of this Agreement) actually and reasonably
incurred by him in such judicial adjudication, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advancement of
expenses or insurance recovery.
(e) The Company shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Section 7 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Agreement.
8. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
-----------------------------------------------------------
(a) The rights of indemnification as provided by this Agreement
shall not be deemed exclusive of any other rights to which Indemnitee may at any
time be entitled under applicable law, the certificate of incorporation of the
Company, the Bylaws, any agreement, a vote of stockholders or a resolution of
directors, or otherwise. No amendment, alteration or repeal of this Agreement or
of any provision hereof shall limit or restrict any right of Indemnitee under
this Agreement in respect of any action taken or omitted by such Indemnitee in
his Corporate Status prior to such amendment, alteration or repeal. To the
extent that a change in the Law, whether by statute or judicial decision,
permits greater indemnification than would be afforded currently under the
Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, and every other right and remedy shall be cumulative
and in addition to every other right and remedy
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<PAGE>
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other right or
remedy.
(b) To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors, officers, employees, or
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
9. Exception to Right of Indemnification. Notwithstanding any other
-------------------------------------
provision of this Agreement, Indemnitee shall not be entitled to indemnification
under this Agreement with respect to any Proceeding brought by Indemnitee, or
any claim therein, unless (a) the bringing of such Proceeding or making of such
claim shall have been approved by the Board of Directors of the Company or (b)
such Proceeding is being brought by the Indemnitee to assert, interpret or
enforce his rights under this Agreement.
10. Duration of Agreement. All agreements and obligations of the
---------------------
Company contained herein shall continue during the period Indemnitee is an
officer or director of the Company (or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and shall continue
thereafter so long as Indemnitee shall be subject to any Proceeding (or any
proceeding commenced under Section 7 hereof) by reason of his Corporate Status,
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors
(including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business or assets of the
Company), assigns, spouses, heirs, executors and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or any
other Enterprise at the Company's request.
11. Security. To the extent requested by the Indemnitee and approved
--------
by the Board of Directors of the Company, the Company may at any time and from
time to time provide
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security to the Indemnitee for the Company's obligations hereunder through an
irrevocable bank line of credit, funded trust or other collateral. Any such
security, once provided to the Indemnitee, may not be revoked or released
without the prior written consent of the Indemnitee.
12. Enforcement.
-----------
(a) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in order to
induce Indemnitee to serve as an officer or director of the Company, and the
Company acknowledges that Indemnitee is relying upon this Agreement in serving
as an officer or director of the Company.
(b) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
13. Definitions. For purposes of this Agreement:
-----------
(a) "Corporate Status" describes the status of a person who is or
was a director, officer, employee or agent or fiduciary of the Company or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the express written
request of the Company.
(b) "Disinterested Director" means a director of the Company who
is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
(c) "Enterprise" shall mean the Company and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is or was serving at the express written request
of the Company as a director, officer, employee, agent or fiduciary.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, participating, or being or preparing to
be a witness in a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party (other than with
respect to matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in
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representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement. The Company agrees to pay the
reasonable fees of the Independent Counsel referred to above and to fully
indemnify such counsel against any and all Expenses, claims, liabilities and
damages arising out of or relating to this Agreement or its engagement pursuant
hereto.
(f) "Proceeding" includes any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or
otherwise and whether civil, criminal, administrative or investigative, in which
Indemnitee was, is or will be involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director of the Company, by reason of any
action taken by him or of any inaction on his part while acting as an officer or
director of the Company, or by reason of the fact that he is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other Enterprise; in each case
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement; including one pending on or before the date of this Agreement;
and excluding one initiated by an Indemnitee pursuant to Section 7 of this
Agreement to enforce his rights under this Agreement.
14. Severability. If any provision or provisions of this Agreement
------------
shall be held by a court of competent jurisdiction to be invalid, void, illegal
or otherwise unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, each portion of any section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and shall remain enforceable to the fullest extent
permitted by law; and (b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.
15. Modification and Waiver. No supplement, modification,
-----------------------
termination or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
16. Notice By Indemnitee. Indemnitee agrees promptly to notify the
--------------------
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification covered hereunder. The
failure to so notify the Company shall not relieve the Company of any obligation
which it may have to the Indemnitee under this Agreement or otherwise unless and
only to the extent that such failure or delay materially prejudices the Company.
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17. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to the address set forth below Indemnitee
signature hereto.
(b) If to the Company, to:
Total Sports Inc.
234 Fayetteville Street Mall, 2/nd/ Floor
Raleigh, North Carolina 27601
Attention: Chief Executive Officer
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
18. Identical Counterparts. This Agreement may be executed in one or
----------------------
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
19. Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
20. Governing Law. The parties agree that this Agreement shall be
-------------
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without application of the conflict of laws principles
thereof.
21. Gender. Use of the masculine pronoun shall be deemed to include
------
usage of the feminine pronoun where appropriate.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
COMPANY: TOTAL SPORTS INC.
By:__________________________
Name:________________________
Title:_______________________
INDEMNITEE: _____________________________
(Signature)
Name:________________________
Address:_____________________
_____________________
_____________________
