<PAGE>
Filed with the Securities and Exchange Commission on April 18, 2000
Registration No. 333-91701
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
--------------
Amendment No. 3 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
BROADBAND SPORTS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 514191 95-4673805
(State or other jurisdiction of (North American Industry (I.R.S. Employer
incorporation or organization) Classification System) Identification No.)
</TABLE>
2120 Colorado Avenue
Santa Monica, California 90404
(310) 453-8100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Richard D. Nanula
Chairman of the Board and Chief Executive Officer
Broadband Sports, Inc.
2120 Colorado Avenue
Santa Monica, California 90404
(310) 453-8100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies of all communications to be sent to:
<TABLE>
<S> <C>
Kenneth L. Guernsey, Esq.
Robert M. Mattson Jr., Esq. Michael J. Sullivan, Esq.
Martin P. Florman, Esq. Michael W. Hauptman, Esq.
Steven E. Meck, Esq. Cecilia M. Mao, Esq.
MORRISON & FOERSTER LLP COOLEY GODWARD LLP
19900 MacArthur Boulevard One Maritime Plaza, 20th Floor
Irvine, California 92612 San Francisco, California 94111
(949) 251-7500 (415) 693-2000
</TABLE>
--------------
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 in 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. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of each class of Amount to Offering Price Aggregate Registration
securities to be registered be Registered Per Share Offering Price(2) Fee(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($0.001 par value)(1)... 3,795,000 $10.00 $37,950,000 $12,788(3)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 495,000 shares that the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act.
(3) Previously paid.
--------------
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 that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this 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>
PROSPECTUS (Subject to Completion)
Issued April , 2000
3,300,000 Shares
[LOGO OF BROADBANDSPORTS]
COMMON STOCK
-----------
Broadband Sports, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We anticipate that the initial public offering price will be between $8 and $10
per share.
-----------
We have applied to have the shares of common stock approved for quotation on
the Nasdaq National Market under the symbol "FANS."
-----------
Investing in the common stock involves risks. See "Risk Factors" beginning on
page 9.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Broadband Sports
-------- ------------- ----------------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total................................... $ $ $
</TABLE>
Broadband Sports has granted the underwriters the right to purchase up to an
additional 495,000 shares of common stock to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers
on , 2000.
-----------
MORGAN STANLEY DEAN WITTER
CHASE H&Q
BEAR, STEARNS & CO. INC.
, 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
[Screen shots of various Broadband Sports Web sites]
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 9
Special Note Regarding Forward-Looking Statements........................ 27
Use of Proceeds.......................................................... 28
Dividend Policy.......................................................... 28
Capitalization........................................................... 29
Dilution................................................................. 30
Selected Consolidated and Combined Financial Data........................ 32
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 33
Industry Background...................................................... 45
Broadband Sports......................................................... 47
Management............................................................... 68
Certain Relationships and Related Transactions........................... 78
Principal Stockholders................................................... 80
Description of Capital Stock............................................. 82
Shares Eligible for Future Sale.......................................... 86
Underwriters............................................................. 88
Legal Matters............................................................ 90
Experts.................................................................. 90
Additional Information................................................... 91
Index to Financial Statements............................................ F-1
</TABLE>
---------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock.
Until , 2000, 25 days after commencement of this offering, all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This delivery requirement
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our Consolidated Financial Statements and Notes to Consolidated
Financial Statements appearing elsewhere in the prospectus.
BROADBAND SPORTS
Broadband Sports is an online sports media company that produces original
content and commerce for groups of sports enthusiasts who have a common
interest in following a particular sport, team or athlete. These geographically
dispersed groups of sports enthusiasts are composed of fans who desire content
and commerce relating to their particular sports interests. In aggregate,
sports fans spent approximately $64 billion in 1999 on such sports related
items as spectator sports, equipment, licensed goods, publications, apparel and
footwear, according to a December 1999 report in Street & Smith's Sports
Business Journal.
We believe that our distinct online media divisions position us to
effectively reach these groups of sports fans and deliver the sports content
and commerce that these groups desire. Each of our online media divisions
create content and commerce that target these sports enthusiasts. We currently
offer our content and commerce through our own web sites. In addition, we have
distribution relationships for our content and commerce with AOL, DIRECTV,
eBay, Fox Sports, Lycos, uBid and Yahoo!. This allows us to derive revenues
from multiple sources including: content syndication, advertising, electronic
commerce and subscriptions.
To date, we have developed four online media divisions:
. AthletesDirect - AthletesDirect is a branded network of exclusive web
sites for more than 275 athletes and sports personalities. Our contracts
with these individuals provide us with exclusive online rights for each
of these athletes and sports personalities, with the exception that these
individuals can participate in a limited number of online chats outside
AthletesDirect's network. We currently operate and market the exclusive
web sites for athletes and sports personalities such as:
<TABLE>
<S> <C> <C> <C>
Troy Aikman Sergei Fedorov Anna Kournikova Alex Rodriguez
Barry Bonds Kevin Garnett Karl Malone Keith Van Horn
Kobe Bryant Ken Griffey, Jr. Reggie Miller Michael Waltrip
Ward Burton Tony Gwynn Mike Piazza Ricky Williams
Brett Favre Mia Hamm Dennis Rodman Steve Young
</TABLE>
We create web sites that offer unique content and commerce related to our
athletes and sports personalities. These individuals regularly provide us
with fresh interactive content and authentic sports-related merchandise
and collectibles. By aggregating a large number of athlete and sports
personality web sites under one branded network, we believe AthletesDirect
provides sports fans with exclusive and original content and commerce.
4
<PAGE>
. SportsWritersDirect--SportsWritersDirect is an online publisher and
distributor of in-depth team and player information. SportsWritersDirect
covers all Major League Baseball, National Football League, National
Basketball Association and National Hockey League sports teams and
players, as well as every Division I college football and basketball
team. We believe that sports enthusiasts who follow these teams and
players are seeking the most up-to-date and inside information, which may
not be available through other online or offline media sources.
SportsWritersDirect is able to provide original and timely information
through its network of over 315 local and regional sports writers, all of
whom are under contract to provide us with exclusive online content. In
addition, we distribute this content through our distribution
relationships and directly through our subscription products.
. RotoNewsDirect--RotoNewsDirect is an online fantasy sports web site.
Since 1997, RotoNewsDirect has provided content and services to online
consumers who engage in simulations that track the performance of actual
sports teams and players. RotoNewsDirect offers consumers proprietary
news and analysis, games, statistical services and league management
services that enable fantasy sports participants to compete against one
another.
. SportsAuthenticsDirect--SportsAuthenticsDirect is an online retailer of
sports collectibles and merchandise. Because of the large number of teams
and available products, we believe traditional retailers cannot
effectively offer the full range of sports-related products necessary to
satisfy the demand of fans of different teams and players. We believe
that we address these limitations of traditional distribution channels by
providing team and athlete-related products to fans outside of their
local markets and by providing authentic player/team endorsed products.
The distribution of our content and commerce across multiple platforms and
across our own web sites enables us to target groups of sports enthusiasts,
increase the awareness of our four online media divisions and promote our
product offerings. Revenues from our distribution relationships represented
approximately 80% of our total revenues for the 12 months ended December 31,
1999, with AOL and uBid representing approximately 44% and 17% of our total
revenues, respectively. Our four online media divisions derive revenues from
multiple sources, including:
. Content Syndication. We currently receive syndication fees from AOL, Fox
Sports, Lycos and Yahoo! for the right to distribute our original sports
content on their online sites. Our distribution relationships allow us to
promote our online media divisions and attract online traffic to our web
sites, including the web sites of our athletes and sports personalities.
. Advertising. We offer advertisers the opportunity to reach an attractive
demographic, the 18 to 35 year-old male audience. Our advertising
revenues are generated by the sale of advertising banners, as well as the
sale of sponsorships that provide an advertiser with the right to be
promoted as a sponsor of a specific area within our web sites. We also
allow advertisers the opportunity to associate their brands with high
profile athletes and sports personalities.
. Electronic Commerce. We offer sports fans an easy-to-use online
environment to purchase authentic player and team-related merchandise and
collectibles.
. Subscriptions. We sell subscription products, such as Baseball Insider,
that provide in-depth and original information about teams and players.
Information included in our subscription products is generated by our
network of sports writers and generally consists of information that is
not available through traditional media sources.
We will encounter various risks and uncertainties in connection with the
implementation of our strategy. These include uncertainties regarding our
ability to enter into new distribution relationships, to continue to develop
original content, and to attract and retain athletes and sports personalities.
In
5
<PAGE>
addition, we have incurred significant losses, including approximately $17.7
million for the year ended December 31, 1999, and we had an accumulated deficit
of $22.2 million as of December 31, 1999. We operate in an emerging and highly
competitive marketplace, and anticipate incurring losses in the foreseeable
future which may be substantial.
We are a Delaware corporation. Our principal executive offices are located at
2120 Colorado Avenue, Santa Monica, California 90404, and our telephone number
is (310) 453-8100.
References to and information contained on our web sites do not constitute
part of this prospectus.
ATHLETESDIRECT, BROADBAND SPORTS, SPORTSWRITERSDIRECT, ROTONEWSDIRECT, THE
WRITER NETWORK, SPORTSAUTHENTICSDIRECT, WHERE ATHLETES AND FANS INTERACT and
the AthletesDirect, RotoNewsDirect, SportsWritersDirect, SportsAuthenticsDirect
and Broadband Sports logos are trademarks and service marks of Broadband
Sports. All other brand names and trademarks appearing in this prospectus are
the property of their respective holders.
6
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common stock offered.................... 3,300,000 shares
Common stock to be outstanding
after this offering.................... 32,133,514 shares(1)
Use of proceeds......................... Approximately $4.5 million to repay
outstanding indebtedness,
approximately $2.3 million to redeem
our outstanding mandatorily
redeemable shares of series A
preferred stock, approximately $6.0
million for advertising and
promotion of our brands, our web
sites, approximately $6.0 million
for sports content production and
the development and enhancement of
our own web sites, approximately
$5.0 million to enhance our
technology platform, approximately
$2.0 million for expansion into
other markets, and the balance of
the proceeds for general corporate
purposes, including working capital.
We may use a portion of the net
proceeds to acquire or invest in
complementary businesses,
technologies, or products. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol.. FANS
</TABLE>
- -------------------
(1) Outstanding share information excludes 2,090,125 shares of restricted
common stock and excludes an aggregate of 12,492,280 shares of common stock
reserved for issuance under our stock option plans, of which options to
purchase 5,750,702 shares of common stock were outstanding as of March 31,
2000 at a weighted average price of $6.26 per share, assuming a public
offering price of $9.00. In addition, outstanding share information also
excludes warrants to purchase an aggregate of 1,911,342 shares of common
stock at a weighted average price of $13.29 per share (including a warrant
to purchase 1,360,883 shares of common stock at a price of $14.00 per
share, subject to adjustment). The number of shares of common stock to be
outstanding is based on the number of shares outstanding as of March 31,
2000, and includes an aggregate of 1,097,109 shares of common stock to be
issued in connection with agreements entered into in March and April 2000.
In this prospectus, "Broadband Sports," "we," "us," and "our" refer to
Broadband Sports, Inc. and our wholly owned subsidiaries, and not to the
underwriters.
Unless otherwise stated, all information in this prospectus:
. gives effect to a 20-for-1 stock split, which was effective on December
4, 1998;
. assumes the redemption upon the closing of this offering of all of our
outstanding mandatorily redeemable series A preferred stock for
approximately $2.3 million;
. assumes the conversion of our outstanding shares of series C preferred
stock and our outstanding shares of series B preferred stock into an
aggregate of 4,771,666 shares of common stock;
. assumes the effectiveness prior to the closing of this offering of an
amendment to our certificate of incorporation providing for (i) an
authorized capital of 100,000,000 shares of common stock and 10,000,000
shares of preferred stock and (ii) a 1-for-10 reverse stock split of the
outstanding common stock; and
. assumes no exercise of the underwriters' over-allotment option.
7
<PAGE>
SUMMARY CONSOLIDATED AND COMBINED FINANCIAL INFORMATION
The combined financial statements of Athlete Direct LLC and Pro Sports
Xchange LLC (the "Predecessor Companies") as of December 31, 1997 and for the
period from February 1, 1996 through December 31, 1996 and for the year ended
December 31, 1997 and the two months ended February 27, 1998, have been
prepared on a combined basis due to the respective companies' common ownership.
The summary consolidated and combined financial data presented below are
derived from our financial statements included at the end of this prospectus.
The pro forma consolidated balance sheet data reflects the conversion of the
series B and series C convertible preferred stock into an aggregate of
4,771,666 shares of common stock. In addition, the pro forma consolidated
balance sheet data reflects the application of the proceeds from the sale of
1,097,109 shares of our common stock for $13.2 million and the exercise of
stock options for 312,133 shares of our common stock for $452,000 after
December 31, 1999. The pro forma as adjusted consolidated balance sheet data
reflects the application of net proceeds from the sale of our common stock in
this offering at an assumed initial public offering price of $9.00 per share,
after deducting estimated underwriting discounts and commissions and estimated
offering expenses, the repayment of outstanding indebtedness of approximately
$4.5 million and the redemption of our outstanding mandatorily redeemable
series A preferred stock for approximately $2.3 million. See "Use of Proceeds"
and "Capitalization."
<TABLE>
<CAPTION>
Predecessor Companies
------------------------------------------
Period Broadband Sports, Inc.
February 1, 1996 -------------------------
(inception) Two Months Ten Months
Through Year Ended Ended Ended Year Ended
December 31, December 31, February 27, December 31, December 31,
1996 1997 1998 1998 1999
---------------- ------------ ------------ ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated and
Combined Statement of
Operations Data:
Revenues................ $ 219 $1,874 $507 $ 2,719 $ 8,734
Gross profit, excluding
$0, $0, $0, $528 and
$119 of amortization of
deferred stock
compensation........... (195) 574 211 683 2,370
Total operating
expenses............... 164 1,277 368 4,966 20,149
Operating loss.......... (359) (703) (157) (4,283) (17,779)
Net loss................ (359) (700) (157) (4,356) (17,796)
Historical loss per
share basic and
diluted (1)............ $ (0.20) $ (0.82)
Pro forma loss per share
basic and diluted (2).. $ (0.20) $ (0.75)
Weighted average common
and common equivalent
shares outstanding.....
Historical (1)........ 21,704 21,783
Pro forma (2)......... 21,704 23,729
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------
Pro Forma
Actual Pro Forma as adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents............ $18,374 $31,991 $51,778
Working capital......... 20,411 34,028 53,851
Total assets............ 29,170 42,787 62,575
Revolving loan due to
stockholder............ 4,468 4,468 --
Long term portion of
capital lease
obligation............. 246 246 246
Mandatorily redeemable
series A preferred
stock.................. 2,330 2,330 --
Series B convertible
preferred stock........ 16,520 -- --
Series C convertible
preferred stock........ 14,840 -- --
Total stockholders'
equity................. 18,521 32,138 58,759
</TABLE>
- -------------------
(1) See notes to the consolidated and combined financial statements for an
explanation of the determination of the number of shares used in computing
basic and diluted per share amounts.
(2) Gives effect to the issuance and conversion of the series B convertible
preferred stock as having been outstanding from the issuance date of May
25, 1999 and the series C convertible preferred stock as having been
outstanding from the issuance date of November 24, 1999.
8
<PAGE>
RISK FACTORS
You should carefully consider the risks described below, together with all
of the other information included in this prospectus before making an
investment decision. If any of the following risks actually occurs, our
business, financial condition or operating results could be seriously
affected, the trading price of our common stock could decline, and you may
lose all or part of your investment.
Risks Related To Our Business
Because we have operated our business for only two years, it is difficult to
evaluate our prospects
In 1998, Broadband Sports was incorporated for the purpose of combining
Athlete Direct LLC and Pro Sports Xchange LLC, each of which had operated
independently prior to our inception. In 1999, the Company acquired RotoNews
and formed SportsAuthentics.com. Because we have a limited operating history,
you should consider and evaluate our operating prospects in light of the risks
and difficulties frequently encountered by relatively new companies,
particularly companies in the rapidly evolving online industry. These risks
include our ability to do the following:
. provide sports-related content and commerce;
. maintain existing and develop new distribution relationships as well as
relationships with athletes, sports writers, sports personalities, agents
and advertisers;
. successfully market and promote our web sites;
. create and maintain a common technology platform that supports the
creation and distribution of all of our content and commerce offerings
across all of our online media divisions;
. achieve projected levels of online traffic and revenues on our web sites;
. secure and retain additional sponsors and advertisers;
. promote our name in the sports and media markets;
. respond to competitive developments; and
. build an electronic commerce infrastructure and increase our distribution
fulfillment capabilities.
Our future growth will depend substantially on our ability to address these
risks and the other risks described below. We cannot assure you that we will
succeed in addressing any of these risks; and, if we fail to address these
risks, our business could be adversely affected.
We incurred a net loss of $4.4 million for the ten months ended December 31,
1998 and a net loss of $17.8 million for the year ended December 31, 1999 and
anticipate losses for the foreseeable future
We have incurred net losses in each quarterly and annual period since we
began operations. As of December 31, 1999, we had an accumulated deficit of
$22.2 million. We expect to incur increasing net losses and negative cash
flows on a quarterly and annual basis in the foreseeable future. We need to
generate significant revenues to achieve profitability, and we cannot assure
you that our revenues will be sufficient to achieve this goal. We have
incurred substantial costs to do the following:
. produce, develop and enhance our web sites;
. create and enhance our content and product offerings;
9
<PAGE>
. acquire, develop and implement our technology infrastructure; and
. attract and retain qualified personnel.
We intend to continue these efforts and, in addition, to do the following:
. repay outstanding indebtedness;
. redeem our outstanding mandatorily redeemable series A preferred stock;
. advertise and promote our brands and our web sites; and
. expand into other markets.
If our revenues grow more slowly than we anticipate or if our operating
expenses exceed our expectations, our business could be adversely affected.
Fluctuations in our operating results may adversely affect our stock price
Some of the factors that could cause our revenues and operating results to
fluctuate include the following:
. the addition or loss of distribution relationships, advertisers, athletes
or sports personalities;
. the introduction by us or by our competitors of new online sites, content
and products;
. positive or negative events or publicity concerning particular sports,
leagues, teams, athletes or sports personalities,
. the amount and timing of our capital expenditures and other costs related
to the expansion of our operations;
. seasonal trends in sporting events related to major U.S. sports seasons
and events and during summer and year-end vacation and holiday periods;
. changes in demand for, and availability of supply of, merchandise and
collectibles;
. technical difficulties or system downtime affecting the online medium
generally, on the online sites of our distribution relationships or on
our web sites in particular; and
. general economic conditions, as well as economic conditions specific to
the online medium, electronic commerce, content syndication, online
advertising and the sports industry.
Some of our operating expenses, including personnel costs and rent expense,
are planned or committed in advance in anticipation of future revenues, which
are difficult to predict. If our revenues in a particular quarter are lower
than we anticipate, we may not be able to reduce fixed costs in that quarter.
As a result, any shortfall in revenues could adversely affect our operating
results.
Because of these factors, we believe that historical and any period-to-
period comparisons of our operating results are not necessarily meaningful and
you should not view them as indicators of our future performance. If our
operating results in any period fall below the expectations of securities
analysts and investors, the market price of our shares could likely decline.
We may experience difficulties in the successful marketing and promotion of
AthletesDirect
Historically, AthletesDirect has been available on AOL's proprietary network
and, more recently, online through our distribution relationships with Yahoo!
and eBay. We launched www.athletesdirect.com in November 1999 and generated
less than two percent of our total revenues for the year ended
10
<PAGE>
December 31, 1999 from this web site. Growth of revenue from this web site
depends on our ability to successfully market and promote AthletesDirect. We
cannot assure you that we will be successful in marketing and promoting
AthletesDirect on a timely basis, if at all. We anticipate that our marketing
initiatives will require the hiring of additional marketing personnel and the
implementation of online and offline marketing campaigns. We do not currently
have significant internal marketing resources and we do not have significant
experience in planning and executing the marketing initiatives described
above. Further, we cannot assure you that even if our marketing initiatives
are successful, the AthletesDirect web site will attract a significant level
of traffic or revenues.
Our future growth depends on our existing AOL relationship and our ability
to enter into new distribution relationships
To date, we have derived a significant portion of our revenues from our
distribution relationships with AOL and uBid. For the ten months ended
December 31, 1998, AOL accounted for approximately 46% of our revenues. For
the year ended December 31, 1999, AOL and uBid accounted for approximately 44%
and 17% of our revenues, respectively. We expect that a limited number of
distribution relationships will continue to have a significant impact on our
expected growth for the foreseeable future. Accordingly, our future success
depends on our ability to retain our existing AOL and uBid distribution
relationships and to attract new distribution relationships on a timely basis
and on terms favorable to us. Failure to do so could adversely affect our
business.
We entered into a distribution relationship with uBid which terminates in
March 2001. This distribution relationship limits our ability to distribute
the collectibles offered by SportsAuthenticsDirect. We may in the future enter
into distribution arrangements with exclusivity provisions that may limit our
ability to enter into favorable arrangements with complementary businesses and
thereby limit our growth. We cannot assure you that we will achieve the
strategic objectives of these relationships or that any of the parties with
whom we have distribution relationships will perform their respective
obligations as agreed.
Failure by our distribution relationships on which we depend for the
delivery of our content and products could adversely affect our business
The successful delivery of our content and products through our distribution
relationships, including AOL and uBid, is dependent upon the technology and
functionality of these third parties. While we do have back office electronic
commerce capabilities (such as sales order processing, customer service,
distribution fulfillment and inventory management), we are reliant on
receiving information from our distribution relationships in order for us to
fulfill sales that originate from their online platforms. If these third
parties are unable to effectively distribute our content or our products due
to technological problems or system outages or if these third parties are
unable to provide us timely and accurate information, we may be unable to sell
advertising, electronic commerce or subscriptions through these distribution
relationships, and our business could be adversely affected.
If we are unable to continue to develop original content that is compelling
to our target audience, our business could be adversely affected
Our future success depends on our ability to continue to develop original
content that is interesting and engaging to our target audience. If our
content does not reflect the preferences of our target audience, traffic on
our web sites and on the online sites of our distribution relationships could
decrease or the demographic characteristics of our audience could change.
Either of these results could
11
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adversely affect our ability to syndicate our content, sell subscriptions for
premium content products, conduct electronic commerce and attract advertisers.
Our ability to develop original content depends on several factors, including
the following:
. acquiring and retaining online rights relating to athletes, sports
writers and sports personalities;
. the level and quality of participation of our athletes, sports writers
and sports personalities;
. monitoring and adapting to changing consumer preferences;
Additionally, as a larger percentage of online consumers have higher-speed
online access to the Internet, it will become increasingly important for us to
effectively integrate leading-edge technologies that will help us create
digital sports programming and distribute it in a way that is compelling to
the consumer. While we have not made material expenditures to date we do
currently create broadband programming, among our other types of content, and
expect this type of programming to become more important to our target
audience in the future. We believe that our ability to hire employees that
have the technological expertise to understand and utilize new technologies
will be important to our future success. If we are unable to adapt to these
technological changes, we may not be able to create compelling content for our
target audience and our business could be adversely affected.
We depend on athletes and other sports personalities to provide original
content to attract distribution relationships, advertisers and online traffic
We believe that our future success depends on our ability to maintain our
existing agreements and to secure additional agreements with athletes and
sports personalities, such as broadcasters, commentators, coaches and other
non-athlete public figures in sports. Our business could be adversely affected
by any of the following:
. cancellations or non-renewal of these agreements or the renewal of these
agreements on terms less favorable to us;
. decreased participation by our athletes and sports personalities on our
web sites or failure of athletes to perform under their agreements with
us;
. poor performance of our athletes, or negative events or publicity
relating to our athletes or sports personalities;
. increased costs of acquiring or retaining athletes and sports
personalities; and
. increased competition to obtain agreements with athletes and sports
personalities.
Competition for online rights to use and market the voices, attributes and
original first-person content provided by athletes and sports personalities is
intense. Competitors may be able to offer our athletes and sports
personalities a better online opportunity. If we lose the services of, or the
online rights related to, any high-profile athlete or a significant number of
athletes or sports personalities, or if we are unable to continue to attract
high-profile athletes and sports personalities, our business could be
adversely affected. We cannot assure you that any athlete or sports
personality will continue his or her relationship with us, or that our
athletes or sports personalities will not decide to affiliate with a
competitor.
In addition, we believe that approximately 30 sports agents represent more
than 50% of the prominent U.S. professional athletes within Major League
Baseball, the National Football League, the
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National Basketball Association and the National Hockey League. Although we
currently work with a number of these agents, adverse changes in our
relationships with these sports agents could adversely affect our business.
Although these agents have a fiduciary responsibility to present the athletes
they represent with the best opportunities, in the event that any of these
agents establishes a strategic relationship or other affiliation with one or
more of our competitors or directly provides online content relating to the
athletes they represent, our business could be adversely affected.
Increased competition for the online rights of athletes and sports
personalities could increase the guarantees required to obtain these rights
Because of intense competition for the online rights of athletes and sports
personalities, the need to offer advances, and the amounts being advanced to
acquire these rights, could increase. The advances associated with securing
these rights are amortized over the respective term of the agreements. As a
result, higher advances would cause us to recognize additional amortization
expense which could have an adverse effect on our net income.
We depend on our network of sports writers for original content
We rely on a network of independent sports writers to deliver original and
timely sports content. Our future success depends substantially upon our
ability to maintain our existing relationships with, and the continued efforts
of, our network of sports writers. We will also need to attract and retain
additional sports writers. We currently have exclusive online agreements with
over 315 sports writers.
If we are unable to continue to attract and retain sports writers with
appropriate qualifications, the amount of sports news and information we could
offer would decrease and our business could be adversely affected. In
addition, we believe that certain sports writers may have a large and loyal
following among our online users. If we were to lose the services of any one
of these sports writers, the demand for our content could decrease. A
significant reduction in the demand for our content could adversely affect our
business. We cannot assure you that each sports writer will continue his or
her relationship with us, or that our sports writers will not decide to
affiliate with a competitor.
Our agreements require our sports writers to provide us with original
content for our exclusive online use. However, certain content produced by our
sports writers who are also employed by newspapers may be published online by
these newspapers and other third parties. We face the risk that certain
newspapers may prohibit our sports writers from working for us, which could
adversely affect our business. We face possible liability for claims brought
by third parties, such as newspapers, asserting ownership of content published
by us. Any claim would likely result in our incurring substantial costs and
could adversely affect our business.
If we fail to effectively implement our branding strategy, our business
could be adversely affected
A growing number of online sites and traditional media companies, some of
which already have well-established brands, offer sports content and products
that compete with ours. As a result, we believe we must pursue an aggressive
branding strategy in order to attract users, advertisers, distribution
relationships, athletes, sports writers and sports personalities. We have not
yet developed strong brand identities. If we fail to implement our branding
strategy effectively and on a timely basis, our business could be adversely
affected. We believe the importance of brand recognition will increase as
additional companies offer content and products similar to ours.
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Competition in our industry is growing, and we may have difficulty competing
with companies providing content or products similar to ours
We compete for users, advertising, syndication, commerce and subscription
revenues, as well as for athletes, sports writers, sports personalities and
other content providers, with many other entities, such as:
. entities that provide access to sports-related content and services (many
of which have been established by traditional media companies through
online entities targeted to sports enthusiasts generally), online search
and retrieval services, and other high-traffic online entities;
. sports agents, leagues and other third parties that have existing
relationships with a number of athletes and sports personalities;
. vendors of sports information, merchandise, products and services
distributed through online sites and other means, including retail
stores, mail, facsimile and private online bulletin board services; and
. television, radio and other established media entities that broadcast
sporting events.
We anticipate that, as the Internet and other interactive distribution
systems converge with traditional television broadcasting and cable,
significant competition might come from the providers of broadband networks,
including sports-oriented cable networks. Some of our existing competitors, as
well as a number of potential new competitors, have longer operating
histories, greater name recognition, larger customer bases and significantly
greater financial, technical and marketing resources than we do, and may be
better able to attract athletes, sports writers, sports personalities and
other content providers, as well as distribution relationships, agents,
advertisers, viewers and consumers. These competitors may be able to respond
more quickly than we can to new technologies and changes in online user
preferences and to devote greater resources than we can to building our
business. These competitors may develop content and product offerings
comparable or superior to ours.
We expect that the number of our direct and indirect competitors will
increase in the future and this could adversely affect our business. Increased
competition could result in lower revenues and loss of users, any of which
could adversely affect our business.
Development of our brand identity and expansion of our business may result
in our competing with our distribution relationships
We have, and might have in the future, business relationships with some of
our potential competitors. Online users access our sports content through the
web sites of our distribution relationships. In the future, as we develop our
brand identity and expand our business, parties with which we currently have
distribution relationships may choose to discontinue their distribution
relationships with us. If these parties choose to discontinue their
relationships with us and compete with us within our lines of business, our
business could be adversely affected.
If we are unsuccessful in expanding our direct advertising sales force and
our internal marketing team, our business could be adversely affected.
We have limited experience in marketing our divisions and selling
advertisements, and we have relied primarily on third parties to sell
advertisements and sponsorships on our web sites and to
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provide us with marketing support. We have only recently hired an internal
sales force to sell advertising and sponsorships on our web sites. In
addition, we intend to continue to expand our internal marketing resources.
Expanding our internal sales force and marketing organization involves a
number of risks, including the following:
. our ability to hire, retain, integrate and motivate sales and marketing
personnel;
. the length of time necessary for new sales and marketing personnel to
become productive; and
. the competition we face from other companies in hiring and retaining
sales and marketing personnel.
Our business could be adversely affected if we do not continue to develop
and maintain an effective sales force or expand our marketing team.
Our business success depends on our ability to attract and retain
advertisers
Our failure to attract a significant number of advertisers or sponsors to
our web sites could adversely affect our business and financial results.
Advertising sales accounted for 12% of our revenues for the year ended
December 31, 1999. Currently, our internal advertising sales force sells
advertising directly, and in some cases, we also sell advertising through
agencies that represent advertisers. Most of our advertising agreements have
historically been, and we anticipate that in the near term will be, short term
and/or subject to termination by the advertiser at any time with little
notice. These agreements vary in term, from as short as two weeks to as long
as three years. Accordingly, the cancellation or deferral of even a limited
number of orders could adversely affect our quarterly performance.
Historically, we have not recognized material revenue from sponsorships. The
failure to sell a significant number of advertisements and sponsorships could
adversely affect our business.
Our ability to attract and retain advertisers and sponsors will depend on
several factors, including the following:
. our ability to retain athletes, sports personalities and other content
providers;
. our ability to achieve, demonstrate and maintain a significant level of
online traffic from the attractive 18 to 35-year old male demographic
group;
. the general market for athlete sponsorships;
. the pricing of advertising on other online sites;
. advertisers' acceptance of the current banner size on AOL's proprietary
network, which is smaller than traditional online advertising banners;
and
. content introductions by us and our competitors.
We may not be able to obtain sufficient supplies of sports merchandise or
collectibles to meet customer demand or to manage inventory effectively
The market for sports merchandise and collectibles is highly volatile and
subject to consumer trends relating to particular sporting events and the
popularity of particular athletes and teams. As a result, demand for sports
merchandise and collectibles can often be intense or short-lived. To date, we
have sourced only a limited amount of collectibles from our athletes and
sports personalities. We
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cannot assure you that we will be able to procure collectibles from these
individuals on a timely basis, if at all. We may be unable to obtain
sufficient inventory of merchandise or collectibles to meet demand on a timely
basis, if at all. We generated approximately 26% of our total revenues for the
year ended December 31, 1999 from electronic commerce. In order to support a
higher level of sales, we may need to maintain a larger inventory of sports
merchandise and collectibles. Maintaining a larger inventory subjects us to
numerous risks, including carrying costs, obsolescence and price erosion. If
we are unsuccessful in effectively managing our inventory, we could be forced
to sell our inventory at a discount or loss.
Our business success depends on our ability to generate electronic commerce
and to develop a scalable commerce platform and distribution capabilities
If we do not generate increased revenues from electronic commerce, our
growth will be limited and our business could be adversely affected. To grow
our electronic commerce revenues, however, we will have to create or source
sports merchandise and collectibles that are appealing to a large number of
online consumers, build a sufficiently robust and scalable electronic commerce
platform and increase our distribution fulfillment capabilities. While we do
have back office electronic commerce capabilities (such as sales order
processing, customer service, distribution fulfillment and inventory
management), we have only been involved in distribution fulfillment operations
for approximately 15 months. Our failure to enhance these capabilities in a
timely manner could adversely affect our business. If we fail to meet any of
these challenges, our business could be adversely affected.
Our collectibles provided by third parties may be subject to fraud
We acquire the majority of our collectibles from third-party providers and
sell them through independent auction web sites, eBay and uBid, and through
our own web sites. We rely on guarantees made by these third-party providers
as to the authenticity of these collectibles. Although we do not independently
verify the authenticity of third-party collectibles, we guarantee and verify
our AthletesDirect collectibles, which are provided to us directly by our
athletes and sports personalities. To the extent that any collectible sold by
us is not authentic, we could be subject to, among other things, significant
negative publicity and litigation. Any negative publicity generated as a
result of actual or perceived fraudulent or deceptive collectibles or any
litigation, regardless of the merits, could adversely affect our business.
Our growth may strain our resources
Our business has grown rapidly over the last three years. The number of our
employees has grown from approximately 13 employees at May 1, 1998 to 183
employees at March 31, 2000. The scope of our operating and financial systems
has also expanded significantly. Our rate of growth places a significant
strain on our resources for a number of reasons, including the following:
. the need for the continued development of our financial and information
management systems;
. the need to manage our distribution relationships as well as
relationships with numerous athletes, sports writers, sports
personalities, and other third parties;
. the difficulties in hiring and retaining skilled personnel necessary to
support our current level of business and to grow our multiple sources of
revenue; and
. the need to train and manage our growing employee base.
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The addition of new sports media or other divisions and the attention they
demand could also strain our management resources. We cannot assure you that
we will adequately address these risks, and if we do not, our business could
be adversely affected.
Our business model depends on us generating revenues from our subscription
products
To date, only a limited number of online users have been willing to pay for
content sold through the Internet. Subscription product sales accounted for
less than one percent of our total revenues for the year ended December 31,
1999. If this market for subscription products does not develop or develops
more slowly than we expect, our business could be adversely affected. Even if
this market develops, it is possible that the renewal rate of our subscribers
may be significantly lower than we expect, which could also adversely affect
our business.
We may not be able to respond to technological changes, and may not remain
competitive with others that are better able to respond to these changes
quickly
The online industry is characterized by rapid technological change, changes
in user and customer preferences, frequent new content and product
introductions and enhancements, and emerging industry standards. The
introduction of new technologies and the emergence of new industry standards
can render our existing offerings less attractive and unmarketable. In
addition, if we are unable to integrate new technologies and standards
effectively, or to introduce new content and products, our ability to remain
competitive will be adversely affected. We are in the process of implementing
the technology platform that is currently supporting the storage, delivery and
display of our original content and commerce for AthletesDirect across our
other online media divisions. If we are unsuccessful in the implementation of
this technology platform across our other online media divisions, we would not
be able to realize the financial and operating efficiencies planned by our
investments in this technology platform and our business could be adversely
affected. Our future success will depend, in part, on numerous factors,
including our ability to do the following:
. enhance our existing offerings;
. develop new offerings that address the increasingly sophisticated and
varied needs of our prospective users;
. respond to technological advances and emerging industry standards and
practices on a timely and cost-effective basis;
. develop, enhance and improve the responsiveness, functionality and
features of our web sites;
. provide compelling audio and video content for distribution in a
broadband environment as broadband access becomes more widely available;
and
. license or acquire leading technologies.
If we are unable to integrate and capitalize on new technologies and
standards effectively, our business could be adversely affected.
Any inability to protect our intellectual property rights could adversely
affect our business
Proprietary rights are important to our success and our competitive
position. To protect our proprietary rights, we rely generally on copyright,
trademark and trade secret laws, confidentiality agreements with third
parties, and license agreements with consultants, vendors and customers.
Despite
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such protection, a third party could, without authorization, copy or otherwise
misappropriate information from our database. Our agreements with employees,
consultants and others who participate in development activities could be
breached. We may not have adequate remedies for any breach, and our trade
secrets may otherwise become known or independently developed by competitors.
In addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States, and effective
copyright, trademark and trade secret protection may not be available in those
jurisdictions.
We have applied for registration of several trademarks in the United States
and we will seek to register additional trademarks as appropriate. The uses
for which we have applied for registration of these trademarks include
providing online retail services, and delivering sports information,
photographs, interactive chat rooms and fan message boards through the
Internet. We believe that securing these registrations is vital to the
successful marketing and promotion of our lines of business. We cannot assure
you that we will be successful in obtaining the trademarks for which we have
applied. Even if these applications mature to registration, they may be
successfully challenged by others or invalidated. If the applications do not
register because third parties own the trademarks, or if our rights to use the
trademarks are challenged by owners of similar rights, the use of the
trademarks may be restricted unless we enter into arrangements with the third
parties, which may be unavailable on commercially reasonable terms.
We also use content from athletes, sports writers, sports personalities and
other third parties and it is possible that we could become subject to
infringement actions based upon this content. We generally obtain
representations as to the origin and ownership of this content; however, this
may not adequately protect us. Any of these claims, with or without merit,
could subject us to costly litigation and the diversion of our technical and
management personnel.
There has been substantial litigation in the computer and online industries
regarding intellectual property assets. Third parties may claim infringement
by us with respect to current and future products, trademarks or other
proprietary rights, or we may counterclaim against these parties. Any claims
or counterclaims, with or without merit, could be time-consuming, result in
costly litigation, divert management's attention, cause product release
delays, require us to redesign our products or require us to enter into
royalty or licensing agreements, any of which could harm our business. These
royalty and licensing agreements, if required, may not be available on terms
acceptable to us, if at all.
Our business may be restricted by rights of sports leagues and players'
associations
The operation of our business and our ability to expand into new areas may
be restricted by rights of sports leagues and players' associations. Sports
leagues, such as the National Football League, typically own league and team
trademarks, and we may be required to obtain a license to any of those
trademarks that we use. In addition, the leagues also own other rights, such
as the rights to display highlights of games, that we may wish to use in our
business in the future. License agreements with the leagues for trademarks or
other rights, if required, may not be available on terms acceptable to us or
at all, and failure to obtain these license agreements could adversely affect
our business.
Players' associations have certain rights to license athlete names,
likenesses and other attributes for groups of athletes, referred to as group
licensing rights. We may be required to pay for or otherwise obtain licenses
from players' associations for these group licensing rights in order to
conduct certain aspects of our business. If licenses were not available or
were not provided on terms acceptable to us and we were required to modify our
web sites, our business could be adversely affected. We, and
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agents for some of the athletes with whom we have contracts, have received
correspondence from the National Football League Players' Association, and
other players' associations, telling us to cease creating, selling,
advertising and promoting web sites for athletes represented by the players'
association. On January 27, 2000, a complaint was filed in the United States
District Court of California by the National Football League Players
Association and the National Football League Players, Inc. against
AthletesDirect. The complaint alleges that by operating its web site,
AthletesDirect is violating certain rights that the plaintiffs have to license
the names, likenesses and other attributes for groups of six or more football
players for products that are sold at retail or used as promotional items. The
complaint also alleges that by entering into contracts with football players
with whom the plaintiffs already have contracts, AthletesDirect is interfering
with the plaintiffs' contractual relationships with these football players.
The complaint seeks declaratory relief and unspecified damages. Approximately
80% of the athletes who play in the National Football League and for whom we
provide individual web sites have a relationship with the NFLPA. Although we
do not believe that the NFLPA's suit has merit, and although we intend to
contest the suit vigorously, if the NFLPA were to prevail on its claims and/or
if athletes and agents determine not to work with us because of the players'
association claims or actions, our business could be adversely affected. This
litigation, whether or not determined in our favor or settled by the parties,
may be costly and may divert the efforts and attention of our management from
normal business operations.
The loss of key personnel, or the inability to attract and retain
additional, qualified personnel, could adversely affect our business
Our future success depends, in significant part, upon the continued services
of a relatively small number of key senior management personnel. The key
senior management personnel who are important to our success are Richard D.
Nanula, Chief Executive Officer and Chairman of the Board, Tyler J. Goldman,
President, Broadband Studios, a division of Broadband Sports, and Ross B.
Schaufelberger, Senior Vice President, Business Development. Mr. Nanula has
been with us for fewer than 12 months. We have entered into employment
agreements with all of the aforementioned officers. However, we cannot assure
you that we will be able to retain these or other key employees or that we
will be successful in attracting, assimilating and retaining other personnel
in the future. In particular, we need to hire qualified marketing,
advertising, sales and merchandise personnel as well as engineers to assist
with our web sites and our technology infrastructure. These personnel are in
high demand. The loss of any of our senior management personnel or the
inability to attract and retain additional, qualified personnel could
adversely affect our business.
We may acquire other businesses and we may have difficulty integrating these
businesses
We acquired RotoNewsDirect in February 1999 and may in the future broaden
the scope of our business by acquiring additional businesses that complement
our current content or product offerings, increase our market share or
otherwise offer growth opportunities. However, our experience in acquiring and
assimilating other companies is limited. We may not be successful in
overcoming problems encountered in connection with future acquisitions, and
our inability to do so could adversely affect our business. Future
acquisitions could expose us to increased risks, including risks associated
with the following:
. assimilating new operations, technologies, products, online sites and
personnel;
. diverting resources from our existing businesses, web sites and
technologies;
. diverting management's attention from other business concerns;
. entry into new markets in which we have limited or no experience;
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. the inability to generate revenues from new online sites sufficient to
offset associated acquisition costs;
. maintaining uniform standards, controls, procedures and policies; and
. the impairment of our distribution relationships or our relationships
with employees and other customers as a result of integration of new
businesses.
Failure to integrate successfully any business, product, technology or
personnel could adversely affect our business.
Because business acquisitions typically involve significant amounts of
intangible assets, our operating results could be adversely affected by
amortization of intangible assets acquired. In addition, in the event of
future acquisitions or business combinations, we could do the following:
. issue equity securities that would dilute current stockholders'
percentage ownership in us;
. use cash or incur substantial debt; or
. assume contingent liabilities.
We plan to expand into international markets, which involves additional
risks
As part of our business strategy, we plan to expand into international
markets, which involves additional risks. At this time, our planning has not
reached the stage of identifying a specific region or regions for any such
expansion. In marketing our content and products internationally, we will face
new competitors. In addition, expansion into international markets will
require us to hire and retain additional personnel to execute our
international strategy and may require us to create localized versions of our
content on a cost effective basis. We cannot assure you that we will be
successful in attracting, hiring or retaining the necessary personnel,
creating localized versions of our content or marketing or distributing our
content or products abroad. Even if we are successful, our international
revenues may not offset the expense of establishing and maintaining
international operations. To date, we have limited experience in marketing and
distributing our content and products internationally. Additional difficulties
and risks inherent in doing business internationally include the following:
. compliance with a variety of local regulatory requirements and changes in
those requirements;
. export controls relating to technology, tariffs and other trade barriers;
. difficulties in staffing and managing foreign operations;
. potentially weaker protection of intellectual property rights in foreign
countries, including the possibility that our trademarks will not be
available for our use in those countries;
. political instability in foreign countries;
. fluctuations in foreign currency exchange rates;
. longer payment cycles and greater difficulty in collecting accounts
receivable;
. seasonality in sports outside of the United States; and
. potentially adverse tax consequences.
Risks Related To Our Industry
Our business depends on the development and growth of electronic commerce on
the Internet and other online media
The use of online media for retail transactions, particularly those for
sports-related products, is a recent development, and the continued demand and
growth of a market for services and products via
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online media is uncertain. Online media may ultimately prove not to be a
viable commercial marketplace for a number of reasons, including the
following:
. unwillingness of consumers to shift their purchasing from traditional
retailers to online retailers;
. lack of acceptable transaction and data security;
. concern for privacy of personal information;
. limitations on access and ease of use;
. congestion leading to delayed or extended response times;
. inadequate development of infrastructure of online media to keep pace
with increased levels of use; and
. increased government regulation and taxation.
Malfunctions of third-party systems and the strain on our own systems due to
increased traffic could adversely affect our business
In the past, our web sites have experienced significant increases in traffic
when there are significant sports-related events. To the extent the number of
users increases, our web sites must accommodate a high volume of traffic. Our
web sites have in the past and may in the future experience slower response
times or other problems for a variety of reasons. If increases in user traffic
result in system interruptions or increases in response time, it could result
in a loss of potential or existing users or advertisers and, if sustained or
repeated, could reduce the attractiveness of our web sites to users, content
providers and advertisers. In addition, our users depend on Internet service
providers, and other online service providers for access to our web sites.
These providers have experienced significant outages in the past, particularly
as a result of increased traffic, and could experience outages, delays and
other difficulties due to system failures unrelated to our systems in the
future. These types of occurrences could cause users to perceive our web sites
as not functioning properly and, therefore, could adversely affect our ability
to attract and retain users, content providers and advertisers.
Any failure of our network infrastructure could decrease the availability of
our content and products
The performance, reliability and availability of our web sites are critical
to our reputation and ability to attract and retain users, content providers
and advertisers. We cannot guarantee that:
. we will have uninterrupted access to the Internet;
. our users will be able to reach our web sites; or
. communications via our web sites will be secure.
Despite precautions taken by us and by the companies that now host or in the
future may host our web sites, our system is susceptible to natural and man-
made disasters such as earthquakes, fires, floods, power loss and sabotage.
Our system is also vulnerable to disruptions from computer viruses and
attempts by hackers to penetrate our network security. We do not currently
have redundant systems or a formal disaster recovery plan.
Any disruption in our users' Internet access provided by third-party
services or any failure of third parties to handle higher volumes of Internet
users to our web sites could adversely affect our business.
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Services based on sophisticated software and computer systems often
encounter development delays and the underlying software may contain
undetected errors that could cause system failures when introduced. Any system
error or failure that causes interruption in availability of content or an
increase in response time could result in a loss of potential or existing
advertisers, content providers and users and, if sustained or repeated, could
reduce the attractiveness of our content services to such entities or
individuals. Expanding our network infrastructure could require substantial
financial and operational resources in 2000 and future periods.
Our revenues depend on advertisers and sponsors adopting the Internet and
other online media as an attractive platform
The Internet and other online media have not been available for a sufficient
period of time to gauge their effectiveness as advertising platforms when
compared with traditional media. There is intense competition among sellers of
advertising space on online media, making it difficult to project advertising
revenues or anticipate whether we or the parties with whom we have
distribution relationships will be successful in selling advertising space.
Market acceptance of online media as an advertising platform is highly
uncertain for a number of reasons, including the following:
. lack of widely accepted standards for measuring the extent of Internet
traffic;
. concerns about privacy and security among users;
. the limited acceptance to date of online media for widespread commercial
use; and
. inadequate development of the network infrastructure and enabling
technologies.
Tracking and measurement standards for advertising are evolving and create
uncertainty about the viability of advertising on the Internet
It is important to our advertisers that we accurately measure the size and
demographics of our user base and the delivery of advertisements on our web
sites. There are currently no widely accepted standards to measure the
effectiveness of online media as a platform for attracting audiences or
targeting particular demographic groups. If measurement standards do not
develop, we may be unable to retain current, or attract new, advertisers. We
depend on the use of DoubleClick's DART software to measure both the number of
advertising impressions displayed on our web sites and the number of times
that online users click on an advertisement displayed on our web sites. If
this technology is not available to us, we would be required to perform these
services ourselves or obtain this information through the use of technology
offered by another provider. This could cause us to incur additional costs or
cause interruptions in our business while we are replacing these services. If
we do not develop these systems successfully, we may not be able to accurately
evaluate the demographic characteristics of our users. Companies may not
advertise on our web sites or may pay less for advertising if they do not
perceive our measurements, or measurements made by third parties, to be
reliable.
Online security concerns could hinder electronic commerce
The need to securely transmit confidential information over online media has
been a significant barrier to electronic commerce and electronic
communications. Any well-publicized compromise of security could deter people
from using the Internet or other online media or from using it to conduct
transactions that involve transmitting confidential information, such as
credit card numbers. We transmit personal information such as credit card
numbers and store proprietary information such as
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customer names, addresses and purchase trends. To the extent that our
activities or those of third-party contractors involve the storage and
transmission of proprietary or personal information, security breaches could
damage our reputation and expose us to a risk of loss or litigation and
possible liability. Our business could be adversely affected if our security
measures do not prevent security breaches, and we cannot assure you that we
can prevent any security breaches. In addition, we may be subject to liability
for orders placed with fraudulent credit card data even though the associated
financial institution approved payment of the orders. Under current credit
card practices, a merchant is liable for fraudulent credit card transactions
where, as is the case with the transactions we process, the merchant does not
obtain a cardholder's signature. Fraudulent use of credit card data in the
future could adversely affect our business.
In addition, we could be liable for the misuse of personal information. The
Federal Trade Commission, the European Union and certain state and local
authorities have been investigating certain Internet companies regarding their
use of personal information. We could incur additional expenses if new
regulations regarding the use of personal information are introduced or if
these authorities choose to investigate our privacy practices.
We could be subject to liability for online content
The nature and breadth of content disseminated by us on our web sites and
through our distribution relationships could expose us to liability in various
areas, including claims relating to:
. defamation, libel, negligence, personal injury and other legal theories
based on the nature and content of the material we publish or distribute;
. copyright or trademark infringement or wrongful action due to the actions
of third parties; and
. use of third-party content made available through our online sites or
through content and material posted by parties with whom we have
distribution relationships and participants on online pages or in chat
rooms and bulletin boards, such as information provided by our sports
writers.
Because of the large amount of content that is provided to us by our sports
writers on a daily basis, it is difficult to verify the originality or
accuracy of this information. Any claim would likely result in our incurring
substantial costs and could also be a drain on our financial and other
resources. In addition, we might experience disruptions in our distribution
relationships as well as in our relationships with our athletes, sports
writers, sports personalities, advertisers and other third parties. This could
reduce traffic on our web sites, negatively affect our user base, or reduce
our revenue from advertising and electronic commerce.
Imposition of government regulations and other legal uncertainties
associated with lotteries and gambling could adversely affect our business
RotoNewsDirect's occasional use of prizes in its fantasy sports games may
subject some of its games to state and federal laws governing lotteries and
gambling. These laws vary from jurisdiction to jurisdiction and are complex
and uncertain both in application and enforcement. RotoNewsDirect seeks to
design its games so as not to constitute lotteries or gambling under these
laws and, where possible, to fall within exemptions from applicable laws. We
cannot assure you that our contests will be exempt from such laws or that the
applicability of such laws will not adversely affect our business. Failure to
comply with applicable laws could adversely affect our business.
23
<PAGE>
Risks Associated With Our Offering
We may need additional financing to achieve our business objectives or
achieve profitability
We currently anticipate that our available cash resources, combined with the
net proceeds from this offering, will be sufficient to meet our anticipated
working capital and capital expenditure needs for at least the 12 months
following the date of this prospectus. Nevertheless, we may need to raise
additional funds to maintain and develop our position in the marketplace. We
cannot assure you that additional financing will be available on terms
favorable to us, or at all. If we cannot obtain needed funds on acceptable
terms, or at all, we would be limited in our ability to do the following:
. fund more rapid expansion;
. develop or enhance existing content or products;
. upgrade our technological infrastructure;
. build our multiple brands;
. respond to competitive pressures; or
. acquire complementary products, businesses or technologies.
Even if we succeed in raising additional funding, it may have a dilutive
effect on the percentage of ownership of our then-current stockholders because
we may need to raise these funds by issuing equity or convertible debt
securities. Also, any new securities may have rights and privileges senior to
the rights of the common stock.
Our officers, directors and principal stockholders can exert control over
matters requiring stockholder approval
After this offering, executive officers, directors and holders of five
percent or more of our outstanding common stock will, in the aggregate,
beneficially own approximately 75% of our outstanding common stock. These
stockholders will be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of significant corporate transactions. This concentration of
ownership may also have the effect of delaying, deterring or preventing a
change in control and may make some transactions more difficult or impossible
without the support of these stockholders.
Provisions in our charter documents and Delaware law may delay or prevent an
acquisition of our company
Upon the closing of this offering, our certificate of incorporation and
bylaws will contain provisions which could make it harder for a third party to
acquire us without the consent of our board of directors. For example, if a
potential acquiror were to make a hostile bid for us, the acquiror would not
be able to call a special meeting of stockholders to remove our board of
directors or act by written consent without a meeting. In addition, our board
of directors will have staggered terms which makes it difficult to remove them
all at once. The acquiror would also be required to provide advance notice of
its proposal to remove directors at an annual meeting. The acquiror also will
not be able to cumulate votes at a meeting, which will require the acquiror to
hold more shares to gain representation on the board of directors than if
cumulative voting were permitted.
Our board of directors also has the ability to issue preferred stock which
would significantly dilute the ownership of a hostile acquiror. In addition,
Section 203 of the Delaware General Corporation Law
24
<PAGE>
limits business combination transactions with 15% stockholders that have not
been approved by the board of directors. These provisions and other similar
provisions make it more difficult for a third party to acquire us without
negotiation. These provisions may apply even if the offer may be considered
beneficial by some stockholders.
Our board of directors could choose not to negotiate with an acquiror that
it did not feel was in our strategic interests. If the acquiror was
discouraged from offering to acquire us or prevented from successfully
completing a hostile acquisition by the antitakeover measures, you could lose
the opportunity to sell your shares at a favorable price.
The number of shares that will be eligible for sale in the open market in
the near future could depress our stock price
If our existing stockholders sell substantial amounts of our common stock
(including shares issued upon the exercise of outstanding options) in the
public market following this offering, the market price of our common stock
could fall. These sales also might make it more difficult for us to sell
equity securities in the future at a time and price that we deem appropriate.
After this offering, we will have outstanding 34,223,639 shares of common
stock. Of these shares, the 3,300,000 shares being offered hereby are freely
tradable. This leaves 30,923,639 shares eligible for sale in the public market
as follows:
<TABLE>
<CAPTION>
Number of Shares Date
---------------- ----
<S> <C>
0 The date of this prospectus
24,932,549 180 days after the date of this prospectus
5,991,090 At various times after 180 days from the date of this prospectus
</TABLE>
Our directors, officers and substantially all of our stockholders and
optionees have agreed that they will not sell, directly or indirectly, any
common stock without the prior written consent of Morgan Stanley and Co.
Incorporated for a period of 180 days from the date of this prospectus. Morgan
Stanley & Co. Incorporated may, at its discretion, release existing
stockholders from such lock-up agreements. Factors that could lead to a
release include market demand for shares of our common stock and a
stockholder's liquidity concerns. Sales of these shares in the future, whether
due to early release or termination of lock-up agreements, could cause the
market price of our common stock to decline.
Upon the closing of this offering, we intend to file a registration
statement to register for resale the 12,804,412 shares of common stock
reserved for issuance under our stock option plans. We expect this
registration to become effective immediately upon filing. As of March 31,
2000, options to purchase a total of 5,750,702 shares of common stock were
outstanding, of which 752,959 shares will be immediately exercisable upon the
closing of this offering. These stock options generally have exercise prices
significantly below the assumed initial public offering of our common stock.
The possible sale of a significant number of these shares may cause the price
of our common stock to fall.
Certain stockholders, representing approximately 25,798,036 shares of common
stock, have the right, subject to conditions, to include their shares in
certain registration statements relating to our securities. By exercising
their registration rights and causing a large number of shares to be
registered and sold in the public market, these holders may cause the price of
the common stock to fall. In addition, any demand to include such shares in
our registration statements could have an adverse effect on our ability to
raise needed capital.
25
<PAGE>
As a new investor, you will experience immediate and substantial dilution
The initial public offering price is expected to be substantially higher
than the net tangible book value per share of the outstanding common stock
immediately after this offering. Investors purchasing common stock in this
offering, therefore, will incur immediate dilution of $7.40 in net tangible
book value per share, assuming an initial public offering price of $9.00 per
share. To the extent that outstanding stock options to purchase common stock
are exercised, there will be further dilution. See "Dilution."
26
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results
may differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.
27
<PAGE>
USE OF PROCEEDS
We currently estimate that our net proceeds from the sale of the 3,300,000
shares of common stock in this offering will be approximately $26.6 million,
assuming an initial public offering price of $9.00 per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses. If the underwriters exercise their over-allotment option in
full, we estimate that our net proceeds will be $30.8 million.
We currently estimate that we will use the net proceeds for the following
purposes:
. approximately $4.5 million to repay outstanding indebtedness;
. approximately $2.3 million to redeem our outstanding mandatorily
redeemable series A preferred stock;
. approximately $6.0 million for advertising and promoting our online media
divisions and our web sites;
. approximately $6.0 million for sports content production and the
development and enhancement of our web sites;
. approximately $5.0 million to enhance our technology platform;
. approximately $2.0 million for expansion into other markets; and
. general corporate purposes, including working capital.
We believe the net proceeds from this offering and current cash and cash
equivalents will be sufficient to fund our working capital and capital
expenditure requirements for at least the next 12 months. We do not believe
our cash and cash equivalents will be sufficient to fund our working capital
and capital expenditure requirements for the next 12 months exclusive of the
net proceeds from this offering as we expect to continue to incur significant
operating losses for the foreseeable future.
In applying the net proceeds from this offering, the allocation of which may
differ from the estimates above, our management team will have broad
discretion. We may use a portion of the net proceeds to acquire or invest in
complementary businesses, technologies, assets or products. We currently have
no agreements or understandings with respect to any such acquisitions. Pending
such uses, we intend to invest the net proceeds of this offering in short-
term, interest-bearing, investment grade securities, certificates of deposit
or direct guaranteed obligations of the United States.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
intend to retain any future earnings to finance operations and the growth of
our business and do not anticipate paying any cash dividends on our common
stock in the foreseeable future. We may incur indebtedness in the future which
may prohibit or effectively restrict the payment of dividends, although we
have no current plans to do so. Any future determination to pay cash dividends
will be at the discretion of our board of directors.
28
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
(a) on an actual basis;
(b) on a pro forma basis to reflect:
. the conversion of our series B and series C convertible preferred
stock into an aggregate of 4,771,666 shares of common stock;
. the sale of 1,097,109 shares of common stock for $13.2 million; and
. the exercise of stock options for 312,133 shares of our common stock
for $452,000.
(c) on a pro forma as adjusted basis to reflect the following adjustments:
. the sale of 3,300,000 shares of common stock and the receipt of the
net proceeds from the sale of common stock, at an assumed initial
public offering price of $9.00 per share and after deducting
estimated underwriting discounts and commissions and estimated
offering expenses;
. the repayment of outstanding indebtedness of $4.5 million, which was
outstanding at December 31, 1999;
. the redemption of our outstanding mandatorily redeemable series A
preferred stock for $2.3 million;
. the conversion of our series B and series C convertible preferred
stock into an aggregate of 4,771,666 shares of common stock;
. the sale of 1,097,109 shares of common stock for $13.2 million; and
. the exercise of stock options for 312,133 shares of our common stock
for $452,000.
The table below should be read in conjunction with the more detailed
financial statements and the related notes, which are included elsewhere in
this prospectus:
<TABLE>
<CAPTION>
As of December 31, 1999(1)
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Revolving loan due to stockholder......... $ 4,468 $ 4,468 $ --
-------- -------- --------
Long term portion of capital lease
obligation............................... 246 246 246
-------- -------- --------
Mandatorily redeemable series A preferred
stock, $0.001 par value, 2,000,000 shares
authorized issued and outstanding actual
and pro forma; no shares issued and
outstanding pro forma as adjusted........ 2,330 2,330 --
-------- -------- --------
Preferred stock, $0.001 par value,
56,000,000 authorized actual and pro
forma; 10,000,000 authorized pro forma as
adjusted
Series B convertible preferred stock;
34,000,000 shares authorized; 29,166,663
shares issued and outstanding actual; no
shares authorized, issued and
outstanding pro forma and pro forma as
adjusted................................ 16,520 -- --
Series C convertible preferred stock;
20,000,000 shares authorized;
18,550,000 shares issued and outstanding
actual; no shares authorized, issued and
outstanding pro forma and pro forma as
adjusted................................ 14,840 -- --
Common stock, $0.001 par value,
306,000,000 shares authorized, 24,742,731
shares issued and outstanding actual;
306,000,000 authorized, 30,923,639 issued
and outstanding pro forma; 100,000,000
shares authorized, 34,223,639 issued and
outstanding pro forma as adjusted........ 25 31 34
Additional paid-in capital................ 31,394 76,365 102,983
Receivable from stockholder............... (16,701) (16,701) (16,701)
Deferred stock compensation............... (5,405) (5,405) (5,405)
Accumulated deficit....................... (22,152) (22,152) (22,152)
-------- -------- --------
Total stockholders' equity.............. 18,521 32,138 58,759
-------- -------- --------
Total capitalization................... $ 25,565 $ 39,182 $ 59,005
======== ======== ========
</TABLE>
- ------------------
(1) The preceding table excludes (a) an aggregate of 12,492,280 shares of
common stock reserved for issuance under our stock option plans, of which
options to purchase 5,750,702 shares of common stock were outstanding as
of March 31, 2000 at a weighted average exercise price of $6.26 per
share, assuming a public offering price of $9.00 per share, and (b)
warrants to purchase an aggregate of 1,911,342 shares of common stock at
a weighted average exercise price of $13.29 per share (including a
warrant to purchase 1,360,883 shares of common stock at an exercise price
of $14.00 per share, subject to adjustment).
29
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $28.3 million or $0.91 per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets reduced by
the amount of our total liabilities and divided by the total number of shares
of common stock outstanding, after giving effect to:
. the automatic redemption of the mandatorily redeemable series A preferred
stock;
. the conversion of the series B and series C convertible preferred stock
into an aggregate of 4,771,666 shares of common stock upon the closing of
this offering; and
. the sale of 1,409,242 shares of common stock after December 31, 1999.
Dilution in pro forma as adjusted net tangible book value per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after the closing of this
offering. After giving effect to the sale of 3,300,000 shares of common stock
offered by us at an assumed initial public offering price of $9.00 per share,
and after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us, our pro forma as adjusted net
tangible book value at December 31, 1999 would have been approximately
$54.9 million or $1.60 per share of common stock. This represents an immediate
increase in pro forma net tangible book value of $0.70 per share to existing
stockholders and an immediate dilution of $7.40 per share to new investors of
common stock. The following table illustrates this dilution on a per share
basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $9.00
Pro forma net tangible book value per share as of December
31, 1999 ................................................... $0.91
Increase in pro forma net tangible book value per share
attributable to new investors............................... 0.69
-----
Pro forma as adjusted net tangible book value per share after
this offering................................................. 1.60
-----
Pro forma net tangible book value dilution per share to new
investors..................................................... $7.40
=====
</TABLE>
The following table summarizes, on a pro forma as adjusted basis to give
effect to the offering at an assumed initial public offering price of $9.00
per share, before deducting estimated underwriting discounts and commissions
and estimate offering expenses, as of December 31, 1999, the differences
between the existing stockholders and new investors as to the number of shares
of common stock purchased from us, the total consideration paid to us and the
average price per share paid:
<TABLE>
<CAPTION>
Shares Purchased(1) Total Consideration
--------------------- ---------------------- Average Price
Number Percentage Amount Percentage Per Share
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 30,923,639 90.36% $63,319,119 68.07% $2.05
New investors........... 3,300,000 9.64 29,700,000 31.93 9.00
---------- ------ ----------- ------
Total................. 34,223,639 100.00% $93,019,119 100.00%
========== ====== =========== ======
</TABLE>
- ---------------------
(1) The preceding table excludes (a) an aggregate of 12,492,280 shares of
common stock reserved for issuance under our stock option plans, of which
options to purchase 5,750,702 shares of common stock were outstanding as
of March 31, 2000 at a weighted average exercise price of $6.26 per share,
assuming a public offering price of $9.00 per share, and (b) warrants to
purchase an aggregate of 1,911,342 shares of common stock at a weighted
average exercise price of $13.29 per share (including a warrant to
purchase 1,360,883 shares of common stock at an exercise price of $14.00
per share, subject to adjustment).
30
<PAGE>
After giving effect to the sale of 3,795,000 shares of common stock offered
by us at an assumed initial public offering price of $9.00 per share (assuming
the exercise of the underwriters' over-allotment option), and after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us, our pro forma net tangible book value as adjusted at
December 31, 1999 would have been approximately $59.0 million or $1.70 per
share of common stock. This represents an immediate increase in pro forma net
tangible book value of $0.79 per share to existing stockholders and an
immediate dilution of $7.30 per share to new investors of common stock. The
following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $9.00
Pro forma net tangible book value per share as of December
31, 1999.................................................... $0.91
Increase in pro forma net tangible book value per share
attributable to new investors............................... 0.79
-----
Pro forma net tangible book value as adjusted per share after
this offering................................................. 1.70
-----
Pro forma net tangible book value as adjusted dilution per
share to new investors........................................ $7.36
=====
</TABLE>
The following table summarizes, on a pro forma as adjusted basis to give
effect to the offering at an assumed initial public offering price of $9.00
per share (assuming the exercise of the underwriters' over-allotment option),
before deducting estimated underwriting discounts and commissions and estimate
offering expenses, as of December 31, 1999, the differences between the
existing stockholders and new investors as to the number of shares of common
stock purchased from us, the total consideration paid to us and the average
price per share paid:
<TABLE>
<CAPTION>
Shares Purchased(1) Total Consideration
--------------------- ---------------------- Average Price
Number Percentage Amount Percentage Per Share
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 30,923,639 89.07% $63,319,119 64.96% $2.05
New investors........... 3,795,000 10.93 34,155,000 35.04 9.00
---------- ------ ----------- ------
Total................. 34,718,639 100.00% $97,474,119 100.00%
========== ====== =========== ======
</TABLE>
- ---------------------
(1) The preceding table excludes (a) an aggregate of 12,492,280 shares of
common stock reserved for issuance under our stock option plans, of which
options to purchase 5,750,702 shares of common stock were outstanding as
of March 31, 2000 at a weighted average exercise price of $6.26 per share,
assuming a public offering price of $9.00 per share, and (b) warrants to
purchase an aggregate of 1,911,342 shares of common stock at a weighted
average exercise price of $13.29 per share (including a warrant to
purchase 1,360,883 shares of common stock at an exercise price of $14.00
per share, subject to adjustment).
31
<PAGE>
SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA
The combined financial statements of the Predecessor Companies as of
December 31, 1996 and 1997 and for the period from February 1, 1996 through
December 31, 1996 and for the year ended December 31, 1997 and the two months
ended February 27, 1998, have been prepared on a combined basis due to the
companies common ownership. The statement of operations data set forth below
for the fiscal year ended December 31, 1997, the two months ended February 27,
1998, the ten months ended December 31, 1998, and the year ended December 31,
1999, and the selected balance sheet data as of December 31, 1998 and 1999
have been derived from our financial statements, which have been audited by
Ernst & Young LLP, independent auditors, included elsewhere in this
prospectus. The statement of operations data for the period from inception
(February 1, 1996) through December 31, 1996 and the combined balance sheet
data as of December 31, 1996 and 1997 are derived from financial statements of
the Predecessor Companies that are not included herein. You should read the
selected consolidated and combined financial and operating data set forth
below in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and the
notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Predecessor Companies Broadband Sports, Inc.
------------------------------------------ -------------------------
The period
February 1, 1996
(inception) Two months Ten months
through Year ended ended ended Year ended
December 31, December 31, February 27, December 31, December 31,
1996 1997 1998 1998 1999
---------------- ------------ ------------ ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated and
Combined Statement of
Operations Data:
Revenues................ $ 219 $ 1,874 $ 507 $ 2,719 $ 8,734
Cost of revenues,
excluding $0, $0, $0,
$528 and $119 of
amortization of
deferred stock
compensation........... 414 1,300 296 2,036 6,364
----- ------- ----- ------- --------
Gross profit (loss)..... (195) 574 211 683 2,370
Operating expenses:
Sales and marketing,
excluding $52, $297,
$130, $517 and $820
of amortization of
deferred stock
compensation and
deferred incentives... 4 154 69 592 7,244
Product development,
excluding $0, $117,
$18, $108 and $488 of
amortization of
deferred stock
compensation.......... 8 22 9 137 1,270
General and
administrative,
excluding $0, $0, $2,
$1,260 and $2,355 of
amortization of
deferred stock
compensation.......... 97 672 136 1,537 7,001
Depreciation........... 3 15 4 43 489
Amortization of
goodwill.............. -- -- -- 244 363
Amortization of
deferred stock
compensation and
deferred incentives
(1)................... 52 414 150 2,413 3,782
----- ------- ----- ------- --------
Total operating
expenses............ 164 1,277 368 4,966 20,149
----- ------- ----- ------- --------
Operating loss.......... (359) (703) (157) (4,283) (17,779)
Interest income......... -- 3 -- -- 345
Interest and other
expense................ -- -- -- (73) (362)
----- ------- ----- ------- --------
Net loss................ $(359) $ (700) $(157) $(4,356) $(17,796)
===== ======= ===== ======= ========
Historical loss per
share basic and
diluted (2)............ $ (.20) $ (.82)
Pro forma loss per share
basic and diluted (3).. $ (.20) $ (.75)
Weighted average common
and common equivalent
shares outstanding.....
Historical (2)......... 21,704 21,783
Pro forma (3).......... 21,704 23,729
</TABLE>
<TABLE>
<CAPTION>
Predecessor
Companies Broadband Sports, Inc.
------------- --------------------------
December 31,
------------- December 31, December 31,
1996 1997 1998 1999
------ ------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Consolidated and Combined Balance
Sheet Data:
Cash and cash equivalents............ $ 258 $ 53 $ 213 $18,374
Working capital ..................... 209 587 403 20,411
Total assets......................... 1,172 1,971 2,356 29,170
Revolving loan due to stockholder.... -- -- 1,998 4,468
Long term portion of capital lease
obligation.......................... -- -- -- 246
Mandatorily redeemable series A
preferred stock..................... -- -- 2,150 2,330
Series B convertible preferred
stock............................... -- -- -- 16,520
Series C convertible preferred
stock............................... -- -- -- 14,840
Total stockholders' equity........... 909 1,631 (2,388) 18,521
</TABLE>
- -------------------
(1) All amortization of deferred stock compensation related to employees and
deferred incentives related to non-employees has been aggregated and shown
as a separate line item in the statements of operations.
(2) See notes to the consolidated and combined financial statements for an
explanation of the determination of the number of shares used in computing
basic and diluted per share amounts.
(3) Gives effect to the conversion of the series B convertible preferred stock
as having been outstanding from the issuance date of May 25, 1999, and the
conversion of the series C convertible preferred stock as having been
outstanding from the issuance date of November 24, 1999.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our
consolidated and combined financial statements and the notes to those
statements included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and intentions. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of certain factors, including, but not limited to,
those discussed in "Risk Factors" and elsewhere in this prospectus.
Broadband Sports is an online sports media company that produces original
content and commerce for groups of sports enthusiasts who have a common
interest in following a particular sport, team or athlete. Our four online
media divisions create content and commerce that target these groups of sports
enthusiasts through leveraging contractual relationships that we have with
over 275 athletes and sports personalities and over 315 sports writers.
We have established distribution relationships with AOL, eBay, DIRECTV, Fox,
Lycos, uBid and Yahoo!. These distribution relationships and our web sites
enable us to effectively target groups of sports enthusiasts, increase the
awareness of our four online media divisions and promote our product
offerings.
Overview
Broadband Sports was founded by Tyler J. Goldman and was incorporated in
February 1998 to combine Athlete Direct LLC and Pro Sports Xchange LLC under
common ownership. Initial funding was primarily provided by NMSS Partners LLC,
an investment company. Athlete Direct began operations in September 1996 and
Pro Sports Xchange began operations in February 1996. Broadband Sports
purchased all of the outstanding stock of the Predecessor Companies in
February 1998 for $2,209,964. The acquisitions were accounted for as purchase
transactions and $877,516 of goodwill was recorded which is being amortized
using the straight-line method over three years. In February 1999, Broadband
Sports acquired the assets of Manna Mir Research, Inc. for $225,000 in cash
and contingent consideration of up to an additional $205,000. Manna Mir
Research owned and operated a fantasy sports web site, rotonews.com. These
assets were contributed to a newly formed subsidiary, RotoNews, Inc. In
connection with the acquisition of the assets of Manna Mir Research, we
recorded $254,074 of goodwill which is being amortized using the straight-line
method over three years. In March 1999, Broadband Sports formed a new
subsidiary, SportsAuthentics.com, Inc., to market and distribute sports-
related merchandise and collectibles.
Revenues. We currently derive revenues from four sources: content
syndication, advertising, electronic commerce and subscriptions. We earn
content syndication revenues through various licenses to display our original
content. Our content includes SportsWritersDirect's Insider Team Reports and
Player Notes, as well as the individual athlete and sports personality web
sites produced by AthletesDirect. Content syndication revenues are recognized
over the period of the license agreement as we deliver such content.
Advertising revenues represent the sale of advertisements and sponsorships and
are recognized ratably over the period in which they are displayed, provided
that no significant obligations remain and collection of the resulting
receivable is probable. Electronic commerce revenues represent the sale of
sports-related merchandise and collectibles and are recognized once the
product has been shipped and collection of the resulting receivable is
probable. Subscription revenues represent the sale of subscriptions and are
recognized ratably over the subscription period, which is
33
<PAGE>
typically a professional sports season. Subscriptions are generally billed in
advance and charged directly to customers' credit cards. Deferred revenues
relate to subscription fees that have been collected but for which revenues
have not yet been recognized. During the year ended December 31, 1999, we
entered into two agreements whereby we received non-monetary benefits. These
are described in the following two paragraphs.
In January 1999, we entered into an interactive services agreement with AOL.
Under this agreement, we record a monthly license fee for content and
programming valued at approximately $288,000 per month. Such content and
programming includes the syndication of AthletesDirect content both within the
AOL Sports Channel and the AOL Kids Channel as well as providing content and
programming for the professional and college team areas within the AOL Sports
Channel. AOL is also entitled to receive a percentage of revenues derived from
the sale of sports-related merchandise and subscription products by the
Company on AOL. The Company also receives guaranteed placement and banner
impressions from AOL for which it records a monthly expense valued at
approximately $232,000 per month. We have received cash for similar
transactions in the past. This agreement will be superseded by the customized
programming agreement executed with AOL in March 2000. See "Business--
Strategic Relationships."
We currently generate revenues from our four online media divisions:
. AthletesDirect, which creates and operates individual athlete and sports
personality web sites, launched its initial site on AOL's proprietary
network in the third quarter of 1996 and recognized its first content
syndication revenues from AOL in that quarter. Since the third quarter of
1996, AthletesDirect has maintained a distribution relationship with AOL,
which was exclusive through March 1999. Under the terms of the new
agreement with AOL, which terminates on June 30, 2001, AthletesDirect
creates and maintains individual athlete sites on AOL's proprietary
network for which AthletesDirect earns a content syndication fee. In May
1999, AthletesDirect entered into an agreement with Yahoo! to syndicate
its content to Yahoo! Sports. This agreement terminates in June 2000.
These agreements provide guaranteed promotion and placement for our
original content as well as promotional links to our subscription
products and our sports-related merchandise and collectibles. In
addition, AthletesDirect currently sells collectibles through its
distribution relationship with eBay.
To date, AthletesDirect has derived revenues primarily from content
syndication and, to a lesser extent, from the sale of advertising and
electronic commerce. To augment the distribution of our content and
products, we released the AthletesDirect web site in November 1999 which
users can access directly at www.athletesdirect.com or through links from
AOL, Yahoo! or eBay.
. SportsWritersDirect, which provides in-depth team and player information,
initially recognized revenues from content syndication in the first
quarter of 1996. During 1997, SportsWritersDirect entered into
syndication relationships that limited distribution for its content to
three individual distribution relationships. These distribution
restrictions expired in December 1998. Currently, SportsWritersDirect's
distribution relationships include AOL, Fox Sports and Yahoo!. These
distribution relationships provide for SportsWritersDirect to license its
content for display on third party sites. SportsWritersDirect derives
revenues primarily from content syndication and, to a lesser extent, from
the sale of subscriptions. Currently, SportsWritersDirect's web site,
www.sportswritersdirect.com, is used solely to distribute
SportsWritersDirect's premium content products.
34
<PAGE>
. RotoNewsDirect, derives its revenues from the sale of advertisements on
its web site, www.rotonewsdirect.com.
. SportsAuthenticsDirect, derives electronic commerce revenues from the
sale of sports-related merchandise and collectibles on its web site.
SportsAuthenticsDirect distributes products through its distribution
relationships with uBid and AOL. Currently, SportsAuthenticsDirect does
not sell products directly through its own web site but intends to do so
within the next six months.
Cost of Revenues. Our cost of revenues includes compensation and benefits
for editorial and operations personnel, and telecommunications, Internet
access and computer-related expenses for the support and delivery of our
services. Cost of revenues also includes the cost of sports-related
merchandise and collectibles sold and the royalties paid to certain athletes,
sports personalities and sports writers based on a percentage of the revenues
or gross profits generated. The royalties paid in 1999 were immaterial. We
expect these royalties to increase significantly as we increase our
advertising and electronic commerce revenues generated from our web sites.
Operating Expenses.
Sales and Marketing. Sales and marketing expenses consist of advertising and
promotional expenditures, salaries and related expenses for personnel engaged
in marketing, advertising sales, customer service, distribution fulfillment
and public relations. We have entered into licensing, royalty, distribution,
and consulting agreements with various online sites, vendors, athletes and
sports personalities. These agreements provide for a specified percentage of
advertising and merchandising revenue to be paid to these athletes and sports
personalities from whose web site the revenue is derived. In addition, some of
these agreements provide for advances of these percentages or royalties. In
some cases, these advances are paid before the advertising and merchandising
revenues are received and the marketing services are provided. These advances
are recoupable against future royalties, and we record them as advances on our
balance sheet and amortize them equally over the term of the contracts. The
portion of the advances attributable to the percentage of advertising and
merchandising revenues earned are recognized as a cost of revenues and any
excess amortization is recognized as sales and marketing expense. Under such
agreements, these individuals are required to provide various marketing and
promotional services. These marketing and promotional services include
participating in online and offline marketing campaigns, providing use of
their image and voice in our marketing efforts, making live appearances at
which they promote their involvement with us and providing authentic
signatures on sports related products we can use for promotional purposes.
Product Development. Product development expenses consist primarily of
employee compensation and benefits, and consulting and development fees
required to enhance existing and develop new product and content offerings.
General and Administrative. General and administrative expenses consist of
salary and related costs for general corporate functions as well as
professional service fees and facilities expenses.
Depreciation. Depreciation expenses consist of the depreciation of property
and equipment.
Amortization. Amortization expenses consist of the amortization of goodwill
associated with the acquisitions of Athlete Direct and Pro Sports Xchange in
February 1998 and the assets of Manna Mir Research in February 1999, deferred
stock compensation and deferred incentives. Amortization of
35
<PAGE>
deferred stock compensation and deferred incentives has been aggregated and
shown on a separate line item on the statement of operations since they both
relate to stock options.
Deferred stock compensation for employees and deferred incentive costs for
non-employees represent the fair value of stock options and common stock that
have been granted to employees and non-employees during 1998 and 1999. Such
amounts were recorded as deferred stock compensation in stockholders' equity
for employees and as advances and deferred incentives in assets for non-
employees. We calculated the fair value of each option to non-employees on the
date of grant using an option pricing model as prescribed by Statement of
Financial Accounting Standards No. 123. The fair value of each stock option
granted to non-employees is amortized ratably as an expense over the period in
which services are provided. We intend to recognize $8.3 million of additional
amortization expense related to deferred stock compensation and deferred
incentives existing as of December 31, 1999 as follows:
<TABLE>
<CAPTION>
Deferred
Stock Deferred
Year Compensation Incentives Total
---- ------------ ---------- -----
(in millions)
<S> <C> <C> <C>
2000........................................... $3.1 $0.9 $4.0
2001........................................... 1.8 0.9 2.7
2002........................................... 0.5 0.6 1.1
2003........................................... -- 0.3 0.3
2004........................................... -- 0.2 0.2
---- ---- ----
Total........................................ $5.4 $2.9 $8.3
==== ==== ====
</TABLE>
During January, February and March 2000, we issued options for which we will
be recording deferred stock compensation and deferred incentive costs of
approximately $4.9 million. We will record amortization expense in connection
with such deferred stock compensation and deferred incentives over the next
five years as follows:
<TABLE>
<CAPTION>
Deferred
Stock Deferred
Year Compensation Incentives Total
---- ------------ ---------- -----
(in millions)
<S> <C> <C> <C>
2000........................................... $0.4 $0.8 $1.2
2001........................................... 0.2 0.8 1.0
2002........................................... 0.1 0.8 0.9
2003........................................... 0.1 0.8 0.9
2004........................................... -- 0.8 0.8
2005........................................... -- 0.1 0.1
---- ---- ----
Total........................................ $0.8 $4.1 $4.9
==== ==== ====
</TABLE>
Interest Expense. Interest expense consists of interest incurred on our
existing revolving loan due to NMSS Partners in the amount of $4.5 million.
The interest rate is one percent above the prime rate. All amounts borrowed
under the revolving note mature and are payable the earlier of February 27,
2003 or upon the occurrence of other reorganization transactions including an
initial public offering that results in net proceeds to us of at least $10.0
million.
Interest Income. Interest income represents interest earned on cash and cash
equivalents and marketable securities.
Income Taxes. No provision for Federal or state income taxes has been
recorded as we incurred net operating losses for each period presented. As of
December 31, 1999, we had approximately
36
<PAGE>
$15.0 million of net operating loss carryforwards for Federal income tax
purposes, available to offset future taxable income. Due to the change in our
ownership interests in connection with this offering and prior private
placements, future utilization of the net operating loss carryforwards may be
subject to certain annual limitations. These net operating losses begin to
expire in 2009. Given our limited operating history, losses incurred to date
and the difficulty in accurately forecasting our future results, we do not
believe that the realization of the related deferred income tax assets meets
the criteria required by generally accepted accounting principles and,
accordingly, a full 100% valuation allowance has been recorded to reduce the
deferred income tax assets to zero. See Note 8 of Notes to Consolidated and
Combined Financial Statements.
Results of Operations
The following tables set forth statement of operations data for the periods
indicated as a percentage of revenues.
<TABLE>
<CAPTION>
Period from Two Months Ten Months
February 1, 1996 Year ended ended ended Year ended
to December 31, December 31, February 27, December 31, December 31,
1996 1997 1998 1998 1999
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues,
excluding 0%, 0%, 0%,
19.4% and 1.4% of
amortization of
deferred stock
compensation........... 189.0 69.4 58.4 74.9 72.9
------- ------ ------ ------- ------
Gross profit (loss)..... (89.0) 30.6 41.6 25.1 27.1
Operating expenses:
Sales and marketing,
excluding 24.0%,
15.9%, 25.6%, 19.0%
and 9.39% of
amortization of
deferred stock
compensation and
incentives........... 1.9 8.2 13.8 21.8 82.9
Product development,
excluding 0%, 6.2%,
3.5%, 4.0% and 5.6%
of amortization of
deferred stock
compensation......... 3.6 1.2 1.7 5.0 14.5
General and
administrative,
excluding 0%, 0%, 0%,
46.34% and 27.0% of
amortization of
deferred stock
compensation......... 44.4 35.9 26.8 56.5 80.2
Depreciation.......... 1.3 0.8 0.7 1.6 5.6
Amortization of
goodwill............. -- -- -- 9.0 4.2
Amortization of
deferred stock
compensation and
deferred incentives.. 24.0 22.0 29.6 88.7 43.3
------- ------ ------ ------- ------
Total operating
expenses............... 75.2 68.1 72.6 182.6 230.7
------- ------ ------ ------- ------
Operating loss.......... (164.2) (37.5) (31.0) (157.5) (203.6)
Interest and other
expense................ (0.1) (0.1) -- 2.7 (0.2)
------- ------ ------ ------- ------
Net loss................ (164.1) (37.4) (31.0) (160.2) (203.8)
======= ====== ====== ======= ======
</TABLE>
All amortization of deferred stock compensation related to employees and
deferred incentives related to non-employees has been aggregated and shown as
a separate line item in the statement of operations presented above.
Ten Months Ended December 31, 1998 and Year Ended December 31, 1999
The following discussion of results of operations compares the ten months
ended December 31, 1998 and the year ended December 31, 1999. As expected, due
to the different number of months in the comparative periods, our results of
operations fluctuate significantly and as a result may not be meaningful.
37
<PAGE>
Revenues. Revenues increased $6.0 million, to $8.7 million, or 221.3%, for
the year ended December 31, 1999 from $2.7 million for the ten months ended
December 31, 1998. The increase in revenues was primarily the result of a
136.1% increase in content syndication revenues from additional distribution
relationships, a 155.7% in advertising and a 1,805.4% increase in electronic
commerce revenues due to higher traffic, the introduction of additional
content offerings and new distribution relationships.
Cost of Revenues. Cost of revenues increased $4.4 million to $6.4 million
for the year ended December 31, 1999 from $2.0 million for the ten months
ended December 31, 1998. Our gross margin increased to 27.1% from 25.1% for
the year ended December 31, 1999 from the ten months ended December 31, 1998.
The decrease in cost of revenues as a percentage of total revenues was
primarily attributable to the previously discussed increases in syndication,
advertising and electronic commerce revenues for the year ended December 31,
1999 as compared to the ten months ended December 31, 1998. The increase in
cost of revenues on an absolute basis was primarily the result of an
additional 41 employees in editorial and operations.
Sales and Marketing. Sales and marketing expenses increased $6.7 million to
$7.2 million for the year ended December 31, 1999 from $592,000 for the ten
months ended December 31, 1998. As a percentage of total revenues, these costs
increased from 21.8% for the ten months ended December 31, 1998 to 82.9% for
the year ended December 31, 1999. This increase was primarily attributable to
a $3.2 million increase in the marketing expenses incurred under our
distribution relationships, a 174.1% increase in amortization of advances paid
to athletes, and the hiring of an additional 52 sales and marketing employees.
As part of our distribution relationships, we will incur marketing expenses of
approximately $293,000 per month with these parties over the contractual term
of the agreements. (See Note 11 to the Notes to Consolidated and Combined
Financial Statements.) We intend to pursue a branding and marketing campaign
for our web sites and in support of our other online media divisions.
Accordingly, we expect sales and marketing expenses to increase in absolute
dollars in the future.
Product Development. Product development expenses increased $1.1 million to
$1.3 million for the year ended December 31, 1999 from $137,000 for the ten
months ended December 31, 1998. As a percentage of total revenues, product and
development expenses represented 5.0% and 14.5% for the ten months ended
December 31, 1998 and the year ended December 31, 1999, respectively. This
increase was primarily attributable to the costs of an additional 29
personnel. We intend to invest additional resources on the development of our
web sites, upgrades to our technological infrastructure, integration of a
common back-end platform across all our divisions, and other product
development efforts in the future. As a result, we expect product development
expenses to increase in absolute dollars in the future.
General and Administrative. General and administrative expenses increased
$5.5 million to $7.0 million for the year ended December 31, 1999 from $1.5
million for the ten months ended December 31, 1998. As a percentage of
revenues, our general and administrative expenses increased from 56.5% for the
ten months ended December 31, 1998 to 80.2% for the year ended December 31,
1999. This increase in general and administrative expenses was primarily
attributable to increased facility expenses related to our overall personnel
growth and increased expenses associated with the hiring of 18 additional
employees. During 1999, we expensed $680,000 of costs incurred in connection
with our initial public offering. We expect general and administrative costs
to increase in absolute dollars in the future as we continue to hire personnel
and build our operational infrastructure.
38
<PAGE>
Depreciation. Depreciation expenses increased $446,000 to $489,000 for the
year ended December 31, 1999 from $43,000 for the ten months ended December
31, 1998. The increase in depreciation was due to increases in facilities and
equipment. We expect depreciation expenses to continue to increase as we
invest in additional property and equipment in the future.
Amortization. Amortization expenses increased $1.4 million to $3.8 million
for the year ended December 31, 1999 from $2.4 million for the ten months
ended December 31, 1998. This increase in amortization expense was primarily
due to the increased amortization of deferred stock compensation and deferred
incentives related to stock options granted to employees and athletes, sports
personalities and sports writers who provided services to us during the year
ended December 31, 1999. We also incurred deferred stock compensation charges
associated with the sale of common stock to our Chief Executive Officer in
November, 1999. Because we intend to continue hiring personnel and signing
additional athletes and sports personalities, we may incur additional deferred
incentives in the future.
Interest and other Expense. Interest and other expense increased $289,000 to
approximately $362,000 for the year ended December 31, 1999 from $73,000 for
the ten months ended December 31, 1998. The increase in interest and other
expense is primarily attributable to higher interest expense as a result of a
higher outstanding balance on our revolving loan due to stockholders during
the year ended December 31, 1999.
Interest Income. Interest income increased $345,000 for the year ended
December 31, 1999 from zero for the ten months ended December 31, 1998. We
generated this income by investing the proceeds from the series B and series C
convertible preferred stock issued during the second and fourth quarters of
1999.
Year Ended December 31, 1997, Two Months ended February 27, 1998 and Ten
Months ended December 31, 1998
The following discussion of results of operations compares the year ended
December 31, 1997, the two months ended February 27, 1998 and the ten months
ended December 31, 1998. As expected, due to the different number of months in
the comparative periods, our results of operations fluctuate significantly and
as a result may not be meaningful.
Revenues. Revenues were $1.9 million, $507,000 and $2.7 million,
respectively, for the year ended December 31, 1997, the two months ended
February 27, 1998 and the ten months ended December 31, 1998. Average monthly
revenues increased from $156,000 for the year ended December 31, 1997 to
$253,000 for the two months ended February 27, 1998 to $272,000 for the ten
months ended December 31, 1998. Overall, revenues increased $1.3 million, or
68.8%, for the two and the ten month periods in 1998 compared to the 1997
period as a result of our entering into additional content syndication
agreements during the two months ended February 27, 1998 and the year ended
December 31, 1998.
Cost of Revenues. Costs of revenues were $1.3 million, $296,000 and $2.0
million, respectively, for the year ended December 31, 1997, the two months
ended February 27, 1998 and the ten months ended December 31, 1998. Average
monthly cost of revenues increased from $108,000 for the year ended December
31, 1997 to $148,000 for the two months ended February 27, 1998 to $204,000
for the ten months ended December 31, 1998. Overall, cost of revenues
increased $996,000, or 76.6%, for the two and the ten month periods in 1998
compared to the 1997 period primarily as a result of the previously discussed
increase in content syndication revenues and their associated costs combined
with the hiring of an additional three employees in editorial and operations.
39
<PAGE>
Sales and Marketing. Sales and marketing costs were $154,000, $69,000 and
$592,000, respectively, for the year ended December 31, 1997, the two months
ended February 27, 1998 and the ten months ended December 31, 1998. Average
monthly sales and marketing costs increased from $13,000 for the year ended
December 31, 1997 to $34,500 for the two months ended February 27, 1998 to
$59,000 for the ten months ended December 31, 1998. Overall, sales and
marketing increased $507,000, or 329.2%, for the two and the ten month periods
in 1998 as compared to the 1997 period primarily as a result of the hiring of
an additional four employees in sales and marketing and a 166.5% increase in
the amortization of advances paid to athletes and sports personalities.
Product Development. Product development costs were $22,000, $9,000 and
$137,000, respectively, for the year ended December 31, 1997, the two months
ended February 27, 1998 and the ten months ended December 31, 1998. Average
monthly product development costs increased from $2,000 for the year ended
December 31, 1997 to $4,500 for the two months ended February 27, 1998 to
$13,700 for the ten months ended December 31, 1998. Overall, product
development costs increased $124,000, or 563.6%, for the two and the ten month
periods in 1998 as compared to the 1997 period which was primarily the result
of the hiring of an additional three employees in product development.
General and Administrative. General and administrative expenses were
$672,000, $136,000 and $1,537,000, respectively, for the year ended December
31, 1997, the two months ended February 27, 1998 and the ten months ended
December 31, 1998. Average monthly general and administrative expenses
increased from $56,000 for the year ended December 31, 1997 to $68,000 for the
two months ended February 27, 1998 to $153,700 for the ten months ended
December 31, 1998. Overall, general and administrative expenses increased
$1,001,000, or 149.0%, for the two and the ten month periods in 1998 as
compared to the 1997 period primarily as a result of the hiring of an
additional ten employees in general and administrative.
Depreciation. Depreciation expenses were $15,000, $4,000 and $43,000,
respectively, for the year ended December 31, 1997, the two months ended
February 27, 1998 and the ten months ended December 31, 1998. Average monthly
depreciation expenses increased from $1,000 for the year ended December 31,
1997 to $2,000 for the two months ended February 27, 1998 to $4,300 for the
ten months ended December 31, 1998. Overall, depreciation expenses increased
$32,000, or 213.3%, for the two and the ten month periods in 1998 compared to
the 1997 period due to the purchase of additional property and equipment
during 1998.
Amortization. Amortization expenses were $414,000, $150,000 and $2.7
million, respectively, for the year ended December 31, 1997, the two months
ended February 27, 1998 and the ten months ended December 31, 1998. Average
monthly amortization expense increased from $34,500 for the year ended
December 31, 1997 to $75,000 for the two months ended February 27, 1998 to
$265,700 for the ten months ended December 31, 1998. Overall, amortization
expenses increased $2.4 million for the two and the ten month periods in 1998
from the year ended December 31, 1997. This increase in amortization expense
was primarily due to the increased amortization of deferred stock compensation
and deferred incentives related to stock options granted to employees and
athletes, sports writers and sports personalities during the ten months ended
December 31, 1998.
Interest and other Expense. We incurred no interest and other expense during
the year ended December 31, 1997 or the two months ended February 27, 1998.
Interest and other expense was approximately $73,000 for the ten months ended
December 31, 1998. The interest expense was primarily due to interest incurred
on our existing revolving loan due to stockholders for the ten months ended
December 31, 1998.
40
<PAGE>
Quarterly Results of Operations
The following table sets forth the unaudited quarterly statement of
operations data for our six most recent quarters, through December 31, 1999,
and as a percentage of revenues for our six most recent quarters. The
unaudited quarterly information has been derived from our unaudited financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information for the periods covered. The quarterly data
should be read in conjunction with our financial statements and related notes.
The operating results for any quarter are not necessarily indicative of the
operating results for any future period.
All amortization of deferred stock compensation related to employees and
deferred incentives relating to non-employees has been aggregated and shown on
a separate line item in the statement of operations. For a more detailed
description of deferred stock compensation and deferred incentives. See Note 9
to the Notes to Consolidated and Combined Financials.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------
September 30, December 31, March 31, June 30, September 30, December 31,
1998 1998 1999 1999 1999 1999
------------- ------------ --------- -------- ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ 890 $ 811 $ 1,553 $ 1,758 $ 2,414 $ 3,009
Cost of revenues,
excluding $4, $5, $14,
$28, $32 and $46 of
amortization of
deferred stock
compensation........... 712 631 786 1,371 1,655 2,552
------- ------- ------- ------- ------- -------
Gross profit............ 178 180 767 387 759 457
Operating expenses:
Sales and marketing,
excluding $134, $177,
$172, $169, $123 and
$355 of amortization
of deferred stock
compensation and
deferred incentives.. 70 382 977 1,331 2,180 2,756
Product development,
excluding $34, $31,
$108, $114, $122 and
$143 of amortization
of deferred stock
compensation......... 40 51 195 272 247 556
General and
administrative,
excluding $291, $372,
$400, $379, $259 and
$1,318 of
amortization of
deferred stock
compensation......... 584 449 814 1,473 1,811 2,903
Depreciation.......... 15 17 30 87 151 221
Amortization of
goodwill ............ 73 74 80 94 95 94
Amortization of
deferred stock
compensation and
deferred incentives.. 463 585 694 690 536 1,862
------- ------- ------- ------- ------- -------
Total operating
expenses............ 1,245 1,558 2,790 3,947 5,020 8,392
------- ------- ------- ------- ------- -------
Operating loss.......... (1,067) (1,378) (2,023) (3,560) (4,261) (7,935)
Interest income......... -- -- -- 43 156 146
Interest and other
expenses............... (18) (33) (54) (91) (99) (118)
------- ------- ------- ------- ------- -------
Net loss................ $(1,085) $(1,411) $(2,077) $(3,608) $(4,204) $(7,907)
======= ======= ======= ======= ======= =======
As a Percentage of
Revenues:
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues,
excluding 0%, 1%, 1%,
2%, 1% and 2% of
amortization of
deferred stock
compensation........... 80.0 77.8 50.6 78.0 68.6 84.8
------- ------- ------- ------- ------- -------
Gross profit............ 20.0 22.2 49.4 22.0 31.4 15.2
Operating expenses:
Sales and marketing,
excluding 15.1%,
21.8%, 11.1%, 9.6%,
5.1% and 11.8% of
amortization of
deferred stock
compensation and
deferred incentives.. 7.9 47.1 62.9 75.7 90.3 91.6
Product development,
excluding 3.8%, 3.8%,
6.9%, 6.45%, 5.0% and
4.7% of amortization
of deferred stock
compensation......... 4.5 6.3 12.5 15.5 10.2 18.5
General and
administrative,
excluding 32.7%,
45.9%, 25.8%, 21.6%,
10.7% and 43.8% of
amortization of
deferred stock
compensation......... 65.6 55.4 52.4 83.8 75.0 96.4
Depreciation.......... 1.7 2.1 1.9 5.0 6.3 7.3
Amortization of
goodwill............. 8.2 9.1 5.2 5.3 3.9 3.1
Amortization of
deferred stock
compensation and
deferred incentives.. 52.0 72.1 44.7 39.2 22.2 61.9
------- ------- ------- ------- ------- -------
Total operating
expenses............ 139.9 192.1 179.6 224.5 207.9 278.8
------- ------- ------- ------- ------- -------
Operating loss.......... (119.9) (169.9) (130.2) (202.5) (176.5) (263.6)
Interest income......... -- -- -- 2.4 6.5 4.8
Interest and other
expenses............... (2.0) (4.1) (3.5) (5.1) (4.1) (3.9)
------- ------- ------- ------- ------- -------
Net loss................ (121.9) (174.0) (133.7) (205.2) (174.1) (262.7)
======= ======= ======= ======= ======= =======
</TABLE>
41
<PAGE>
Liquidity and Capital Resources
From inception through February 1998, we and the Predecessor Companies have
funded our operations primarily through capital contributions. Since February
1998 through December 31, 1999, we have funded our operations through a
$4.5 million revolving loan that was established by our principal stockholder
and have raised an aggregate of $35.0 million, net of offering expenses,
through the sale of our equity securities. Interest on outstanding debt
accrues at an annual rate of prime plus one percent (8.75% and 9.50% at
December 31, 1998 and 1999, respectively) and the borrowings under the
revolving loan line are secured by our assets. All amounts borrowed under the
revolving loan mature and become due upon the closing of this offering. At
December 31, 1999, the outstanding balance on the revolving loan was
$4.5 million.
We and the Predecessor Companies have entered into agreements with athletes
and sports personalities. Some of these agreements provide for the payment of
advances which are recoupable from future royalties earned. The minimum
advance payments required under these agreements at December 31, 1999 are as
follows:
<TABLE>
<S> <C>
Year ended December 31:
2000...................................... $1,334,999
2001...................................... 1,033,500
2002...................................... 459,167
2003...................................... 205,000
2004...................................... 125,000
Thereafter................................ 125,000
----------
Total................................... $3,282,666
==========
</TABLE>
Royalties earned represents a percentage of revenues from sports-related
merchandise sales generated from, and advertising placed on, the athlete or
sports personality's web site. We expect to enter into additional agreements
of this nature in the future. The terms of these existing agreements may vary
greatly from the terms of the agreements entered into in the future.
At December 31, 1999, we had $18.4 million in cash and cash equivalents. Net
cash used in operating activities was $14.3 million for the year ended
December 31, 1999 and $1.4 million for the ten months and December 31, 1998.
Net cash used in operating activities resulted primarily from our net
operating losses, adjusted for certain non-cash items, including amortization
of deferred stock compensation and deferred incentives. Non-cash charges
related to the issuance of these options were $3.8 million, $2.4 million and
$150,000 for the year ended December 31, 1999, the ten months ended December
31, 1998 and the two months ended February 27, 1998, respectively. Non-cash
charges relating to depreciation expenses for the year ended December 31, 1999
and the ten months ended December 31, 1998 were $489,000 and $43,000,
respectively.
Net cash used in investing activities was $2.6 million, $2.4 million and
$5,278 for the year ended December 31, 1999, the ten months ended December 31,
1998 and the two months ended February 27, 1998, respectively. Net cash used
in investing activities resulted primarily from capital expenditures related
to purchases of computer software and equipment for $2.1 million during the
year ended December 31, 1999, $190,000 during the ten months ended December
31, 1998 and $5,278 during the two months ended February 27, 1998. During
1998, we acquired the Predecessor Companies for $2.2 million and, during 1999,
we acquired the assets of Manna Mir Research, Inc. for $256,000 and contingent
consideration of an additional $205,000.
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Net cash provided by financing activities was $35.0 million and $4.1 million
for the year ended December 31, 1999 and the ten months ended December 31,
1998, respectively. Net cash provided by financing activities for the ten
months ended December 31, 1998 includes capital contributions of $2.1 million
and borrowings of $2.0 million from the revolving loan due to stockholder. The
$35.0 million provided in the year ended December 31, 1999 includes $16.5
million of proceeds from the issuance of series B convertible preferred stock,
$2.5 million of proceeds from the revolving loan due to stockholder and $16.0
million of proceeds from the issuance of series C convertible preferred stock
to various investors and common stock to our Chief Executive Officer.
We have experienced a substantial increase in our capital expenditures since
our inception, consistent with the growth in our operations and staffing, and
we anticipate that this will continue for the foreseeable future. These
expenditures are primarily for computer equipment, software, lease
commitments, furniture and fixtures. We had no material commitments for
capital expenditures at December 31, 1999, but we expect to incur capital
expenditures and other lease expenses of $5.0 million in 2000. Additionally,
we will continue to evaluate possible investments in businesses, products and
technologies, and plan to expand our sales and marketing programs and conduct
more significant brand promotions. In October 1999, we entered into an
equipment lease agreement where we can finance up to a maximum amount of
$2.8 million in capital expenditures. The agreement is for three years with an
interest rate of 7.5%. This line will help us finance our capital investments.
In March 2000, we entered into an agreement with AOL in which we have
committed to make payments to AOL totalling $30.8 million through September
2002. We are required to make an initial payment of $2.6 million in April
2000, a second payment of $2.6 million 60 days thereafter, a third payment of
$2.6 million 30 days thereafter and subsequent payments of equal amounts
quarterly through September 2002.
We believe our current cash and cash equivalents will be sufficient to fund
our working capital and capital expenditure requirements for at least the next
12 months inclusive of the net proceeds from this offering. We do not believe
our cash and cash equivalents will be sufficient to fund our working capital
and capital expenditure requirements for at least the next 12 months without
the net proceeds from this offering as we expect to continue to incur
significant operating losses for the foreseeable future. To the extent we
require additional funds to support our operations or the expansion of our
business, we may sell additional equity, issue debt or convertible securities
or obtain credit facilities through financial institutions. The sale of
additional equity or convertible securities will result in additional dilution
to our stockholders. We cannot assure you that additional financing, if
required, will be available to us in amounts or on terms acceptable to us, if
at all. If funding is insufficient at any time in the future, we may be
limited in our ability to fund expansion, develop or enhance content or
products, respond to competitive pressures or take advantage of business
opportunities.
Seasonality
We expect that our revenues will be higher leading up to and during major
U.S. sports seasons and sporting events and during the year-end holiday
periods, and lower at other times of the year, particularly during the summer
months. In addition, the effect of such seasonal fluctuations in revenues
could be enhanced or offset by revenues associated with certain major sporting
events, such as the Superbowl, or the effects of having our athletes
participate in events that do not occur on an annual basis, such as the
Olympics and the World Cup.
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Qualitative and Quantitative Disclosures About Market Risk
Our sales from inception to date have been made to U.S. customers and, as a
result, we have not had any exposure to factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets.
However, in future periods, we expect to sell in foreign markets, including
Europe and Asia. As our sales are made in U.S. dollars, a strengthening of the
U.S. dollar could make our products less competitive in foreign markets. At
December 31, 1999, we did not hold any significant short or long-term
investments and, therefore, did not have any market risk exposure related to
changes in interest rates related to such investments. As of December 31,
1999, we were exposed to interest rate risk on our outstanding revolving loan
due to stockholder. The table below presents principal amounts by expected
maturity date and the weighted average interest rates of debt obligations
which are sensitive to changes in interest rates.
<TABLE>
<CAPTION>
Expected Maturity Date
---------------------------------------
2000 2001 2002 2003
---------- ---------- ---------- ------
(in thousands)
<S> <C> <C> <C> <C>
Revolving loan due to stockholder...... $ -- $ -- $ -- $4,468
Weighted average interest rate......... -- -- -- 8.81%
</TABLE>
44
<PAGE>
INDUSTRY BACKGROUND
The Sports Market
Sports is one of the most popular forms of entertainment, generating intense
interest and profound loyalty among sports fans worldwide. Approximately 87%
of the U.S. population over the age of 11 consider themselves sports fans,
according to the 1998 espn/chilton Sports Poll. The popularity of sports has
produced one of the largest industries in the world, creating substantial
business opportunities, such as providing sports-related entertainment,
products and advertising. Sports fans spent approximately $64 billion in 1999
on such sports-related items as spectator sports, equipment, licensed goods,
publications, apparel and footwear, according to a December 1999 report in
Street & Smith's SportsBusiness Journal. More specifically, in 1999:
. retailers sold approximately $40 billion of licensed sports merchandise,
sports equipment and apparel; and
. sports-related advertising was approximately $28 billion.
In addition to advertising, many corporations spend significant amounts of
sponsorship dollars annually to associate their brands with individual
athletes and sporting events.
Although the sports market is large, it is also highly fragmented,
comprising groups of sports enthusiasts who are devoted to their favorite
leagues, teams and athletes and desire higher levels of interaction with the
players they admire. Many of these individual groups are sizeable in their own
right and often consist of geographically dispersed sports fans. Whether it be
Dallas Cowboys fans or a fantasy baseball league, each distinct group includes
numerous sports fans who desire timely, original and in-depth information and
authentic merchandise and collectibles related to their favorite leagues,
teams and athletes. The Dallas Cowboys, for example, generated over $50
million in home game receipts and suite revenues, and fans bought
approximately $300 million of Dallas Cowboys merchandise in 1998, according to
Forbes magazine.
Emergence of the Internet
The Internet has emerged as a mass medium for commerce and communication,
enabling millions of people worldwide to be entertained, interact, distribute
and collect information, create communities among individuals with similar
interests and make purchases electronically. International Data Corporation
projects that worldwide Internet use will grow from approximately 142 million
users at the end of 1998 to 399 million users in 2002.
As a platform for commerce, the Internet enables businesses to reach a
worldwide audience, achieve greater economies of scale and operate with less
physical infrastructure, while providing consumers with greater convenience
and access to a broad selection of content and products. International Data
Corporation projects that the value of goods and services purchased worldwide
on the Internet will grow from approximately $50 billion in 1998 to $734
billion in 2002. As an advertising medium, the Internet provides numerous
advantages over traditional media, including the ability to target specific
demographic groups, measure the effectiveness of advertising campaigns and
modify these campaigns in response to real-time feedback. Forrester Research
projects that total annual spending on Internet advertising will reach $15
billion in 2003.
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Traditional Sports Media and Commerce
While traditional mass media, such as broadcast and cable television, radio,
newspapers and magazines, are effective in providing sports programming and
content to a broad audience, these media are limited in their ability to
efficiently tailor their content to appeal to the specific interests of
distinct groups of sports enthusiasts. In addition, traditional media are
constrained in their ability to enable sports fans to interact with each other
and with their favorite athletes, sports personalities and sports writers.
Similarly, we believe that traditional retail distribution channels face a
number of challenges in providing a satisfying shopping experience for
consumers of sports merchandise and collectibles. Traditional retail
distribution channels are generally limited in their ability to provide a
broad selection of products related to teams and players outside of their
local markets. They are also limited in their ability to quickly alter their
inventory or presentation of sports offerings in response to specific sporting
event outcomes and milestones.
Existing Internet Sports Offerings
In response to the limitations of traditional sports media and commerce, the
Internet has emerged as an attractive and growing distribution channel for
sports content and products. Approximately 36 million people in the United
States accessed sports information on the Internet in 1998, 40% more than in
1997, as estimated by the espn/chilton Sports Poll. According to the November
1999 Media Metrix report, approximately 46% of Internet users are between the
ages of 12 and 34. The Internet has become a medium of choice for individuals
in this age group. We believe that sports has become a popular application
over the Internet because, among other reasons, there is a significant overlap
between the demographic of Internet users and sports fans.
Although there are many online sites that include sports information as part
of their content offerings, these sites typically offer general information
and do not provide content and commerce targeted at distinct groups of sports
enthusiasts. Most online sites do not create environments and situations for
fans to interact with one another and with athletes and other sports
personalities or offer electronic commerce integrated into their sports
content. Because their sports content is typically generic, these online sites
are required to incur significant marketing expenses to differentiate
themselves from other online sites with comparable information.
Because of these limitations and the desire to attract users, Internet
portals and other destination sites continue to seek ways to differentiate
their online sites by expanding and enriching their offerings with distinctive
content, including sports content. This demand has created a significant
market for syndicated content, including sports content, that is original,
entertaining and informative.
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BROADBAND SPORTS
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our Consolidated and Combined Financial Statements and Notes to
Consolidated and Combined Financial Statements appearing elsewhere in this
prospectus.
Broadband Sports is an online media company that produces original content
and commerce for groups of sports enthusiasts who have a common interest in
following a particular sport, team or athlete.
We currently have four online media divisions through which we reach these
groups of sports enthusiasts. AthletesDirect is a branded network that
produces and operates over 275 exclusive athlete and sports personality web
sites. SportswritersDirect is an online publisher and distributor of in-depth
team and player information. RotoNewsDirect is an online fantasy sports web
site. SportsAuthenticsDirect is an online retailer of sports collectibles and
merchandise.
Through our own web sites and our distribution relationships with AOL,
DIRECTV, eBay, Fox Sports, Lycos, uBid and Yahoo!, we are able to effectively
target groups of sports enthusiasts, increase the awareness of our four online
media divisions and promote our content and product offerings. We currently
derive revenues through content syndication, advertising, electronic commerce
and subscriptions.
Our strategy
Our objective is to be the leading online sports media company dedicated to
serving the needs of sports enthusiasts worldwide. Key strategies to achieve
our objective include:
Continue to Develop Exclusive Sports Relationships. Athletes, sports
personalities and sports writers are fundamental to the growth and popularity
of sports. We intend to utilize our existing resources and market position to
continue building our relationships with additional athletes, sports
personalities and sports writers and to acquire the rights to new types of
proprietary assets, such as sports teams. During 1999, we entered into
contracts with more than 200 athletes, sports personalities and sports writers
to develop content and products for our online media divisions.
Continue to offer sports fans compelling original content, programming and
unique collectibles. We currently offers sports enthusiasts a broad range of
original athlete-oriented content, team and player information, and fantasy
sports news online. Additionally, through our exclusive relationships with
athletes and sports personalities, we are able to offer sports fans the
opportunity to purchase authentic, unique merchandise and collectibles. We
intend to leverage our exclusive relationships to expand our sports
programming, content and commerce in order to differentiate us from other
online and traditional media offerings. For example, we intend to work closely
with several of our high profile athletes to develop a regular series that
will be featured on the athlete's web site.
Capitalize on Distribution Relationships. We currently have distribution
relationships for our original content and products through online sites such
as AOL, eBay, Lycos and Yahoo! and offline through a distribution relationship
with DIRECTV. The distinctiveness of our content and products has provided
significant value to these relationships. We intend to expand our distribution
across both new online and other offline platforms, including across satellite
and wireless systems. Our programming and commerce offerings are developed in
a way that allows us to distribute our content
47
<PAGE>
to sports enthusiasts across multiple platforms in an efficient manner.
Through these existing and new distribution relationships, we intend to
increase the awareness of our online media divisions, build traffic to our web
sites and derive revenues from multiple sources.
Increase Online Traffic and Build Awareness of Our Online Media
Divisions. To date, we have capitalized on the nature of our content and
product offerings and the efforts of our distribution relationships to create
online traffic and promote our online media divisions. In addition, we intend
to aggressively market our brands through both traditional and online media.
We also intend to leverage the significant brand name recognition of our high
profile athletes and sports personalities to effectively promote our web
sites. For example, through Mia Hamm's high profile during the 1999 Women's
World Cup, our web site for Mia Hamm generated over 600,000 page impressions
over a period of only a few days.
Capitalize on Evolving Broadband Opportunities. We believe that sports-
related content will become increasingly compelling as more online users
access the Internet through broadband connections. To address this
opportunity, we are investing in the technology and building the creative
resources necessary to offer compelling sports programming within this
broadband environment. We intend to develop a broadband commerce environment
featuring individual athlete hosts, the broadcast of event-related programming
and the development of real-time audio and video reports from our extensive
network of athletes, sports personalities and sports writers.
Capitalize on our Common Technology Platform. We are building a common
technology platform across all of our online media divisions that includes a
common content publishing system, electronic storefront and customer
relationship management system. In addition, we are implementing a full suite
of back office capabilities such as sales order processing, customer service,
distribution fulfillment and inventory management to support the growth of our
electronic commerce and subscription revenues through both our own web sites
and our distribution relationships. We believe that our investment in creating
a common technology platform will enable us to achieve significant cost
savings in technology development, efficiently launch new online media
divisions and effectively capture the value in the relationships between our
various online media divisions and the sports enthusiasts that we serve. For
example, a Green Bay Packer fan that purchases a SportsWritersDirect
subscription covering the Green Bay Packers can be identified and offered a
related product such as a Brett Favre signed football.
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<PAGE>
Our Online Media Divisions
To capitalize on the opportunities within the online sports marketplace, we
develop branded online media divisions that combine original content and
products. We offer our content and products through our distribution
relationships and through our web sites to effectively reach sports
enthusiasts with common interests in a particular sport, team or athlete.
Currently, we have four online media divisions:
<TABLE>
<CAPTION>
Primary
Distribution
Online Media Divisions http web address Revenue Sources Relationships
- ---------------------- -------------------------- ------------------- --------------
[AthletesDirect Logo]
<S> <C> <C> <C>
Official athlete sites, athletesdirect.com Content Syndication AOL
original athlete Advertising eBay
programming, and online Electronic Commerce Lycos
stores Yahoo!
[SportsWritersDirect Logo]
In-depth professional sportswritersdirect.com Content Syndication AOL
and collegiate team and Subscription AOL.com
player information from Advertising Fox Sports
our network of sports Lycos
writers Yahoo!
[RotoNewsDirect Logo]
Comprehensive fantasy rotonewsdirect.com Advertising AOL
news, games and Lycos
statistical and
commissioner services
[SportsAuthenticsDirect Logo]
Sports-related sportsauthenticsdirect.com Electronic Commerce AOL
merchandise and (under construction) uBid
collectibles
</TABLE>
49
<PAGE>
AthletesDirect
AthletesDirect is a branded network of exclusive web sites for more than 275
athletes and sports personalities that commenced operations in 1996.
AthletesDirect's has contractual relationships with some of the world's most
prominent athletes across 15 sports, including football, baseball, basketball,
auto racing and tennis. These contracts provide AthletesDirect with exclusive
online rights to use and market the athletes and sports personalities' voices,
attributes and original first-person content, with the exception that athletes
and sports personalities can participate elsewhere in a limited number of
online chats outside the AthletesDirect network.
AthletesDirect is an online destination site for sports fans to obtain
information about, interact with and purchase products relating to their
favorite athletes and sports personalities. We aggregate individual athlete
and sports personality web sites within the AthletesDirect-branded network.
The web sites within this network create a focal point for sports enthusiasts
to access original athlete-oriented content, participate in chat rooms and
message boards and purchase sports-related merchandise and collectibles in an
environment that specifically capitalizes on the athlete or sports
personality's image and appeal. For example, just prior to Superbowl XXXIII,
AthletesDirect created an original broadband feature in which Jamal Anderson,
star running back of the Atlanta Falcons, explained to his fans how to perform
the "Dirty Bird" dance. At the same time, AthletesDirect offered fans an
opportunity to buy exclusive, limited "Dirty Bird" merchandise and related
collectibles.
AthletesDirect designs each athlete or sports personality's web site to
target a distinct group of sports enthusiasts who have a high degree of
interest in the individual's team or sport. AthletesDirect and its athletes
and sports personalities provide users with original content, including online
programs, breaking news, interviews, journals, live online chats, email
correspondence and online fan clubs. By aggregating numerous athlete and
sports personality web sites from a variety of sports, AthletesDirect can
provide sports enthusiasts with fresh and original content and products
throughout the year. By contrast, independently operated individual athlete
web sites are generally restricted to the content that can be provided by an
individual athlete and are limited by the duration of the athlete's season and
the athlete's ability to participate on his or her site on a continual basis.
Additionally, AthletesDirect enables fans to purchase merchandise and
collectibles directly from the stores located within the athletes and sports
personalities' web sites.
AthletesDirect offers its athletes and sports personalities a number of
benefits, including a complete online solution in terms of design, publishing,
marketing, promotion and day-to-day operation of their web sites. Through
AthletesDirect's web sites, athletes and sports personalities can interact
with a larger number of their fans more effectively than through traditional
personal appearances such as card shows, radio and television interviews or
mailings. Additionally, participation in athletes and sport personalities' web
sites provides these individuals with the opportunity to:
. manage their public and media interactions more effectively;
. control distribution of selected products;
. create a platform to derive additional revenues from existing and new
sponsors; and
. receive greater financial benefit from the sale of related merchandise
and collectibles.
By contracting with AthletesDirect, we believe each athlete and sports
personality benefits from the traffic generated directly by his or her own web
site, the AthletesDirect web sites of other athletes and sports personalities
and the traffic generated by AthletesDirect's distribution relationships.
50
<PAGE>
Features of our Athletes and Sports Personalities' Web Sites
Below is an example of an individual athlete's official web site along with a
description of the exclusive features which are available within each such site
on AthletesDirect.
[Screen shot of Athlete Direct home page for Ken Griffey Jr. marked
by numbers corresponding to the features described above.]
1. Athlete Journal--Regular updates from the athlete offering fresh,
entertaining perspectives on events related to the athlete's sport and other
non-sports-related activities. These journals often contain an athlete's
thoughts on key games and events within the athlete's sport, and can be in
either text or multimedia format.
2. Athlete Store--Electronic storefront offering athlete-signed memorabilia,
collectible items and other team-licensed merchandise. Some athletes' sites may
provide a personal audio greeting from the athlete to his or her fans upon
entering the store.
3. Athlete News--Current news about the athlete during his or her season,
including original commentary, recent events, game statistics and other
highlights.
51
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4. Athlete Community Area--Suite of interactive features, including
regularly scheduled chats, bulletin boards for fan and athlete postings and
other interactive activities. The site also includes the athlete's message
board, which is an interactive bulletin board where fans can communicate with
each other on a variety of topics. Additionally, an athlete can interact with
his or her fans by posting responses to fan questions on the message board.
5. Multimedia--Original multimedia programming created around the individual
athlete, including both audio and video clips as well as recent and archived
photos of players and teams. As a larger percentage of online consumers get
higher-speed access to the Internet, we will intend to provide additional
sports programming created especially for consumers with broadband access.
6. Athlete Background--Personal information and perspectives from the
athlete about his or her youth, important influences and memories as well as
information on the athlete's charitable and community activities.
52
<PAGE>
Distribution
From inception through March 31, 1999, AthletesDirect distributed its
content exclusively on AOL's proprietary network. Subsequently, AthletesDirect
expanded its relationship with AOL on a non-exclusive basis. Under this
relationship, AOL currently provides AthletesDirect with its own separately
branded area and with certain guaranteed promotion, including promotion of a
separate Stars Area within the AOL Sports Channel and an anchor tenancy
position within the AOL Kids Channel. AOL divides the content on its
proprietary network into different categories, and refers to these categories
as channels. AthletesDirect also has an agreement with Yahoo! under which it
provides Yahoo! with certain exclusive athlete content for a select number of
athletes; produces live athlete events; develops fan clubs for each of its
athletes within the Yahoo! Clubs area; and creates individual athlete stores
that are integrated within the Yahoo! Stores area. As part of this agreement,
AthletesDirect receives continuous placement on the front page of the Yahoo!
Sports area and the front of Yahoo! Sports screens. In addition,
AthletesDirect has a distribution agreement with eBay which allows continuous
placement on the front of eBay's sports collectibles page with links to
various pages featuring AthletesDirect's athletes and sports personalities. On
each of these pages, AthletesDirect offers collectibles in the eBay auction
format, such as in the example below.
[Two screen shots of the athlete page for Anna Kournikova
on the eBay web site at www.eBay.com]
These distribution relationships complement the traffic generated by
individual athlete and sports personality's web sites, such as
www.kournikova.com, by providing links between each of our athletes and sports
personalities' web sites and our own web sites.
In November 1999, we launched the www.athletesdirect.com web site, and began
actively advertising and promoting this site commencing in March 2000.
Revenue Sources
Syndication. AthletesDirect receives syndication fees for the distribution
of our content and programming from AOL, Lycos and Yahoo!.
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Advertising. AthletesDirect offers advertisers the opportunity to benefit
from the association of their products and brands with our athletes and sports
personalities and to target an attractive 18 to 35 year-old male demographic
group. In addition, advertisers can sponsor the web sites of our athletes and
sports personalities and other areas within AthletesDirect.
Electronic Commerce--Merchandise. AthletesDirect currently offers sports
merchandise through each athlete and sports personality's online store. This
merchandise includes licensed team and player apparel and league, event and
team merchandise and collectibles. By selling through individual athlete's
online stores, we believe that we offer fans a logical venue for purchasing
player-related and team-related products in a contextually rich environment,
24 hours a day, seven days a week. Although AthletesDirect currently sources
substantially all of its merchandise from third-party vendors, we anticipate
that, in the future, we will create AthletesDirect-branded merchandise for
individual athletes, sports personalities and events.
Electronic Commerce--Collectibles. AthletesDirect offers its own branded
products, typically consisting of autographed and game-worn and game-used
items. AthletesDirect's products are sourced directly from its athletes and
sports personalities' and sold through their web sites and through our
distribution relationships. We believe that this approach greatly reduces the
likelihood of fraud, a common characteristic of the sports collectibles
market.
SportsWritersDirect
SportsWritersDirect publishes and distributes in-depth team and player
information. SportsWritersDirect is built around The Writer Network, which was
formed in the early 1990s to enable local sports journalists to cover sports
on a national basis by exchanging detailed information relating to the local
teams and athletes they covered. Today, SportsWritersDirect has evolved into a
network of over 315 local and regional sports writers, who are under contract
with SportsWritersDirect and have granted SportsWritersDirect online rights.
The SportsWritersDirect network of sports writers includes beat writers who
write for major publications in their respective cities. Typically, beat
writers cover the same team for an extended period of time and have privileged
access to players, coaches and other team officials. As a result, these sports
writers possess in-depth information about the teams and players they cover
that is not generally published or distributed by traditional media. With the
proliferation of multiple media channels, such as cable, satellite and the
Internet, sports fans are able to easily access general information, such as
scores, statistics and game summaries. However, space limitations resulting
from the costs of production and distribution have limited traditional media's
ability to provide in-depth, timely information on a broad scale.
SportsWritersDirect addresses the demand of sports enthusiasts with a common
interest in a particular sport, team or athelete by providing them with in-
depth coverage.
Because SportsWritersDirect generates original and detailed information and
distributes this content online, SportsWritersDirect can cost-effectively
deliver large volumes of in-depth information to geographically dispersed
sports fans. SportsWritersDirect's offerings include original editorials,
predictions, opinions, injury reports, roster moves, trades and other
commentary on teams and players. SportsWritersDirect provides this content to
a large number of sports enthusiasts. SportsWritersDirect produces and
distributes original content covering more than 110 professional sports teams
and, over 300 collegiate sports teams. The following table lists the
professional and collegiate teams covered by our sports writers.
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<PAGE>
TEAMS COVERED BY SPORTSWRITERSDIRECT
Professional Teams
<TABLE>
<S> <C> <C> <C> <C>
Anaheim Angels Chicago Bulls Florida Marlins Minnesota Twins Philadelphia 76ers
Anaheim Mighty Ducks Chicago Cubs Florida Panthers Minnesota Vikings Philadelphia Eagles
Arizona Cardinals Chicago White Sox Golden State Warriors Montreal Canadiens Philadelphia Flyers
Arizona Diamondbacks Cincinnati Bengals Green Bay Packers Montreal Expos Philadelphia Phillies
Atlanta Braves Cincinnati Reds Houston Astros Nashville Predators Phoenix Coyotes
Atlanta Falcons Cleveland Browns Houston Rockets New England Patriots Phoenix Suns
Atlanta Hawks Cleveland Cavaliers Indiana Pacers New Jersey Devils Pittsburgh Penguins
Baltimore Orioles Cleveland Indians Indianapolis Colts New Jersey Nets Pittsburgh Pirates
Baltimore Ravens Colorado Avalanche Jacksonville Jaguars New Orleans Saints Pittsburgh Steelers
Boston Bruins Colorado Rockies Kansas City Chiefs New York Giants Portland Trailblazers
Boston Celtics Dallas Cowboys Kansas City Royals New York Islanders Sacramento Kings
Boston Red Sox Dallas Mavericks Los Angeles Clippers New York Jets San Antonio Spurs
Buffalo Bills Dallas Stars Los Angeles Dodgers New York Knicks San Diego Chargers
Buffalo Sabres Denver Broncos Los Angeles Kings New York Mets San Diego Padres
Calgary Flames Denver Nuggets Los Angeles Lakers New York Rangers San Jose Sharks
Carolina Hurricanes Detroit Lions Miami Dolphins New York Yankees Seattle Mariners
Carolina Panthers Detroit Pistons Miami Heat Oakland Athletics Seattle Sonics
Charlotte Hornets Detroit Red Wings Milwaukee Brewers Oakland Raiders San Francisco 49ers
Chicago Bears Detroit Tigers Milwaukee Bucks Orlando Magic San Francisco Giants
Chicago Blackhawks Edmonton Oilers Minnesota Timberwolves Ottawa Senators St. Louis Blues
Anaheim Angels St. Louis Cardinals
Anaheim Mighty Ducks St. Louis Rams
Arizona Cardinals Tampa Bay Bucaneers
Arizona Diamondbacks Tampa Bay Devil Rays
Atlanta Braves Tampa Bay Lightning
Atlanta Falcons Tennessee Titans
Atlanta Hawks Texas Rangers
Baltimore Orioles Toronto Blue Jays
Baltimore Ravens Toronto Maple Leafs
Boston Bruins Toronto Raptors
Boston Celtics Utah Jazz
Boston Red Sox Vancouver Canucks
Buffalo Bills Vancouver Grizzlies
Buffalo Sabres Washington Capitals
Calgary Flames Washington Redskins
Carolina Hurricanes Washington Wizards
Carolina Panthers
Charlotte Hornets
Chicago Bears
Chicago Blackhawks
</TABLE>
Colleges and Universities
<TABLE>
<S> <C> <C> <C>
*Air Force *Colorado Howard *Minnesota
*Akron *Colorado State High Point *Mississippi
*Alabama *Columbia *Idaho *Mississippi State
Alabama State Connecticut Idaho State Miss. Valley St.
*Alabama-Birmingham Coppin State *Illinois *Missouri
Albany *Cornell Illinois State Missouri-Kansas City
Alcorn State Creighton Illinois-Chicago Monmouth
American *Dartmouth *Indiana Montana
Appalachian State Davidson Indiana State Montana St.
*Arizona Dayton Iona Morehead State
*Arizona State Delaware *Iowa Morgan State
Arkansas-- Delaware State *Iowa State Mount St. Mary's
Pine Bluff DePaul IUPUI Murray State
*Arkansas Detroit Jackson State *Navy
*Arkansas State Denver Jacksonville *Nebraska
Arkansas-Little Rock Drake Jacksonville State *Nevada-Las Vegas
*Army Drexel James Madison *Nevada-Reno
*Auburn *Duke *Kansas New Hampshire
Austin Peay State Duquesne *Kansas State *New Mexico
*Ball State Elon *Kent *New Mexico State
*Baylor *East Carolina *Kentucky New Orleans
Belmont (Tn.) Eastern Illinois La Salle Niagara
Bethune-Cookman Eastern Kentucky Lafayette Nicholls State
*Boise State *Eastern Michigan Lamar Norfolk State
*Boston College E. Tennessee State Lehigh *North Carolina
Boston Eastern Washington Liberty N. Car. A&T State
*Bowling Green Evansville Long Beach State *North Carolina State
Bradley Fairfield Long Island University North Carolina-Charlotte
*Brigham Young Fairleigh Dickinson Louisiana-Lafayette NC--Asheville
*Brown *Florida Louisiana-Monroe NC--Greensboro
Bucknell Florida A&M *Louisiana State No. Carolina-Wilmington
*Buffalo Florida Atlantic *Louisiana Tech *North Texas
Butler Florida International *Louisville Northeastern
Cal Poly-San Luis Obispo *Florida State Loyola, Chicago Northern Arizona
Cal State-Northridge Fordham Loyola, Md. *Northern Illinois
Cal State-Fullerton *Fresno State Loyola Marymount Northern Iowa
*California Berkeley Furman Maine *Northwestern
California Irvine George Mason Manhattan Northwestern State
California Santa Barbara George Washington Marist *Notre Dame
Campbell Georgetown Marquette Oakland
Canisius *Georgia *Marshall *Ohio
Centenary Georgia Southern *Maryland *Ohio State
Central Connecticut State Georgia State Md.-Baltimore County *Oklahoma
*Central Florida *Georgia Tech Maryland-Eastern Shore *Oklahoma State
*Central Michigan Gonzaga Massachusetts Old Dominion
Charleston Southern Grambling St. McNeese State Oral Roberts
Chattanooga Hampton *Memphis *Oregon
Chicago State Hartford Mercer *Oregon State
*Cincinnati *Harvard *Miami Pacific
*Clemson *Hawaii *Miami (Ohio) *Penn State
Cleveland State Hofstra *Michigan *Pennsylvania
Coastal Carolina Holy Cross *Michigan State Pepperdine
Col. of Charleston *Houston *Middle Tenn. State *Pittsburgh
Colgate
*Air Force Portland Tennessee State
*Akron Portland State Tennessee Tech
*Alabama Prairie View A&M Tennessee-Martin
Alabama State *Princeton *Texas
*Alabama-Birmingham Providence *Texas A&M
Albany *Purdue *Texas Christian
Alcorn State Quinnipiac *Texas Tech
American Radford Texas-Arlington
Appalachian State Rhode Island *Texas-El Paso
*Arizona *Rice Texas-Pan American
*Arizona State Richmond Texas-San Antonio
Arkansas-- Rider Texas Southern
Pine Bluff Robert Morris The Citadel
*Arkansas *Rutgers *Toledo
*Arkansas State Sacramento State Towson
Arkansas-Little Rock Sam Houston State Troy State
*Army Samford *Tulane
*Auburn San Diego *Tulsa
Austin Peay State *San Diego State *UCLA
*Ball State San Francisco *Utah
*Baylor *San Jose State *Utah State
Belmont (Tn.) Santa Clara Valparaiso
Bethune-Cookman Seton Hall *Vanderbilt
*Boise State Siena Vermont
*Boston College *SMU Villanova
Boston South Alabama *Virginia
*Bowling Green *South Carolina Virginia Commonwealth
Bradley S. Carolina State *Virginia Tech
*Brigham Young South Florida VMI
*Brown SE Missouri State Wagner
Bucknell SE Louisiana *Wake Forest
*Buffalo Southern *Washington
Butler *Southern California *Washington State
Cal Poly-San Luis Obispo Southern Illinois Weber State
Cal State-Northridge *Southern Mississippi *West Virginia
Cal State-Fullerton Southern Utah Western Carolina
*California Berkeley Southwest Missouri State Western Illinois
California Irvine SW Texas State Western Kentucky
California Santa Barbara St. Bonaventure *Western Michigan
Campbell St. Francis (NY) Wichita State
Canisius St. Francis (PA) William & Mary
Centenary St. John's Winthrop
Central Connecticut State St. Joseph's *Wisconsin
*Central Florida St. Louis Wisconsin-Green Bay
*Central Michigan St. Mary's Wisconsin-Milwaukee
Charleston Southern St. Peter's Wofford
Chattanooga *Stanford Wright State
Chicago State Stephen F. Austin *Wyoming
*Cincinnati Stetson Xavier
*Clemson Stony Brook *Yale
Cleveland State *Syracuse Youngstown State
Coastal Carolina *Temple
Col. of Charleston *Tennessee
Colgate
</TABLE>
- -----------------
* Covers both Division I football and basketball. All other schools only offer
Division I basketball programs.
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SportsWritersDirect collects and stores the information it receives from its
network of sports writers. This information is then packaged into two general
types of content offerings: offerings that are syndicated to online sites and
specialized content offerings that are sold on a subscription basis. Some of
our current content offerings include:
<TABLE>
<CAPTION>
Product Description Price
------- ----------- -----
<S> <C> <C>
Insider Team Reports........ In-depth coverage of all Varying content syndication fee
National Football League,
Major League Baseball,
National Basketball
Association and National
Hockey League teams and
daily editorial features
In-depth coverage of all Varying content syndication fee
Division I college football
and basketball teams
Player Notes................ Daily highlights of key Varying content syndication fee
player news from Major
League Baseball and the
National Football League
Baseball Insider............ Daily personalized updates $19.95 per season per
regarding players selected subscription
in subscribers' portfolios
The Minor League Scout...... Daily information on minor $9.95 per season per subscription
league baseball teams and
players
Fred Edelstein's NFL
Football Insider........... Weekly National Football $19.95 per year per subscription
League gossip
Fred Edelstein's NFL Draft
Report..................... Annual insider view of the $9.95 per subscription
National Football League
draft
Wrestling Observer.......... In-depth coverage of $9.95 per month or $99.95
professional wrestling annually
</TABLE>
By working with SportsWritersDirect, sports writers are able to generate
additional income and, in certain cases, further enhance their readership.
These sports writers are paid a flat fee for syndicated content and can earn
royalties from the sale of subscription products.
Distribution and Revenue Sources
SportsWritersDirect syndicates its content through AOL's proprietary
network, Internet portals and other destination online sites and sells its
subscription products to users on a subscription-fee basis. Insider Team
Reports for all teams are currently provided to online sites such as AOL,
AOL.com and Fox Sports. In addition, SportsWritersDirect produces the Team
Areas for major professional and college teams within AOL Sports, providing
team and player feeds and news updates. SportsWritersDirect controls the
majority of promotional links within the Team Areas, which it uses to cross-
promote our other online media divisions. Player Notes are syndicated to many
online sites, including AOL, Fox Sports and Yahoo!. All of the third parties
licensing SportsWritersDirect content are obligated to promote
SportsWritersDirect's subscription products as part of their license
agreements.
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<PAGE>
RotoNewsDirect
RotoNews was founded in 1997 and was acquired by us in February 1999.
RotoNewsDirect is an online fantasy sports web site, offering player news,
games and statistical services, as well as league management services, or
commissioner services, that enable fantasy sports participants to compete
against one another in simulations.
Unlike most competing online fantasy sites, RotoNewsDirect offers its full
suite of fantasy news and services free of charge to consumers. This strategy
has helped RotoNewsDirect build a significant audience base. RotoNewsDirect
currently operates commissioner services for over 50,000 active leagues
representing over 225,000 fantasy players. RotoNewsDirect supplements its
commissioner services with regular player updates, which are delivered both
through the www.rotonewsdirect.com web site and through free email
subscriptions. RotoNewsDirect currently has over 300,000 registered users and
sends out regular emails to over 55,000 email subscribers. To extend its brand
and build its traffic, RotoNewsDirect provides player content and commissioner
services to other sites, including online newspapers and other sports sites.
Fantasy sports have experienced significant growth in the United States over
the past several years. Currently, millions of fantasy sports fans play their
games, receive their statistics, or access information about their fantasy
teams online. Leading sports sites that provide fantasy games have
traditionally charged users fees to participate in their fantasy games or to
use commissioner and statistical services. Players invest significant time in
entering specific league and player information, setting-up league rules,
becoming familiar with the user interface and researching archived
information.
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RotoNewsDirect Features
Below is a copy of the RotoNewsDirect home web page and an example
commissioner page for an individual online fantasy league, along with a
description of selected features available on www.rotonewsdirect.com.
[Screen shot of RotoNews web site marked by numbers corresponding
to the features described above.]
1. Commissioner Services--Offers fantasy sports participants commissioner
services with daily statistics, updated standings, bulletin boards and other
league and management services covering the National Football League, the
National Basketball Association, Major League Baseball and the National Hockey
League.
2. Player News--Up-to-date player information, news and statistics, as well
as searchable athlete databases for various sports and leagues.
National Football League, -- Latest player information, statistical
National Basketball projections and player rankings with a
Association, Major League searchable database for every player.
Baseball, National Hockey Additionally, offers feature stories,
League columns and team previews.
Golf
-- Latest player information with a
searchable database for many professional
golfers on the Pro Golf Association tour
and other worldwide tours.
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Auto Racing
-- Latest driver information, with a
searchable database for NASCAR, Formula
One and other auto-racing series.
-- Latest news and information for many of
Wrestling the professional wrestlers within the
World Wrestling Federation, World
Championship Wrestling and Extreme
Championship Wrestling.
College Football -- Latest news and information on individual
college players within Division I NCAA
football.
3. MyRotoNewsDirect--Provides users with a personalized web page with news
and statistics tailored to players chosen by the user.
4. Email Reports--Twice-weekly email newsletter providing up to date player
news and information.
5. Office Pools--Online management tool for traditional office pools.
Creates an easy-to-use graphical interface for participants to enter their
picks online, see updated standings, access relevant team, and player
information and communicate with each other.
6. Fantasy Forum--Online community where users can share thoughts on fantasy
sports topics, seek advice and information with other community members, as
well as seek participants for their online leagues.
Distribution and Revenue Sources
In addition to operating its web site, www.rotonewsdirect.com,
RotoNewsDirect distributes its content through AOL's proprietary network,
Lycos, Sandbox.net, and the online versions of the New York Post and San Diego
Union Tribune. Pursuant to these distribution agreements, RotoNewsDirect
typically provides statistical services and/or fantasy games in a co-branded
format.
To date, RotoNewsDirect has derived revenues from the sale of advertising on
its web site. RotoNewsDirect also sells advertising placements within email
newsletters it regularly sends to its customers. In addition, RotoNewsDirect
receives a share of the advertising sold on the sites to which it provides
commissioner services and/or player information. In March 1999, RotoNewsDirect
began selling subscriptions, such as Baseball Insider. To date, RotoNewsDirect
has not derived significant revenues from these subscription products.
SportsAuthenticsDirect
SportsAuthenticsDirect is an online retailer of sports-related merchandise
and collectibles. SportsAuthenticsDirect aggregates products from a large
number of providers, including AthletesDirect. SportsAuthenticsDirect offers a
broad range of products across major United States sports, including baseball,
football, basketball, hockey, boxing and auto racing. Although
SportsAuthenticsDirect does not source its memorabilia products directly from
athletes and sports personalities, it works to carefully select reputable
providers who represent that they produce such products directly from the
source and provide legally binding certificates of authenticity.
SportsAuthenticsDirect's objective is to become the premier provider of
sports-related merchandise and collectibles. SportsAuthenticsDirect currently
offers over 10,000 stock keeping units and believes it has become one of the
largest sellers of sports collectibles online.
We believe there is a significant opportunity to sell these types of
products online because of the limitations inherent in traditional retail
distribution. Because of the large number of teams and
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<PAGE>
available products, traditional retailers cannot effectively inventory the
large number of available products necessary to satisfy the demand of fans of
different teams and athletes. Similarly, sports retailers have had a difficult
time offering a wide range of collectibles and trading products, where the
number of items is even larger.
SportsAuthenticsDirect addresses some of the limitations of current
distribution channels by:
. providing access to products 24 hours a day, seven days a week;
. offering an extensive selection of products updated on a regular basis;
. offering flexible pricing, including auction-based selling; and
. targeting customers based on preference and buying patterns.
Distribution and Revenue Sources
SportsAuthenticsDirect currently sells the majority of its products through
an exclusive relationship with uBid, an online business-to-consumer auction
site. As part of this relationship, SportsAuthenticsDirect provides sports
memorabilia on the www.uBid.com web site as illustrated below.
[Screen shot of uBid web site at www.uBid.com displaying
sports memorabilia offered by SportsAuthentics.com,
and insert with close-up of memorabilia offered.]
SportsAuthenticsDirect also operates individual team stores within the AOL
Team Areas. SportsAuthenticsDirect is currently in the process of opening up
additional online storefronts, though no assurances can be given when such
stores will open. SportsAuthenticsDirect intends to launch a branded online
retail presence in the second half of 2000.
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<PAGE>
SportsAuthenticsDirect handles all distribution fulfillment and customer
service associated with its sales. SportsAuthenticsDirect handles the majority
of its distribution fulfillment through its own distribution center.
Strategic Relationships
We have established a number of strategic relationships to obtain original
sports content, provide broad distribution of our content and products, and
increase consumer awareness of our branded online media divisions. These
relationships include:
Content and Product Agreements
Athletes and Sports Personalities
AthletesDirect currently has agreements with over 275 athletes and sports
personalities. These agreements generally provide AthletesDirect with
exclusive rights to the athletes and sports personalities' online
participation, as well as rights to use the athletes and sports personalities'
names, likenesses and other attributes in connection with the online medium.
The exclusivity provisions of these agreements permit the athletes and sports
personalities to engage in limited online activities on behalf of their
leagues, teams and sponsors. These agreements have terms that range from two
to eight years.
Under these agreements, our athletes and sports personalities are required
to participate in their online sites in specified manners and at specified
times. This participation generally includes engaging in online chats,
responding to fan emails, publishing online journals and providing audio
content for online distribution. The nature and terms of these contracts vary
both in terms of advances paid and royalties to be earned. It is common for
very well-known athletes and sports personalities to receive advances
recoupable against future royalties. These athletes and sports personalities
are entitled to a percentage, or royalty, of the revenues generated from both
sales of sports-related merchandise and advertising placed on their individual
web sites. Merchandise sales originate from both our own web sites and the
online platforms of our distribution relationships. Based on the information
received with each order, we are able to classify the point of sale by the
appropriate online media division and by each athlete or sports personality.
Although it is difficult to predict the nature of the agreements that we will
enter into in the future, it is likely that we will continue to use the
compensation described above to acquire the online rights of high profile
athletes and sports personalities to enter into contracts with us.
Sports Writers
SportsWritersDirect currently has agreements with over 315 sports writers,
which typically have a two-year term with a one-year extension at our option.
These local and regional sports writers provide SportsWritersDirect with
original sports-related content. The majority of these sports writers are beat
writers who cover a particular team or conference for a traditional
publication, such as a newspaper. The agreements require the sports writers to
create original, in-depth content for SportsWritersDirect, provide
SportWritersDirect with exclusive rights to this content and restrict the
sports writers from performing services for anyone, other than
SportsWritersDirect, that provides online products or services. However, these
agreements do permit the sports writers to provide similar information to, and
to perform services for, daily newspapers, including newspapers that maintain
online sites, that are the primary employers of the sports writers. We pay our
sports writers a flat fee for content that we syndicate and, in some cases, a
percentage of revenues derived from the sales of subscription products.
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<PAGE>
Sports Teams
We entered into agreements in March 2000 to produce the official web site
for the Dallas Cowboys Football Club. Under the terms of this agreement, we
will produce original content relating to the team for distribution on the
www.dallascowboys.com web site. Additionally, we will operate the official
Dallas Cowboys online store. We will share revenues generated from this web
site. This agreement expires in March 2005, but is subject to termination in
March 2002.
Distribution Relationships
AOL
In January 1999, we entered into an interactive services agreement with AOL.
Under this agreement, AOL is required to pay to us a license fee for
programming and syndicated content. This programming and syndicated content
includes both SportsWritersDirect team-by-team coverage of professional
baseball, basketball, football and hockey and NCAA Division I college
basketball and football, as well as a minimum of 50 individual athlete web
sites. In addition, in accordance with the agreement, AthletesDirect has
created and operates a separately branded AthletesDirect area within both the
AOL Sports Channel and the AOL Kids Channel. These sites are promoted through
the AOL Sports Channel, including Sports Stars screens which AthletesDirect
programs and through an anchor tenancy position within the AOL Kids Channel.
SportsWritersDirect also provides content designed to appeal to fantasy sports
fans within the AOL Fantasy Center and, in exchange, receives guaranteed
promotion for its subscription products.
In March 2000, AthletesDirect and SportsWritersDirect expanded and enhanced
their AOL distribution relationship by entering into a customized programming
agreement with AOL that becomes effective in June 2000. This agreement
supersedes the prior agreement between us and AOL that was entered into in
January 1999. Under this new programming agreement, AthletesDirect and
SportsWritersDirect will syndicate their athlete and team-related programming
to AOL and several of AOL's other brands, including AOL.com, CompuServe and
ICQ. Additionally, AthletesDirect will provide original programming for the
AOL Extreme Sports Area as well as create country specific areas for AOL
Australia, AOL Brazil, AOL Canada and AOL United Kingdom. Under the terms of
this agreement, AOL will pay AthletesDirect and SportsWritersDirect a license
fee of $15.0 million over the term of the agreement, paid in equal quarterly
installments. This agreement expires in June 2003. AOL has the right to extend
the agreement for two successive one-year periods under the same terms.
In March 2000, we entered into an interactive services agreement with AOL.
Pursuant to this agreement, we will receive anchor tenancy placement on the
front of the AOL Sports, guaranteed banner impressions and promotional
commerce links within AOL Sports, and premier placement across AOL.com,
CompuServe and ICQ. Under the terms of this agreement, we will pay AOL
approximately $31.0 million in cash and $22.0 million of in-kind value over
the term of the agreement. We will make an initial payment of $2.6 million in
April 2000, a second payment of $2.6 million 60 days thereafter, a third
payment of $2.6 million 30 days thereafter and subsequent payments of
$2.6 million quarterly through September 2002. The in-kind value will be
delivered in equal annual installments over the term of the agreement. This
agreement expires in March 2003. AOL has the right, upon the achievement of
specific benchmarks, to extend the agreement for two successive one-year
periods under the same terms.
During the year ended December 31, 1999, AOL accounted for approximately 44%
of our total revenues. The loss of this relationship, or a material adverse
change in this relationship, could have a material adverse effect on our
business.
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<PAGE>
DIRECTV
In April 2000, we entered into a strategic agreement with DIRECTV, Inc. This
agreement calls for DIRECTV to provide us with a guaranteed number of
promotional spots on the DIRECTV satellite system for promotion of our
programming and online media divisions. Additionally, under this agreement, we
will receive a guaranteed daily time period on the DIRECTV satellite system
for distribution of our sports programming. Our programming will be located on
a channel that is received by all DIRECTV subscribers and will provide
promotional support for DIRECTV's other sports packages and sports
programming.
In connection with this agreement, DIRECTV will purchase 680,442 shares of
our common stock at a purchase price of $12.00 per share. DIRECTV will also
receive a warrant to purchase 1,360,883 shares of our common stock at $14.00
per share, subject to adjustment.
In April 2000, we entered into a separate advertising agreement with
DIRECTV. Under this agreement, DIRECTV will purchase $7.6 million of
advertising on our web sites over the next 27 months. DIRECTV can extend this
agreement under similar terms for an additional two years by committing to
purchase $8.5 million of advertising on our web sites over this two-year
period.
eBay
In April 1999, AthletesDirect entered into a co-branding and advertising
agreement with eBay, under which eBay acts as AthletesDirect's official online
person-to-person auction venue for sports collectibles on behalf of its
athletes. Pursuant to this agreement, AthletesDirect creates individual
athlete web pages within eBay's online site. AthletesDirect updates content on
these web pages and provides signed collectibles for sale through eBay's
auction web site. These pages and collectibles are promoted by eBay, including
at the top of eBay's primary collectibles channel. This agreement terminates
in April 2001.
Fox Sports
In September 1998, SportsWritersDirect entered into a content license
agreement with News America Digital Publishing, Inc., an affiliate of Fox
Entertainment Group, Inc. Under this agreement, SportsWritersDirect receives a
syndication fee for providing Insider Team Reports and other content for
distribution on www.foxsports.com. News America Digital Publishing is required
to promote SportsWritersDirect's subscription products. SportsWritersDirect
pays News America Digital Publishing a royalty based on the net revenues of
subscription products sold through Fox Sports Online. This agreement expires
in December 2001.
Lycos
In December 1999, we entered into an agreement with Lycos, Inc. Under this
agreement, we create and maintain a co-branded sports site with Lycos, whereby
we are the principal provider of sports content to Lycos, which includes
providing Lycos official athlete sites, up-to-date sports news, fantasy games
and other sports content. Lycos provides us with promotion for our sports
content and products and provides us with links back to our co-branded web
sites. Lycos pays us a content syndication fee and we share in the advertising
revenue generated from the Lycos sports area. We also sell merchandise and
sports collectibles through the Lycos web site, and we will pay Lycos a
percentage of revenues from these sales. This agreement expires in March 2002,
with successive one-year renewal periods unless either party elects not to
renew the agreement.
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<PAGE>
uBid
In March 1999, SportsAuthenticsDirect entered into a two-year agreement with
uBid. Under this agreement, SportsAuthenticsDirect is the exclusive provider
of sports collectibles for uBid. As part of this agreement,
SportsAuthenticsDirect has agreed to offer a specified minimum dollar value
worth of sports collectibles on the www.uBid.com web site each week.
SportsAuthenticsDirect receives prominent branding within all areas of
www.uBid.com where SportsAuthenticsDirect sports collectibles are offered.
uBid receives a percentage of gross revenues for sales made by
SportsAuthenticsDirect on its web site.
Yahoo!
In May 1999, AthletesDirect and SportsWritersDirect entered into an
agreement with Yahoo! to provide AthletesDirect content and
SportsWritersDirect content to Yahoo! in exchange for a monthly license fee
and promotion and placement within Yahoo! Sports and other Yahoo! divisions.
AthletesDirect manages a minimum of 24 individual athlete online fan clubs and
individual athlete online stores for Yahoo! and delivers a regular schedule of
live events. Yahoo! receives a percentage of revenue derived from electronic
commerce sold within the Yahoo! web site. In addition, pursuant to this
agreement, SportsWritersDirect licenses to Yahoo! player content to be
incorporated into Yahoo!'s Fantasy Area and its MyYahoo! service.
SportsWritersDirect licenses and receives promotion and placement to promote
its subscription products. This agreement expires in June 2000, and
automatically renews for an additional year unless either party elects not to
renew the agreement.
Technology
We use state-of-the-art technology to support our business. Our web sites
have been built around open application standard interfaces. They have been
architected emphasizing a model that is highly scalable, flexible, modular and
has a high degree of automation and redundancy in order to minimize single
points of failure. The software platform and architecture for the
www.athletesdirect.com site and individual athlete sites is available through
multiple Sun Microsystems servers, and integrated with an Oracle relational
database, Netscape Enterprise server and Broadvision's One-to-One enterprise
application environment.
To publish content on AOL's proprietary network, we employ AOL's proprietary
"Rainman" mark-up language. Production involves creation and editing of text
and graphics, which are uploaded from our offices to AOL.
SportsWritersDirect uses a number of Sun Microsystems servers integrated
with an Oracle relational database, Netscape Enterprise server, Netscape
PublishingXpert 2.2 for publishing, Broadvision's One-to-One enterprise
relationship management application environment, and secure credit card
capture and billing. In addition, SportsWritersDirect uses customized software
for real-time update of content by sports writers and editors, and an
extensive modem pool for dial-up remote access.
The RotoNewsDirect platform uses a combination of Microsoft NT with SQL
Server, IIS, Cold Fusion and ASP together with an Oracle relational database,
and Broadvision's One-to-One enterprise relationship management application
environment.
We are currently consolidating the technologies used by all of our
properties into a single, common infrastructure built around a Sun
Microsystems, Oracle and BroadVision infrastructure. This common platform will
emphasize interoperability, scalability and stability.
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<PAGE>
In addition, we are currently in the process of deploying Oracle's
Enterprise Resource Planning System complete with financial reporting,
inventory management, sales order processing, data warehousing and customer
relationship management systems. Our web site's advertisements reference URLs
to advertising banners which are controlled through DoubleClick's proprietary
DART.
We maintain most of our computer systems with Exodus Communications in its
El Segundo, California facility, which provides us with Internet connectivity
via multiple DS-3 and OC-3 links. Exodus also provides human technical
monitoring of all production services 24 hours a day, seven days a week as
well as protection against damage from fire, hurricanes, earthquakes, power
loss, telecommunications failure and break-ins and full redundancy so that a
failure in the network is automatically routed to a different provider. We
also employ in-house monitoring systems, which include automated diagnostic
software, that generate reports and pager calls in the event of system
failures. Notwithstanding these precautions, any system failure that causes an
interruption of service or a failure of our third-party providers to handle
higher volumes of Internet traffic could have a material adverse effect on our
business.
Sales and Marketing
Our advertising and sales efforts are headquartered in our New York office.
To date, we have sold advertising and sponsorships through both our internal
sales force as well as through agencies that represent advertisers. As we
continue to expand, we intend to create a larger internal sales force and open
offices in additional cities.
In our marketing efforts, we work very closely with parties with whom we
have distribution relationships, including AOL, Yahoo! and Lycos. These
parties provide us with placement within their online sites, driving users to
our web sites. In addition, we have purchased advertising on regional and
national media for our products. We anticipate spending a larger amount of
marketing dollars as we continue to promote our online media divisions.
Government Regulation
We are subject to the same federal, state and local laws as other businesses
on the Internet. There are currently relatively few laws directed specifically
toward online media businesses. Due to the increasing popularity and use of
the Internet and online businesses, however, it is possible that laws and
regulations will be adopted with respect to the Internet and online
businesses. Such laws could cover issues such as user privacy, pricing, fraud,
content and quality of products and services, taxation, advertising, freedom
of expression, intellectual property rights and information security. The laws
governing online media remain largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy and libel
apply to online media generally. Such legislation could hamper the growth in
use of online media generally and decrease the acceptance of online media as a
communications and commercial medium, which could have an adverse affect on
our business.
We cannot assure you that violations of local or other laws will not be
alleged or charged by local, state or foreign governments, that we might not
unintentionally violate such laws or that such laws will not be modified, or
new laws enacted, in the future. In addition, the growing popularity and use
of online media has burdened the existing telecommunications infrastructure
and many areas with high traffic have begun to experience interruptions in
phone service. As a result, certain local telephone carriers have petitioned
governmental agencies to regulate Internet service providers and online
service
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providers in a manner similar to long distance telephone carriers and to
impose access fees on Internet service providers and online service providers.
If any of these petitions or the relief that they seek is granted, the costs
of communicating via online media could increase substantially, potentially
adversely affecting the growth in the use of online media. Any of these
developments could have an adverse effect on our business.
We generally do not collect sales or other taxes on goods sold on our web
sites to users located outside of California and New York. However, one or
more states may seek to impose sales tax collection obligations on companies
like ours that engage in or facilitate online commerce. A number of proposals
have been made at the state and local level that would impose additional taxes
on the sale of goods and services online. Such proposals, if adopted, could
substantially impair the growth of electronic commerce and increase our costs
and could adversely affect our opportunity to derive financial benefit from
electronic commerce. If any state or foreign country were to successfully
assert that we should collect sales or other taxes on the exchange of
merchandise on our system, our business could be adversely affected. In
October 1998, the Internet Tax Freedom Act was signed into law placing a
three-year moratorium which expires in 2001 on new state and local taxes on
Internet commerce. Existing state or local laws were excluded from the
moratorium. Once this moratorium is lifted, new federal or state taxes may be
imposed on Internet commerce. Future laws imposing taxes or other regulations
on Internet commerce could adversely affect our business.
We currently hold various web addresses relating to our assets and online
media divisions, including broadbandsports.com, athletesdirect.com,
sportswritersdirect.com, rotonewsdirect.com and sportsauthenticsdirect.com. We
may not be able to prevent third parties from acquiring Web addresses that are
similar to our addresses, which could adversely affect our business. In
addition, a number of third parties have registered as domain names the names
of a number of AthletesDirect's athletes under contract. We may not be able to
acquire these web addresses in a cost-effective manner, or at all, which could
adversely affect our business. The acquisition and maintenance of web
addresses generally is regulated by governmental agencies and their designees.
The regulation of web addresses in the United States and in foreign countries
and the application of trademark laws to web addresses is uncertain and
subject to change. As a result, we may not be able to acquire or maintain
relevant web addresses in all countries in a cost-effective manner, or at all,
where we may conduct business.
Employees
As of March 31, 2000, we had 183 employees. Our ability to attract and
retain highly qualified employees will be a principal determinant of our
success. Competition for qualified personnel in the industry is high. We
cannot assure you that our current and planned staffing will be adequate to
support our future operations or that management will be able to hire, train,
retain, motivate and manage the required personnel. None of our employees is
represented by a labor union and we have not experienced any work stoppages.
We consider our relations with our employees to be good.
Facilities
We are headquartered in Santa Monica, California, where we lease 31,242
square feet located at 2120 Colorado Avenue, Santa Monica, California. This
lease expires November 14, 2006.
In October 1999, we entered into a lease for approximately 2,700 square feet
located at 350 Fifth Avenue, New York, New York. This lease expires October
31, 2002.
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We believe that our current facilities will be adequate to accommodate our
needs for the foreseeable future.
Legal Proceedings
Other than as set forth above in "Risk Factors--Our business may be
restricted by rights of sports leagues and players associations," we are not
currently subject to any material legal proceedings. We may from time to time
become a party to various legal proceedings arising in the ordinary course of
our business. Any such proceeding against us, even if not meritorious, could
result in the expenditure of significant financial and managerial resources.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth the names, ages and positions of our
executive officers and directors as of March 31, 2000:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Richard D. Nanula........ 39 Chief Executive Officer and Chairman of the Board
Tyler J. Goldman......... 33 President, Broadband Studios and Director
Ross B. Schaufelberger... 32 Senior Vice President, Business Development
Gregory S. Hebner........ 31 Chief Financial Officer
Jose A. Royo............. 33 Chief Technology Officer
Thomas F.X. Beusse....... 35 Vice President, Advertising
John M. Collins.......... 37 Vice President, New Media Programming
Laurie C. Hollinger...... 48 Vice President, Human Resources
Steven M. Larkin......... 41 Vice President, Electronic Commerce
Marla P. Messing......... 35 Vice President, Program Marketing
Jeffrey N. Pollack....... 35 Vice President, New Media Publishing
Bruce D. Tobey........... 40 Vice President, General Counsel
Ahmed O. Alfi(2)......... 43 Director
W. Allen Beasley......... 32 Director
Frank J. Biondi,
Jr.(1).................. 54 Director
Stephen D. Greenberg(1).. 51 Director
Douglas Leone(2)......... 42 Director
Geoffrey Y. Yang(1)...... 40 Director
</TABLE>
- ---------------------
(1) Member of the audit committee
(2) Member of the compensation committee
Richard D. Nanula has served as our Chief Executive Officer and one of our
directors since November 1999. From August 1998 to May 1999, Mr. Nanula served
as the President and Chief Operating Officer at Starwood Hotels & Resorts
Worldwide, a Fortune 500 global hotel company. From February 1996 to March
1998 and August 1991 to November 1994, Mr. Nanula served as the Chief
Financial Officer of The Walt Disney Company. From November 1994 to February
1996, Mr. Nanula was the President of the Disney Stores Worldwide. From
December 1989 to August 1991, Mr. Nanula served as the Treasurer of The Walt
Disney Company. Mr. Nanula received a B.A. degree from the University of
California at Santa Barbara and an M.B.A. degree from Harvard University.
Tyler J. Goldman is the founder of Broadband Sports and has served as
President of Broadband Studios, the arm of Broadband Sports focused on new
divisions, since November 1999. Mr. Goldman has served as a director of
Broadband Sports since inception. From inception through October 1999, Mr.
Goldman served as our Chief Executive Officer and President. From 1995 to
December 1997, Mr. Goldman served as an associate at the law offices of
Steinberg & Moorad, an independent provider of athlete services. From 1992 to
1995, Mr. Goldman served as an associate at Wilson Sonsini Goodrich and
Rosati, P.C., a law firm focused on technology companies. Mr. Goldman received
an A.B. degree from Dartmouth College, and J.D. and Masters of Management
degrees from Northwestern University.
Ross B. Schaufelberger has served as our Senior Vice President, Business
Development since our inception. Mr. Schaufelberger is a founder of Athlete
Direct and has served as President of Athlete Direct since February 1996. From
July 1990 to February 1996, Mr. Schaufelberger served as Vice President of
Marketing and Business Development at STATS, Inc., a provider of online sports
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<PAGE>
statistical information. Mr. Schaufelberger received a B.A. degree from the
University of Pennsylvania.
Gregory S. Hebner has served as our Chief Financial Officer since May 1998.
From August 1997 to May 1998, Mr. Hebner served as a senior analyst within the
Technology and New Media Group of the Strategic Planning Department for The
Walt Disney Company. From 1995 to 1997, Mr. Hebner was a graduate student at
Harvard University. From November 1993 to August 1995, Mr. Hebner worked as an
operations manager for Premark International, a consumer goods company. From
August 1991 to November 1993, Mr. Hebner served as an auditor for
PricewaterhouseCoopers LLP, an independent accounting firm. Mr. Hebner
received a B.S. degree in Accountancy from the University of Illinois, and
M.B.A. degree from Harvard University. Mr. Hebner is a certified public
accountant.
Jose A. Royo has served as our Chief Technical Officer since December 1998.
From August 1998 to December 1998, Mr. Royo served as a Program Manager for
Trilogy Software, a provider of front-office software. From October 1997 to
August 1998, Mr. Royo served as the Chief Information Officer for Crimson
Solutions, a software company developing solutions for higher education. From
September 1993 to August 1997, Mr. Royo served as Lead Software Engineer for
Harvard University. From September 1990 to September 1997, Mr. Royo served as
an instructor in the Department of East Asian Studies at Harvard University.
Mr. Royo received a B.A. degree from Earlham College, and A.M., Ph.D. and
M.B.A. degrees from Harvard University.
Thomas F.X. Beusse has served as our Vice President, Advertising Sales since
August 1999. From November 1992 to July 1999, Mr. Beusse served as an
advertising executive for Sports Illustrated, a division of Time-Warner. From
August 1996 to July 1999, Mr. Beusse was the advertising director for Sports
Illustrated's New York office. From August 1989 to November 1992, Mr. Beusse
held various sales positions for Times Mirror Magazines and Hachette
Publishing. Mr. Beusse received a B.A. degree from Ithaca College.
John M. Collins has served as our Vice President, New Media Programming
since November 1999. From April 1991 to November 1999, Mr. Collins served as a
senior programming and sales executive for the National Football League. From
April 1994 to November 1999, Mr. Collins served as the Senior Vice President
of Programming and Sales and the Vice President of Programming and Sales at
the National Football League. From April 1991 to April 1994, Mr. Collins
served as Vice President Sales and Marketing for NFL Films. Mr. Collins
received a B.S. degree from Long Island University.
Laurie C. Hollinger has served as our Vice President, Human Resources since
March 2000. From June 1998 to March 2000, Ms. Hollinger served as the Vice
President, Human Resources for Digital Domain, a visual effects production
company. From June 1996 to May 1998, Ms. Hollinger served as the Vice
President, Human Resources for Paramount Pictures, a division of Viacom, Inc.
From May 1994 to June 1996, Ms. Hollinger served as the Vice President,
Central Services for Capital Group, an investment management company. Ms.
Hollinger received a B.A. degree from California State University, Stanislaus.
Steven M. Larkin has served as our Vice President, Electronic Commerce since
January 2000. From February 1998 to January 2000, Mr. Larkin served as the
Chief Merchandising Officer for the Federated Direct Division of Federated
Department Stores. From September 1995 to February 1998, Mr. Larkin served as
Vice President of Merchandising for the Catalog Division of Fingerhut
Corporation. From December 1989 to September 1995, Mr. Larkin served as the
Vice President of Merchandising for an operating division of Federated
Department Stores. Mr. Larkin received a B.S. degree from The School of
Management at Boston University.
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Marla P. Messing has served as our Vice President, Program Marketing since
February 2000. From January 1997 to December 1999, Ms. Messing served as the
President and CEO of The 1999 Womens World Cup Soccer Tournament, which took
place in June and July of 1999. From January 1995 to June 1996, Ms. Messing
served as the Senior Vice President of Major League Soccer. From March 1992 to
December 1994, Ms. Messing served in a number of roles, including as the
Executive Vice President of the 1994 (Mens) World Cup Soccer Tournament. Ms.
Messing received a B.A. degree from the University of Michigan and a J.D.
degree from the University of Chicago Law School.
Jeffery N. Pollack has served as our Vice President, New Media Publishing
since January 2000. From May 1999 to January 2000, Mr. Pollack served as Vice
President of Marketing and Corporate Communications at the National Basketball
Association. From March 1998 to May 1999, Mr. Pollack served as the
Communications Consultant to the National Basketball Association during
collective bargaining negotiations with the National Basketball Players
Association. Mr. Pollack was the founder of The Sports Business Daily, the
first daily trade publication for the sports industry, and served as its
President from February 1994 to March 1998. Mr. Pollack received a B.S. degree
from the Medill School of Journalism at Northwestern University and an M.P.S.
degree from The Graduate School of Political Management.
Bruce D. Tobey has served as our Vice President, General Counsel since March
2000. From January 1991 to February 2000, Mr. Tobey served as a partner with
Troop, Steuber, Pasich, Reddick and Tobey, a law firm. From May 1986 to
January 1991, Mr. Tobey served as an associate attorney with the same firm.
Mr. Tobey received B.A. and J.D. degrees from the University of California at
Los Angeles.
Ahmed O. Alfi has served as a director of Broadband Sports since inception.
Mr. Alfi is the President of Netcubator, the Managing Member of NMSS Partners
LLC, an investment company. From January 1992 to present, Mr. Alfi has served
as Chairman and Chief Executive Officer of Alfigen, a genetic diagnostic
company. Mr. Alfi also serves on the Board of Directors of several privately
held companies. Mr. Alfi received a B.S. degree from California State
University, Northridge.
W. Allen Beasley has served as a director of Broadband Sports since May
1999. Since March 2000, Mr. Beasley has been a partner of Redpoint Ventures, a
venture capital firm. From September 1999 to March 2000, Mr. Beasley was a
principal of Redpoint Ventures. From June 1998 to September 1999, Mr. Beasley
was an associate of Institutional Venture Partners, a venture capital firm.
From August 1995 to December 1997, Mr. Beasley worked in various marketing
positions for Ipsilon Networks, Inc. a provider of high-performance networking
equipment. From June 1994 to August 1995, Mr. Beasley worked in business
development for Synopsys, Inc. a provider of design automation software. Mr.
Beasley received an A.B. degree in Economics and a M.B.A. degree from Stanford
University.
Frank J. Biondi, Jr. has served as a director of Broadband Sports since May
1999. Since February 1999, Mr. Biondi has served as Senior Managing Director
of WaterView Advisors, LLC, an investment management firm that acts as the
advisor to WaterView Partners, L.P. Mr. Biondi served as Chairman of the Board
and Chief Executive Officer of Universal Studios, Inc., a media company, from
April 1996 until November 1998. From July 1987 until January 1996, he was
President, Chief Executive Officer and a director of Viacom, Inc., a media
company. Mr. Biondi has also served as a director of The Bank of New York,
Vail Resorts, Inc., a resort operator, and About.com as well as several
privately held companies. Mr. Biondi received an A.B. degree in psychology
from Princeton University and a M.B.A. degree from Harvard University.
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Stephen D. Greenberg has served as a director of Broadband Sports since May
1999. Since April 1999, Mr. Greenberg has been a member of General Catalyst
LLC, an investment company. Mr. Greenberg has also served as President of
Classic Sports Network, Inc., a cable television programming service, from
November 1993 through November 1998. From April 1993 to November 1993, Mr.
Greenberg served as President of Stephen D. Greenberg, P.C., an independent
business consulting firm. From January 1990 to April 1993, Mr. Greenberg
served as Deputy Commissioner and Chief Operating Officer of Major League
Baseball. Mr. Greenberg serves as a director on the board of directors of The
Topps Company, a marketer of sports cards. Mr. Greenberg received a B.A.
degree from Yale University, and a J.D. degree from the University of
California at Los Angeles.
Douglas Leone has served as a director of Broadband Sports since May 1999.
Mr. Leone has been a partner of Sequoia Capital since July 1988. Mr. Leone
served on the board of directors of International Network Services, an
enterprise network service provider, from June 1993 to 1998 and Arbor
Software, a software company, from June 1991 to 1997. Mr. Leone is currently
on the board of directors of Scient Corporation and VA Linux Systems as well
as several privately held companies. Mr. Leone holds a B.S. degree in
Mechanical Engineering from Cornell University, an M.S. degree in Industrial
Engineering from Columbia University, and an M.S. degree in Management from
the Massachusetts Institute of Technology.
Geoffrey Y. Yang has served as a director of Broadband Sports since May
1999. Mr. Yang has been a general partner of Institutional Venture Partners, a
venture capital firm, since June 1989. He has also been a managing director of
Redpoint Ventures, a venture capital firm, since August 1999. He also serves
on the Board of Directors of Ask Jeeves, Inc., an online personal service
infrastructure company, MMC Networks, Inc., a developer of network processing
platforms, TiVo, Inc., a provider of personal television services, Turnstone
Systems, Inc., a provider of digital subscriber line deployment and management
products, and as well as several privately held companies. He has also been a
director of Excite, Inc., an online portal company. Mr. Yang holds a B.A.
degree in Economics from Princeton University, a B.S.E. degree in Engineering
and Management Systems from Princeton University, as well as an M.B.A. degree
from Stanford University.
Board Composition
Our certificate of incorporation provides for a classified board of
directors consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of our board of directors will be
elected each year. To implement the classified structure, prior to the
consummation of the offering, three of the nominees to the board will be
elected to one-year terms, three will be elected to two-year terms and two
will be elected to three-year terms. Thereafter, directors will be elected for
three-year terms. Ahmed O. Alfi, W. Allen Beasley and Frank J. Biondi, Jr.
have been designated Class I directors whose term expires at the 2001 annual
meeting of stockholders. Tyler Goldman, Stephen D. Greenberg and Douglas Leone
have been designated Class II directors whose term expires at the 2002 annual
meeting of stockholders. Richard D. Nanula and Geoffrey Y. Yang have been
designated Class III directors whose term expires at the 2003 annual meeting
of stockholders. For more information on the classified board, see the section
entitled "Description of Capital Stock -- Anti-takeover effects of provisions
of our certificate and bylaws and Delaware law."
In April 2000, we entered into a strategic relationship with DIRECTV which
provides, upon the consummation of this offering, we will increase the size of
our board of directors by one director and fill this newly created vacancy
with an individual designated by DIRECTV.
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Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been duly elected and qualified.
There are no family relationships among any of our directors, officers or key
employees.
Board Committees
In May 1999, the board established an audit committee and a compensation
committee. The audit committee monitors the accounting practices and
procedures and the scope of internal and external audits and will recommend
the appointment of the independent auditors. All members of the audit
committee must be independent directors. The members of the audit committee
are Stephen D. Greenberg, Geoffrey Y. Yang and Frank J. Biondi, Jr. The
compensation committee evaluates and approves the compensation policies for
the executive officers and administers our employee benefit plans. The members
of the compensation committee are Ahmed O. Alfi and Douglas Leone. All members
of the compensation committee must be independent directors.
Director Compensation
We reimburse members of our board of directors for out-of-pocket expenses
incurred in the performance of their duties as directors. To date, two non-
employee directors have each received a grant of options to purchase 25,000
shares of common stock at an exercise price of $5.30 per share.
Each non-employee director, upon initial election or appointment to our
board of directors, will receive options to purchase 25,000 shares of common
stock at an exercise price equal to the fair value on the date of grant and
follow-on grants of options to purchase 10,000 shares of common stock at an
exercise price equal to the fair value on the date of grant at the conclusion
of each annual meeting of stockholders. Director grants under the 2000 stock
incentive plan shall vest annually over the remaining term of the director. We
reserve the right to amend the arrangement with directors with respect to
future grants. No member of our board of directors currently receives any
additional cash compensation for his services as a director.
Compensation Committee Interlocks and Insider Participation
The compensation committee will make compensation recommendations to the
board. No interlocking relationship exists between the board or compensation
committee and the board or compensation committee of any other company, nor
has any interlocking relationship existed in the past. Mr. Alfi, who is on our
compensation committee, is a partner of NMSS Partners, LLC, which extended a
$4.5 million credit facility to us in February 1998. Mr. Leone, who is also on
our compensation committee, is a partner of Sequoia Capital, which purchased
our series B preferred stock in May 1999 and series C preferred stock in
November 1999. For more information, see page 79 under "Certain Relationships
and Related Transactions."
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Executive Compensation
The following table sets forth information concerning the compensation paid
by us to our chief executive officer and our four other most highly
compensated executive officers who served as executive officers during fiscal
1999 and whose total compensation for fiscal 1999 exceeded $100,000 (the
"named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation ------------------
-------------------- Awards Underlying
Name and Principal Position Salary($) Bonus($) Options/SARS(#)(1)
- --------------------------- ---------- --------- ------------------
<S> <C> <C> <C>
Richard D. Nanula(2)................... $ 30,000 $ -- --
Chairman of the Board and Chief
Executive Officer
Tyler J. Goldman....................... 150,000 30,000 --
President, Broadband Studios
Ross B. Schaufelberger................. 125,000 25,000 --
Senior Vice President, Business
Development
Gregory S. Hebner...................... 115,000 24,000 --
Chief Financial Officer
Jose A. Royo........................... 135,000 62,000 126,834
Chief Technical Officer
</TABLE>
- -------------------
(1) Consists of shares issuable pursuant to options granted under the 1998
Equity Incentive Plan.
(2) Mr. Nanula became our Chief Executive Officer in November 1999. His
annual salary for the year 2000 is currently $180,000.
Option Grants In Fiscal 1999
The following table sets forth certain information regarding stock options
granted during 1999 to the named executive officers, including the potential
realizable value over the 10-year term of the options based on annual rates of
stock appreciation of 5% and 10%, compounded annually. These assumed rates of
appreciation comply with the rules of the SEC and do not represent our
estimate of future stock prices. Actual gains, if any, on stock option
exercises will depend on the future performance of our common stock. In 1999,
we granted options to acquire up to 2,306,664 shares to employees,
consultants, directors and service providers, all under the 1998 equity
incentive plan and all at an exercise price equal to not less than the fair
value of our common stock on the date of grant as determined in good faith by
the board. Optionees may pay the exercise price by check, note, delivery of
already-owned shares of our common stock or any other instrument the board
will accept.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of Percent of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Option Term(2)
Options Employees in Exercise Price Expiration ---------------------
Name Granted(1)(#) Fiscal Year(%) Per Share Date 5% 10%
- ---- ------------- -------------- -------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Nanula....... -- -- -- -- -- --
Tyler J. Goldman........ -- -- -- -- -- --
Ross B. Schaufelberger.. -- -- -- -- -- --
Gregory S. Hebner....... -- -- -- -- -- --
Jose A. Royo............ 126,834 8.0% $6.00 9/1/09 $478,664 $1,212,843
</TABLE>
- -------------------
(1) All options granted to the named executive officers during 1999 were
granted under the 1998 equity incentive plan. See "Stock Plans."
(2) Potential realizable values are at an assumed initial public offering
price of $9.00 per share and are net of exercise price but before taxes
associated with exercise.
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Aggregated Option Exercises During Fiscal 1999 and Fiscal Year-End Option
Values
No options were exercised during 1999 by our chief executive officer or any
of the other named executive officers. The following table sets forth
information about the number and year-end value of exercisable and
unexercisable options held by the named executive officers in the table below
as of December 31, 1999. The "Value of Unexercised In-the-Money Options at
December 31, 1999" is based on an assumed initial public offering price of
$9.00 per share, minus the exercise price, multiplied by the number of shares
underlying the option.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
December 31, 1999(1) December 31, 1999
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard D. Nanula.......... -- -- -- --
Tyler J. Goldman........... -- -- -- --
Ross B. Schaufelberger..... -- -- -- --
Gregory S. Hebner.......... 176,470 58,824 $1,561,760 $ 520,592
Jose A. Royo............... 29,843 216,362 259,634 1,159,391
</TABLE>
- ---------------------
(1) All options were granted under our 1998 equity incentive plan. Mr.
Hebner's options vest quarterly and become exercisable as to 29,412 shares
each quarter commencing upon employment.
Stock Plans
1998 Equity Incentive Plan. Our 1998 Equity Incentive Plan was approved by
the board of directors and stockholders in December 1998. The 1998 equity
incentive plan provides for the grant of options intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended, nonqualified stock options, the sale of restricted stock and
the grant of other securities or benefits with a value derived from the value
of common stock. The 1998 equity incentive plan also provides for the transfer
or sale of common stock to selected individuals in connection with the
performance of services for us. Initially, 3,529,412 shares of common stock
were reserved for issuance under the 1998 equity incentive plan. The 1998
equity incentive plan was amended to increase the number of shares of common
stock reserved for issuance by 3,374,026 to a total of 6,903,437 shares. We do
not intend to grant further awards under the 1998 equity incentive plan after
the completion of this offering.
As of March 31, 2000, options to purchase 5,750,702 shares had been granted
and were outstanding under the 1998 equity incentive plan. The board of
directors or a committee designated by the board is authorized to administer
the 1998 equity incentive plan, including the selection of individuals to whom
grants of options are made, issuances of common stock, the terms of such
grants or issuances, possible amendments to the terms of such grants or
issuances and the interpretation of the terms of, and adoption of rules for,
the 1998 equity incentive plan. The maximum term of any stock option granted
under the 1998 equity incentive plan is ten years, except that with respect to
incentive stock options granted to a person possessing more than 10% of our
combined voting power, the term of these stock options may not exceed five
years.
The exercise price of incentive stock options granted under the 1998 equity
incentive plan must be at least 100% of the fair value of the common stock on
the grant date except that the exercise price of incentive stock options
granted to a 10% stockholder must be at least 110% of the fair market value on
the grant date. The aggregate fair value on the date of grant of the common
stock for which incentive stock options are exercisable for the first time by
an employee during any calendar year may
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<PAGE>
not exceed $100,000. The purchase price of shares of common stock granted
under the 1998 equity incentive plan must be at least 85% of the fair value of
the common stock on the grant date except that the purchase price of shares of
common stock granted to a 10% stockholder must be at least 110% of the fair
value on the grant date. The individual agreements under the 1998 equity
incentive plan may provide us with repurchase rights under the terms and
conditions set forth in the equity incentive plan. Employee grants generally
become exercisable at the rate of 25% per year over four years; non-employee
grants generally become exercisable at the rate of 20% per year over five
years. Incentive stock options cannot be transferred and other options can be
transferred only in the discretion of the administrator of the plan, but cease
to vest if they are transferred. The 1998 equity incentive plan will terminate
in 2008, unless earlier terminated by the board.
The 1998 equity incentive plan provides that we can cancel any unexpired,
unpaid or deferred award (whether or not vested) at any time if the recipient
of the award violates certain agreements with us or competes with our business
within one year after termination of employment or engagement with us or
renders services for a competitor during this time. In addition, if the
recipient has violated any of these agreements within 180 days of exercise of
an award, the recipient is obligated to pay us the amount of any gain realized
or payment received as a result of the rescinded exercise. This payment must
be made by returning to us all shares of capital stock that the recipient
received in connection with the rescinded exercise, or if the shares have been
transferred by the recipient, by paying in cash to us the fair value of the
shares transferred at the time of transfer of the shares.
Except as otherwise provided in an individual award agreement, in the event
of a merger in which we are not the surviving entity, the sale of all or
substantially all of our assets or a reverse merger resulting in a change of
control, each grant which is at the time outstanding under the 1998 equity
incentive plan will, unless the plan administrator in its discretion decides
differently, will terminate immediately prior to the consummation of such
proposed transaction, unless the grant is assumed or an equivalent grant is
substituted by the successor corporation.
2000 Stock Incentive Plan. Our 2000 Stock Incentive Plan was approved by the
board of directors and stockholders in January 2000. The 2000 stock incentive
plan provides for the grant of options intended to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended,
nonqualified stock options and stock appreciation rights. The 2000 stock
incentive plan also provides for the transfer or sale of common stock to
selected individuals in connection with the performance of services for us.
Initially, 5,900,975 shares of common stock were reserved for issuance under
the 2000 stock incentive plan. This number will be increased annually by a
number equal to the lesser of:
. three percent of the number of shares of common stock outstanding as of
January 1 of such calendar year;
. 1,500,000 shares; or
. a number to be determined by the board of directors.
The board of directors or a committee designated by the board is authorized
to administer the 2000 stock incentive plan, including the selection of
individuals to whom grants of options are made, issuances of common stock, the
terms of these grants or issuances, possible amendments to the terms of these
grants or issuances and the interpretation of the terms of, and adoption of
rules for, the 2000 stock incentive plan. The maximum term of any stock option
granted under the stock incentive plan is ten years, except that with respect
to incentive stock options granted to a person possessing more than 10% of our
combined voting power, the term of these stock options may not exceed five
years.
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The exercise price of incentive stock options granted under the 2000 stock
incentive plan must be at least 100% of the fair value of the common stock on
the grant date except that the exercise price of incentive stock options
granted to a 10% stockholder must be at least 110% of the fair value on the
grant date. The aggregate fair value on the date of grant of the common stock
for which incentive stock options are exercisable for the first time by an
employee during any calendar year may not exceed $100,000. The purchase price
of shares of common stock granted under the stock incentive plan must be at
least 85% of the fair value of the common stock on the grant date except that
the purchase price of shares of common stock granted to a 10% stockholder must
be at least 100% of the fair value on the grant date. The individual
agreements under the 2000 stock incentive plan may provide us with repurchase
rights under the terms and conditions set forth in the 2000 stock incentive
plan. Employee grants generally become exercisable at the rate of 25% per year
over four years; non-employee grants generally become exercisable at the rate
of 20% per year over five years.
In the event of a merger in which we are not the surviving entity, the sale
of all or substantially all of our assets or a reverse merger resulting in a
change of control, each grant which is at the time outstanding under the 2000
stock incentive plan shall, unless the plan administrator in its discretion
decides differently, immediately prior to the specified effective date of such
transaction, automatically accelerate if not assumed. If the options are
assumed, the form of stock option grant under the 2000 Stock Incentive Plan
provides for accelerated vesting of all shares upon involuntary termination of
employment with us without cause occurring within one year of a change of
control of the Company. To the extent it has not been previously exercised,
the grant will terminate immediately prior to the consummation of such
proposed transaction, unless the grant is assumed or an equivalent grant is
substituted by the successor corporation.
2000 Employee Stock Purchase Plan. Our 2000 Employee Stock Purchase Plan was
approved in January 2000 by the board and stockholders. The stock purchase
plan is intended to qualify as an "employee stock purchase plan" under Section
423 of the Internal Revenue Code in order to provide our employees with an
opportunity to purchase common stock through payroll deductions. An aggregate
of 400,000 shares of common stock have been reserved for issuance under the
stock purchase plan and made available for purchase thereunder, subject to
adjustment in the event of a stock split, stock dividend or other similar
change in the common stock or our capital structure. All of our employees (and
employees of our "subsidiary corporations" and "parent corporations" (as
defined by the Internal Revenue Code) designated by the administrator of the
stock purchase plan) whose customary employment is for more than five months
in any calendar year and more than 20 hours per week are eligible to
participate in the stock purchase plan. Non-employee directors, consultants,
and employees subject to the rules or laws of a foreign jurisdiction that
prohibit or make impractical the participation of such employees in the stock
purchase plan are not eligible to participate in the stock purchase plan.
The stock purchase plan designates offer periods and exercise dates. Offer
periods are generally overlapping periods of 24 months. The initial offer
period will begin on the later of July 1, 2000 or the effective date of this
offering and ends on February 28, 2001. Additional offer periods will commence
each March 1 and September 1 thereafter.
Exercise dates are the last date of each purchase period. In the event we
merge with or into another corporation or sell all or substantially all of our
assets, or in the event certain other transactions in which our stockholders
before the transaction own less than 50% of the total combined voting power of
our outstanding securities following the transaction, the administrator of the
stock purchase plan may elect to shorten the offer period then in progress.
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On the first day of each offer period, a participating employee is granted a
purchase right, which is a form of option to be automatically exercised on the
forthcoming exercise dates within the offer period during which deductions are
to be made from the pay of participants (in accordance with their
authorizations) and credited to their accounts under the stock purchase plan.
When the purchase right is exercised, the participant's withheld salary is
used to purchase shares of common stock. The price per share at which shares
of common stock are to be purchased under the stock purchase plan during any
purchase period is the lesser of (A) 85% of the fair value of the common stock
on the date of the grant of the option (the commencement of the offer period)
or (B) 85% of the fair value of the common stock on the exercise date (the
last day of a purchase period). The participant's purchase right is exercised
in this manner on each exercise date arising in the offer period unless, on
the first day of any purchase period, the fair value of the common stock is
lower than the fair value of the common stock on the first day of the offer
period. If so, the participant's participation in the original offer period is
terminated, and the participant is automatically enrolled in the new offer
period effective the same date.
401(k) Plan
We have a 401(k) plan pursuant to which eligible employees may elect to
reduce their current salary by up to the statutorily prescribed annual limit
and have the amount of the reduction contributed to the 401(k) plan.
Contributions to the 401(k) plan by us are discretionary and, to date, we have
not made any contribution to the 401(k) plan. The 401(k) plan is intended to
qualify under Section 401 of the Internal Revenue Code so that contributions
by participants to the 401(k) plan, and income earned on plan contributions,
are not taxed to participants until withdrawn from the 401(k) plan.
Employment Agreements
Under an employment agreement dated November 1999, we currently pay Richard
D. Nanula a base salary of $180,000 per year plus performance bonuses at the
discretion of the compensation committee of the board of directors. Other than
as provided in his restricted stock purchase agreement, neither we nor Mr.
Nanula shall have any further obligation to each other by way of compensation
or otherwise if terminated.
Under an employment agreement dated February 1998, we currently pay Tyler J.
Goldman a base salary of $150,000 per year plus performance bonuses at the
discretion of the compensation committee of the board of directors. After
completion of this offering, Mr. Goldman's base salary will be increased to an
amount to be determined by the compensation committee. The employment
agreement has a term of three years; however, if Mr. Goldman is terminated for
any reason other than for cause, he is entitled to a severance payment equal
to six months of his then-current base salary at the time of termination.
Under an employment agreement dated February 1998, we currently pay Ross B.
Schaufelberger a base salary of $140,000 per year plus performance bonuses at
the discretion of the compensation committee of the board of directors. The
employment agreement has a term of three years; however, if Mr. Schaufelberger
is terminated for any reason other than for cause, he is entitled to a
severance payment equal to six months of his then-current base salary payable
monthly in six equal installments.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with our formation, NMSS Partners, LLC ("NMSS") purchased all
of our 2,000,000 shares of outstanding mandatory redeemable series A preferred
stock for $1.00 per share and extended to us a $4.5 million revolving credit
facility. In connection with the closing of this offering, all of the series A
preferred stock will be redeemed for approximately $2.3 million and the $4.5
million credit facility will be repaid. NMSS owns more than 5% of our company,
and two of its members, Ahmed O. Alfi and Amre Youness, were directors of our
company at the time of these transactions. Mr. Alfi continues to serve as a
director on our board of directors and is also the sole shareholder of the
managing member of NMSS.
In May 1999, we sold 29,166,663 shares of our series B convertible preferred
stock at $0.60 per share. Each share of series B preferred stock will be
converted to one tenth of a share of common stock upon the closing of this
offering for an aggregate of 2,916,666 shares of common stock. In connection
with this financing, we entered into an agreement that provides for certain
rights relating to the registration of our common stock under the Securities
Act of 1933, as amended. WaterView Capital Management LLC, formerly known as
BRCM LLC, and General Catalyst LLC each purchased 3,333,333 shares of series B
convertible preferred stock. Frank J. Biondi, Jr. is a member of our board of
directors and is affiliated with WaterView Capital Management LLC, and Stephen
D. Greenberg is a member of our board of directors and is affiliated with
General Catalyst LLC. Also in May 1999, funds affiliated with Institutional
Venture Partners and Sequoia Capital each acquired shares of common stock
representing more than 5% of our company from existing stockholders. In
addition to WaterView Capital Management LLC and General Catalyst LLC, Tyler
J. Goldman, our President, Broadband Studios, Ross B. Schaufelberger, our
Senior Vice President, Business Development, NMSS, and funds affiliated with
Institutional Venture Partners and Sequoia Capital entered into the agreement
regarding registration rights. W. Allen Beasley and Geoffrey Y. Yang are
members of our board of directors and are affiliated with Institutional
Venture Partners, and Douglas Leone is a member of our board of directors and
is affiliated with Sequoia Capital.
In November 1999, we sold 18,550,000 shares of our series C convertible
preferred stock at $0.80 per share. Each share of series C convertible
preferred stock will be converted to one tenth of a share of common stock upon
the closing of this offering for an aggregate of 1,855,000 shares of common
stock. Of the 18,550,000 shares of series C convertible preferred stock sold,
funds affiliated with Sequoia Capital and Institutional Venture Partners each
purchased 1,250,000 shares, WaterView Partners L.P. purchased 375,000 shares
and General Catalyst LLC purchased 250,000 shares. Frank J. Biondi, Jr. is a
member of our board of directors and is affiliated with WaterView Partners
L.P.
In November 1999, pursuant to a restricted stock purchase agreement, we sold
an aggregate of 3,038,981 shares of common stock at $6.00 per share to Richard
D. Nanula for approximately $18,233,885. In connection with the restricted
stock purchase agreement, Mr. Nanula entered into a note with us, which had a
principal amount of approximately $15,200,906. The note bears interest at the
rate of approximately 6% per annum.
Pursuant to a strategic agreement with DIRECTV, DIRECTV will provide us with
a guaranteed number of promotional spots and a guaranteed daily time period on
the DIRECTV satellite system. In connection with this agreement, DIRECTV will
purchase 680,442 shares of our common stock at a purchase price of $12.00 per
share and will receive a warrant to purchase 1,360,883 shares of our common
stock at $14.00 per share, subject to adjustment. In addition, we agreed to
increase the size of our board of directors by one director following this
offering and to fill this newly created vacancy
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with an individual designated by DIRECTV. We also entered into a separate
advertising agreement with DIRECTV, pursuant to which DIRECTV will purchase
$7.6 million of advertising on our web sites over the next 27 months. See
"Broadband Sports-Distribution Relationships" and "Management-Board
Composition."
A number of our officers have entered into employment agreements with us.
See "Management--Executive Compensation" and "--Employment Agreements."
The following describes our directors who are affiliated with entities that
are beneficial owners of our common stock as of March 31, 2000:
<TABLE>
<CAPTION>
Shares
beneficially
owned as of
Director Affiliation with Stockholder March 31, 2000
-------- ---------------------------- --------------
<S> <C> <C>
Mr. Alfi Managing Member, NMSS Partners, LLC 7,885,976(1)
Mr. Beasley Associate, Institutional Venture Partners 3,225,000
Mr. Biondi, Jr. Senior Managing Director, WaterView Advisors, LLC, 395,833
the Investment Manager of WaterView Partners, L.P.
(WaterView Capital Management LLC, formerly known as
BRCM LLC, is the general partner of WaterView
Partners, L.P.)
Mr. Greenberg Member, General Catalyst LLC 272,222
Mr. Leone Partner, Sequoia Capital 3,225,000
Mr. Yang Partner, Institutional Venture Partners 3,225,000
</TABLE>
- ---------------------
(1) Excludes 2,000,000 shares of mandatorily redeemable series A preferred
stock.
Prior to the offering, we intend enter into indemnification agreements with
each of our executive officers and directors. These agreements may require us,
among other things, to indemnify them (other than for liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses
incurred as a result of any proceedings against them as to which they could be
indemnified. See "Description of Capital Stock--Limitation of liability and
Indemnification Matters."
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PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of March 31, 2000, and as adjusted
to reflect our sale of shares for:
. each person (or group of affiliated persons) who we know to own
beneficially more than 5% of our common stock;
. each of our named executive officers and directors; and
. all of our executive officers and directors as a group.
Unless otherwise indicated, the address for each of the listed individuals
is c/o Broadband Sports, Inc., 2120 Colorado Avenue, Santa Monica, California
90404. Except as otherwise indicated, and subject to applicable community
property laws, the listed persons have sole voting and investment power with
respect to all shares of common stock held by them. The numbers of shares in
the table assumes no exercise of the underwriters' over-allotment option.
Applicable percentage ownership in the table is based on 29,826,530 shares
of common stock outstanding as of March 31, 2000, and 34,223,639 shares
outstanding immediately following the completion of this offering. Beneficial
ownership is determined in accordance with the rules of the SEC. Shares of
common stock subject to options that are presently exercisable or exercisable
within 60 days of March 31, 2000 are deemed outstanding for the purpose of
computing the percentage ownership of the person or entity holding those
options, but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person or entity. To the extent that any
shares are issued upon exercise of options or other rights to acquire our
capital stock that are presently outstanding or granted in the future or
reserved for issuance under our stock plans, there will be further dilution to
new investors.
<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Owned
Shares -----------------
Beneficially Prior to After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
NMSS Partners, LLC (1)......................... 7,885,976 25.4% 22.9%
301 North Lake Avenue
Suite 910
Pasadena, CA 91101
Ahmed O. Alfi (1).............................. 7,885,976 25.4% 22.9%
Tyler J. Goldman............................... 3,791,666 12.2% 11.0%
Entities affiliated with Institutional Venture
Partners (2).................................. 3,225,000 10.4% 9.4%
Institutional Venture Partners
3000 Sand Hill Road
Suite 290
Menlo Park, CA 94025
Geoffrey Y. Yang (2)........................... 3,225,000 10.4% 9.4%
Entities affiliated with Sequoia Capital (3)... 3,225,000 10.4% 9.4%
Sequoia Capital
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
</TABLE>
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<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Owned
Shares -----------------
Beneficially Prior to After
Owned Offering Offering
------------ -------- --------
<S> <C> <C> <C>
Douglas Leone (3).............................. 3,225,000 10.4% 9.4%
Richard D. Nanula.............................. 3,038,981 9.8% 8.8%
Ross B. Schaufelberger......................... 978,750 3.2% 2.9%
Frank J. Biondi, Jr. (4)....................... 395,833 1.3% 1.2%
Stephen D. Greenberg (5)....................... 272,222 * *
Gregory S. Hebner (6).......................... 235,294 * *
Jose A. Royo (7)............................... 37,303 * *
All executive officers and directors as a group
18 persons (8)................................ 23,176,338 74.6% 67.8%
</TABLE>
- ---------------------
* Less Than 1%
(1) Represents 7,885,976 shares held by NMSS Partners, LLC. Mr. Alfi, one of
our directors, is the Managing Member of NMSS.
(2) Represents 98,144 shares held by IVP Broadband Fund, L.P., 3,069,010
shares held by Institutional Venture Partners VIII, L.P. and 57,847
shares held by IVM Investment Fund VIII, LLC. Mr. Yang, one of our
directors, is a partner of Institutional Venture Partners.
(3) Represents 1,935,000 shares held by Sequoia Capital Franchise Fund,
1,169,127 shares held by Sequoia Capital VIII, 14,835 shares held by
Sequoia International Technology Partners VIII, 77,400 shares held by
Sequoia International Technology Partners VIII (Q), 25,800 shares held by
CMS Partners LLC and 2,838 shares held by Sequoia 1997. Mr. Leone, one of
our directors, is a partner of Sequoia Capital.
(4) Represents 333,333 shares held by WaterView Capital Management, LLC
(formerly BRCM LLC), 37,500 shares held by WaterView Partners, L.P. and
25,000 shares held by Mr. Biondi. Mr. Biondi, one of our directors, is
Senior Managing Director of WaterView Advisors LLC, the Investment
Manager of WaterView Partners L.P. WaterView Capital Management LLC is
the general partner of WaterView Partners L.P. Mr. Biondi disclaims
beneficial ownership of the shares held by WaterView Capital Management,
LLC and WaterView Partners, L.P., except to the extent of his pecuniary
interest therein.
(5) Represents 25,000 shares held by Mr. Greenberg and also represents
247,222 shares held by General Catalyst LLC. Mr. Greenberg, one of our
directors, is a director and a member of General Catalyst LLC.
Mr. Greenberg disclaims beneficial ownership of the shares held by
General Catalyst LLC, except to the extent of his pecuniary interest
therein.
(6) Represents 205,883 shares held by Mr. Hebner and 29,412 shares subject to
options issued under the 1998 equity incentive plan, which are
exercisable within 60 days of March 31, 2000.
(7) Represents shares subject to options issued under the 1998 equity
incentive plan, which are exercisable within 60 days of March 31, 2000.
(8) Includes 90,313 shares subject to options issued under the 1998 equity
incentive plan, which are exercisable within 60 days of March 31, 2000
and 187,500 shares of convertible series C preferred stock convertible
into 18,750 shares of common stock.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and certain provisions of our
charter and bylaws are only summaries and are qualified by reference to our
charter and bylaws filed as exhibits to the registration statement of which
this prospectus is a part. At the closing of the offering, our authorized
capital stock will consist of 100,000,000 shares of common stock, $0.001 par
value per share, and 10,000,000 shares of preferred stock, $0.001 par value
per share. As of March 31, 2000, there were 2,000,000 shares of mandatorily
redeemable series A preferred stock outstanding, 29,166,663 shares of series B
convertible preferred stock outstanding and 18,550,000 shares of series C
convertible preferred stock outstanding. The shares of mandatorily redeemable
series A preferred stock outstanding prior to this offering will be redeemed
upon the closing of this offering, the shares of series B convertible
preferred stock outstanding prior to this offering will be converted into
2,916,666 shares of common stock upon the closing of this offering and the
shares of series C convertible preferred stock outstanding prior to this
offering will be converted into 1,855,000, shares of common stock upon the
closing of this offering.
Common Stock
Holders of the common stock are entitled to receive, when and if declared by
the board, dividends and other distributions in cash, stock or property from
our assets or funds legally available for those purposes, subject to any
dividend preferences that may be attributable to preferred stock. Holders of
common stock are entitled to one vote for each share held of record on all
matters on which stockholders may vote. Holders of common stock are not
entitled to cumulative voting for the election of directors.
There are no preemptive, conversion, redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and non-assessable. In the event of our liquidation, dissolution or
winding up, subject to any liquidation preferences that may be attributed to
preferred stock, holders of common stock are entitled to share ratably in the
assets available for distribution.
Based on the number of shares outstanding as of March 31, 2000, after this
offering there will be 34,223,639 shares of common stock outstanding,
including:
. 25,054,864 shares of common stock issued and outstanding;
. 2,916,666 shares to be issued upon conversion of the series B convertible
preferred stock;
. 1,855,000 shares to be issued upon conversion of the series C convertible
preferred stock;
. 3,300,000 shares to be issued in this offering; and
. 1,097,109 shares to be issued in connection with agreements entered into
in March and April 2000.
Preferred Stock
Upon the closing of this offering, 10,000,000 shares of preferred stock will
be authorized and no shares will be issued or outstanding. The board has the
authority, without further action by the stockholders, to issue the shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
and purchase fund provisions, and the number of shares constituting any series
and the designation of such series. The issuance of preferred
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stock could adversely affect the voting power of holders of common stock and
the likelihood that such holders will receive dividend payments and payments
upon liquidation. The issuance of preferred stock could also have the effect
of delaying, deferring or preventing a change in control. We have no present
plan to issue any additional shares of preferred stock.
Warrants
As of March 31, 2000, warrants to purchase up to 28,292 and 22,167 shares of
common stock were outstanding at a purchase price of $6.00 and $8.00 per
share, respectively. During April 2000, warrants to purchase 500,000 and
1,360,883 shares of common stock will be issued at purchase prices of $12.00
and $14.00 per share, respectively. The warrants contain provisions for the
adjustment of the exercise price and the aggregate number of shares issuable
upon the exercise of the warrant in the event of stock dividends, stock
splits, reorganizations and reclassifications and consolidations; and, in the
case of the warrant to purchase 1,360,883 shares at $14.00 per share, the
exercise price is subject to adjustment.
Anti-takeover Effects of our Certificate and Bylaws and Delaware law
Upon the closing of this offering, some provisions of Delaware law and our
certificate of incorporation and bylaws could make the following more
difficult:
. acquisition of Broadband Sports by means of a tender offer;
. acquisition of Broadband Sports by means of a proxy contest or
otherwise; or
. removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids. These provisions are also
designed to encourage persons seeking to acquire control of us to first
negotiate with our board of directors. We believe that the benefits of
increased protection of our potential ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to acquire or restructure us outweigh
the disadvantages of discouraging such proposals because negotiation of such
proposals could result in an improvement of their terms.
Election and Removal of Directors. Our board of directors is divided into
three classes. The directors in each class will serve for a three-year term,
one class being elected each year by our stockholders. For more information on
the classified board, see the section entitled "Management--Board
Composition." This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us because it generally makes it more difficult for
stockholders to replace a majority of the directors.
Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board and the president may call special meetings of
stockholders.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the board of
directors or a committee of the board of directors.
Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date the person became an interested stockholder, unless the
"business
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<PAGE>
combination" or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns or within three years prior to the determination of
interested stockholder status, did own, 15% or more of a corporation's voting
stock. The existence of this provision may have an anti-takeover effect with
respect to transactions not approved in advance by the board of directors,
including discouraging attempts that might result in a premium over the market
price for the shares of common stock held by stockholders.
Elimination of Stockholder Action By Written Consent. Our certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting.
Elimination of Cumulative Voting. Our certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors.
Cumulative voting provides for a minority stockholder to vote a portion or all
of its shares for one or more candidates for seats on the board of directors.
Without cumulative voting, a minority stockholder will not be able to gain as
many seats on our board of directors based on the number of shares of our
stock that such stockholder holds than if cumulative voting were permitted.
The elimination of cumulative voting makes it more difficult for a minority
stockholder to gain a seat on our board of directors to influence the board of
directors' decision regarding a takeover.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock
with voting or other rights or preferences that could impede the success of
any attempt to change control of Broadband Sports. These and other provisions
may have the effect of deferring hostile takeovers or delaying changes in
control or management of Broadband Sports.
Amendment of Charter Provisions. The amendment of any of the above
provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that our
directors are not personally liable for monetary damages to us or our
stockholders for breach of fiduciary duties as a director, except for
liability for:
. any breach of the duty of loyalty to us or our stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. an act related to the unlawful stock repurchase or payment of a dividend
under Section 174 of Delaware General Corporation Law; or
. any transaction from which the director derived an improper personal
benefit.
The limitation of liability provided in the certificate of incorporation does
not affect the availability of equitable remedies such as injunctive relief or
rescission.
Indemnification Agreements. Our certificate of incorporation and bylaws
authorize us to indemnify our directors, officers, employees and other agents,
by agreements or otherwise, to the fullest extent permitted under Delaware
law. We plan to enter into separate indemnification agreements with our
directors and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may
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require us, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or
service as directors or officers, to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified,
and to obtain directors' and officers' insurance if available on reasonable
terms.
Indemnification under Bylaws. Our bylaws require us to indemnify our
directors, officers, employees and other agents to the fullest extent
permitted by law. We believe that indemnification under our bylaws covers at
least negligence on the part of the indemnified party.
Indemnification under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors
and officers and persons that control us pursuant to the foregoing provisions,
or otherwise, we have been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
Pending indemnification proceedings. At present, there is no pending
litigation or proceeding involving any of our directors, officers, employees
or other agents where indemnification will be required or permitted. We are
not aware of any threatened litigation or proceeding which may result in a
claim for such indemnification.
Registration Rights of Certain Holders
After this offering, the holders of approximately 25,798,036 shares of
common stock will be entitled to certain rights to register these shares under
the Securities Act of 1933 pursuant to an investors' rights agreement. These
holders all have "piggyback" rights. If we propose to register any of our
common stock for our own account or for the account of other security holders,
the holders of these 25,798,036 shares of common stock are entitled to notice
of such registration and are entitled to include their shares in the
registration, subject to the ability of underwriters to limit the number of
shares included in the offering.
Subject to certain limitations in the investors' rights agreement, the
holders of an aggregate of 1,010,266 shares of common stock are also entitled
to demand registration rights pursuant to which the holders of at least a
majority of such shares may require us to use our best efforts to register
such shares for public resale. Any holder or holders of such shares may also
require us to register all or a portion of their registrable securities on
Form S-3 when we are eligible to use that form, provided, among other
limitations, that the proposed aggregate price to the public is at least
$500,000 and that we shall not have effected two of these in any 12-month
period.
We will bear all fees, costs and expenses of such registrations, other than
underwriting discounts and commissions.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company. Its address is 40 Wall Street, New York, NY 10005
and its telephone number at this location is (212) 936-5100.
Listing
We have applied to have the shares of common stock approved for quotation on
the Nasdaq National Market under the symbol "FANS."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
there can be no assurance that a significant public market for our common
stock will develop or be sustained after this offering. Future sales of
substantial amounts of our common stock, including shares issued upon exercise
of outstanding options and warrants, in the public market after this offering
could adversely affect market prices prevailing from time to time and could
impair our ability to raise capital through the sale of our equity securities.
Upon completion of this offering, based on the number of shares outstanding
as of March 31, 2000 and the 1,097,109 shares issued in April 2000, we will
have 34,223,639 outstanding shares of common stock, 34,718,639 shares if the
underwriters exercise their over-allotment option in full, assuming no
exercise of outstanding warrants and options. Of these shares, 3,300,000
shares, plus an additional 495,000 shares if the underwriters exercise their
over-allotment option in full, of common stock sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act unless purchased by our affiliates.
Approximately 30,923,639 shares held by our directors, officers and
shareholders are subject to "lock-up" agreements generally providing that,
these shareholders will not (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of, directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock or
(2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the common
stock, whether any of these transactions described in (1) or (2) are to be
settled by delivery of common stock or such other securities, in cash or
otherwise, for a period of 180 days following the date of the final prospectus
for this offering without the prior written consent of Morgan Stanley & Co.
Incorporated. The restrictions described in this paragraph do not apply to:
. the sale to the underwriters of the shares of common stock to be sold in
the offering;
. the issuance by us of shares of common stock upon the exercise of an
existing option or an existing warrant or the conversion of a security
outstanding on the date of this prospectus of which the underwriters
have been advised in writing;
. transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares; or
. issuances of certain shares of common stock or options to purchase
shares of common stock pursuant to our employee benefit plans as in
existence on the date of this prospectus.
Morgan Stanley & Co. Incorporated may, in its sole discretion, release
securities subject to lock-up agreements.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year, including
the holding period of any prior owner except an affiliate, would be entitled
to sell within any three-month period a number of shares that does not exceed
the greater of (1) 1% of the number of shares of common stock then
outstanding, which will equal approximately 328,644 shares immediately after
this offering or (2) the average weekly trading volume of the
86
<PAGE>
common stock during the four calendar weeks preceding the filing of a Form 144
with respect to such sale. Sales under Rule 144 also are subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about us. Under Rule 144(k), a person who is not
deemed to have been an affiliate of Broadband Sports at any time during the
three months preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, including the holding period of
any prior owner except an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period
requirement, of Rule 144. Any employee, officer or director of or consultant
to Broadband Sports who purchased his or her shares pursuant to a written
compensatory plan or contract may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell such shares in reliance
on Rule 144 without having to comply with the holding period, public
information, volume limitation or notice provisions of Rule 144. All holders
of Rule 701 shares are required to wait until 90 days after the date of this
prospectus before selling such shares.
As of the effective date of the registration statement, holders of
25,798,036 shares of common stock will be entitled to "piggyback" registration
rights with respect to their shares. Holders of 1,010,266 of these shares can
also require Broadband Sports to register their shares at any time following
180 days after the date of this prospectus, subject to certain conditions.
87
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Hambrecht & Quist LLC and Bear,
Stearns & Co. Inc. are acting as representatives, have severally agreed to
purchase, and we have agreed to sell to them, severally, the respective number
of shares of common stock set forth opposite the names of the underwriters
below:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated.................................
Hambrecht & Quist LLC.............................................
Bear, Stearns & Co. Inc. .........................................
---------
Total............................................................ 3,300,000
=========
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and accept
delivery of the shares of common stock offered hereby are subject to the
approval of certain legal matters by their counsel and to certain other
conditions, including the absence of any material change in our business, and
the receipt of certain certificates, opinions and letters from us, our counsel
and the independent auditors. The underwriters are obligated to take and pay
for all of the shares of common stock offered by this prospectus if any shares
are taken. However, the underwriters are not required to take or pay for the
share covered by the underwriters over-allotment option described below.
Morgan Stanley Dean Witter Online, Inc. is acting as a dealer in connection
with this distribution and will be the sole distributor of shares of common
stock over the Internet to its eligible account holders.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the
cover page of this prospectus and part to certain dealers at a price that
represents a concession not in excess of $ a share under the public
offering price. Any underwriters may allow, and such dealers may reallow, a
concession not in excess of $ a share to other underwriters or to certain
other dealers. After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be varied by the
representatives of the underwriters.
The following table summarizes the per share and total underwriting
discounts and commissions we will pay to the underwriters. These amounts are
equal to the difference between the initial public offering price and the
amount paid to us by the underwriters.
<TABLE>
<CAPTION>
Without With
Over-Allotment Over-Allotment
-------------- --------------
<S> <C> <C>
Per Share...................................... $ $
Total.......................................... $ $
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be approximately $1.0 million.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of 495,000
additional shares of common stock at the public offering price listed on the
cover page of this prospectus, less underwriting discounts and commissions.
88
<PAGE>
The underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
common stock offered by this prospectus. To the extent such option is
exercised, each underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of the additional
shares of common stock as the number listed next to such underwriter's name in
the preceding table bears to the total number of shares of common stock listed
next to the names of all underwriters in the preceding table.
At our request, the underwriters have reserved up to 495,000 shares of
common stock to be issued by us and offered hereby for sale, at the initial
public offering price, to directors, officers, employees, members of their
families, business associates, friends of the company and other persons with
whom we have or may seek to establish strategic relationships. The number of
shares of common stock available for sale to the general public will be
reduced to the extent these individuals purchase such reserved shares. Any
reserved shares that are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered by this
prospectus. Pursuant to the regulations of the National Association of
Securities Dealers, Inc., certain purchasers of the reserved shares may have
to agree not to sell, transfer, assign or hypothecate their shares for a
period of 90 days after the date of this prospectus.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We, the directors, officers, shareholders and certain optionholders of ours
have agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, we will not, during the period
ending 180 days after the date of this prospectus, directly or indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock,
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise, after the date of
this prospectus.
The restrictions described in the previous paragraph do not apply to:
. the sale to the underwriters of the shares of common stock to be sold in
the offering;
. the issuance by us of shares of common stock upon the exercise of an
existing option or an existing warrant or the conversion of a security
outstanding on the date of this prospectus, of which the underwriters
have been advised in writing;
. transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares; or
. issuances of certain shares of common stock or options to purchase shares
of common stock pursuant to our employee benefit plans as in existence on
the date of this prospectus.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically,
89
<PAGE>
the underwriters may over-allot in connection with the offering, creating a
short position in the common stock for their own account. In addition, to
cover over-allotments or to stabilize the price of the common stock, the
underwriters may bid for, and purchase, shares of common stock in the open
market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a dealer for distributing the common stock in the
offering if the syndicate repurchases previously distributed shares of common
stock in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the common stock above independent market levels. The
underwriters are not required to engage in these activities and may end any of
these activities at any time.
We have applied to have the shares of common stock approved for quotation on
the Nasdaq National Market under the symbol "FANS."
We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
Pricing of the Offering
Prior to this offering, there has been no public market for the common
stock. The public offering price for the shares of common stock will be
determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in determining the public
offering price will be our record of operations, our current financial
position and future prospects and our industry in general, the experience of
our management, sales, earnings and certain of our other financial and
operating information in recent periods, the price-earnings ratios, price-
sales ratios, market prices of securities and certain financial and operating
information of companies engaged in activities similar to ours. The estimated
public offering price range set forth on the cover page of this prospectus is
subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon by
Morrison & Foerster LLP, Irvine, California. Certain matters in connection
with this offering will be passed upon for the Underwriters by Cooley Godward
LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of Broadband Sports, Inc. as of
December 31, 1999 and 1998 and for the year ended December 31, 1999 and ten
months ended December 31, 1998 and the combined financial statements of the
Predecessor Companies for the year ended December 31, 1997 and the two months
ended February 27, 1998 appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
90
<PAGE>
ADDITIONAL INFORMATION
Broadband Sports has filed with the SEC a registration statement on Form S-1
under the Securities Act with respect to the shares of common stock offered
hereby. This prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules that are a part of
the registration statement which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to
Broadband Sports and the common stock, reference is made to the registration
statement and the exhibits and schedules that are a part of the registration
statement. With respect to statements contained in this prospectus as to the
contents of any agreement or other document in each instance reference is made
to the copy of such agreement or other document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference.
You may read and copy any document we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. Our SEC filings are also available to the public from the
SEC's Web site at http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934,
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms and the SEC's Web site, which is described above.
91
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Broadband Sports, Inc.
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1998 and 1999 and Pro Forma
Stockholders' Equity at December 31, 1999 (Unaudited).................... F-3
Combined Statements of Operations for the Predecessor Companies for the
Year ended December 31, 1997 and the Two months ended February 27, 1998
and the Consolidated Statements of Operations of the Company for the Ten
months ended December 31, 1998 and the Year ended December 31, 1999...... F-4
Combined Statements of Cash Flows for the Predecessor Companies for the
Year ended December 31, 1997 and the Two months ended February 27, 1998
and the Consolidated Statements of Cash Flows of the Company for the Ten
months ended December 31, 1998 and the Year ended December 31, 1999...... F-5
Combined Statements of Owners' Equity for the Predecessor Companies for
the Year ended December 31, 1997 and the Two months ended February 27,
1998 and the Consolidated Statements of Stockholders' (Deficit) Equity of
the Company for the Ten months ended December 31, 1998 and the Year ended
December 31, 1999........................................................ F-6
Notes to Consolidated and Combined Financial Statements................... F-7
Schedule Filed as Part of This Report
Schedule II -- Valuation and Qualifying Accounts.......................... F-25
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Broadband Sports, Inc.
We have audited the accompanying consolidated balance sheets of Broadband
Sports, Inc. (the "Company") as of December 31, 1999 and 1998 and the related
consolidated statements of operations, stockholders' (deficit) equity, and
cash flows of the Company for the year ended December 31, 1999 and the ten
months ended December 31, 1998 and the combined statements of operations,
owners' equity, and cash flows of the Predecessor Companies for the year ended
December 31, 1997 and the two months ended February 27, 1998. Our audits also
included the financial statement schedule listed in the index on page F-1.
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at December
31, 1999 and 1998 and the results of operations and cash flows of the Company
for the year ended December 31, 1999 and the ten months ended December 31,
1998 and the results of operations and cash flows of the Predecessor Companies
for the year ended December 31, 1997 and the two months ended February 27,
1998, in conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Los Angeles, California
February 9, 2000
F-2
<PAGE>
Broadband Sports, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Pro Forma
Cash and
Stockholders'
Equity at
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ -------------
(Unaudited)
(See Note 1)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents........... $ 212,997 $ 18,373,878 $ 29,661,107
============
Investments......................... 51,588 285,688
Accounts receivable, net............ 262,208 1,947,310
Advances and deferred incentives.... 421,414 990,705
Inventory........................... 17,223 425,287
Prepaid expenses and other current
assets............................. 33,929 1,993,482
----------- ------------
Total current assets.............. 999,359 24,016,350
Fixed assets, net..................... 200,099 2,125,678
Goodwill, net......................... 633,762 524,760
Advances and deferred incentives...... 503,509 2,348,538
Other assets.......................... 19,324 155,074
----------- ------------
Total assets...................... $ 2,356,053 $ 29,170,400
=========== ============
Liabilities and stockholders'
(deficit) equity
Current liabilities:
Accounts payable.................... $ 153,364 $ 668,149
Accrued liabilities................. 438,540 2,937,545
Deferred revenues................... 4,000 --
----------- ------------
Total current liabilities......... 595,904 3,605,694
Revolving loan due to stockholder..... 1,998,085 4,468,085
Capital lease obligation.............. -- 245,918
Commitments and contingencies (Note
10)..................................
Mandatorily redeemable series A
preferred stock, $0.001 par value,
2,000,000 shares authorized, issued
and outstanding December 31, 1998 and
1999; none issued or outstanding pro
forma................................ 2,150,000 2,330,000 $ --
Stockholders' equity (deficit):
Series B convertible preferred
stock; $0.001 par value, no shares
authorized December 31, 1998;
34,000,000 shares authorized,
29,166,663 shares issued and
outstanding December 31, 1999; no
shares authorized, issued or
outstanding pro forma.............. -- 16,519,487 --
Series C convertible preferred
stock; $0.001 par value, no shares
authorized December 31, 1998,
20,000,000 shares authorized,
18,550,000 issued and outstanding
December 31, 1999; no shares
authorized, issued or outstanding
pro forma.......................... -- 14,840,000 --
Common stock, $0.001 par value,
235,294,118 shares authorized,
21,703,750 issued and outstanding
December 31, 1998; 306,000,000
shares authorized, 24,742,731
issued and outstanding December 31,
1999; 30,923,639 issued and
outstanding pro forma.............. 21,704 24,743 30,924
Additional paid-in capital.......... 3,750,328 31,394,026 76,364,561
Receivable from stockholders........ -- (16,700,906) (16,700,906)
Deferred stock compensation......... (1,804,189) (5,404,567) (5,404,567)
Accumulated deficit................. (4,355,779) (22,152,080) (22,152,080)
----------- ------------ ------------
Total stockholders' (deficit)
equity........................... (2,387,936) 18,520,703 32,137,932
----------- ------------ ------------
Total liabilities and
stockholders' (deficit) equity... $ 2,356,053 $ 29,170,400 $ 40,457,629
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Broadband Sports, Inc.
Consolidated Statements of Operations
and the Predecessor Companies Combined Statements of Operations
<TABLE>
<CAPTION>
Predecessor Companies
-------------------------
Two months Ten months
Year ended ended ended Year ended
December 31, February 27, December 31, December 31,
1997 1998 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues.................. $1,873,930 $ 507,224 $ 2,718,628 $ 8,734,182
Cost of revenues,
excluding $0, $0,
$528,413 and $119,483 of
amortization of deferred
stock compensation....... 1,300,062 296,401 2,035,669 6,363,939
---------- --------- ----------- ------------
Gross profit ............. 573,868 210,823 682,959 2,370,243
Operating expenses:
Sales and marketing,
excluding $296,815, $
129,971, $517,128 and
$819,795 of
amortization of
deferred stock
compensation and
deferred incentives.... 154,487 69,290 592,102 7,244,393
Product development,
excluding $116,695,
$17,854, $107,643 and
$487,587 of
amortization of
deferred stock
compensation........... 22,000 8,822 136,682 1,269,746
General and
administrative,
excluding $0, $1,788,
$1,260,133 and
$2,355,036 of
amortization of
deferred stock
compensation........... 671,946 136,117 1,536,967 7,000,948
Depreciation............ 15,195 3,678 43,246 489,324
Amortization of
goodwill............... -- -- 243,754 363,076
Amortization of deferred
stock compensation and
deferred incentives.... 413,510 149,613 2,413,317 3,781,901
---------- --------- ----------- ------------
Total operating expenses.. 1,277,138 367,520 4,966,068 20,149,388
---------- --------- ----------- ------------
Operating loss............ (703,270) (156,697) (4,283,109) (17,779,145)
Interest income........... 3,056 -- -- 345,343
Interest expense.......... -- -- (66,962) (362,499)
Other expense............. -- -- (5,708) --
---------- --------- ----------- ------------
Net loss.................. $ (700,214) $(156,697) $(4,355,779) $(17,796,301)
========== ========= =========== ============
Historical loss per
share--basic and
diluted.................. $ (.20) $ (.82)
=========== ============
Pro forma loss per share--
basic and diluted ....... $ (.20) $ (.75)
=========== ============
Weighted average common
and common equivalent
shares outstanding
Historical.............. 21,703,750 21,782,753
=========== ============
Pro forma............... 21,703,750 23,728,835
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Broadband Sports, Inc.
Consolidated Statements of Cash Flows
and the Predecessor Companies Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Predecessor Companies
-------------------------
Two months Ten months Year
Year ended ended ended ended
December 31, February 27, December 31, December 31,
1997 1998 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating activities
Net loss.................. $(700,214) $(156,697) $(4,355,779) $(17,796,301)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization of
goodwill................ 15,195 3,678 287,000 852,400
Amortization of deferred
stock compensation and
deferred incentives..... 413,510 149,613 2,413,317 3,781,901
Stock compensation
expense................. -- -- 8,519 --
Changes in operating
assets and liabilities:
Accounts receivable..... (172,497) 16,643 (79,556) (1,685,102)
Inventory............... (4,002) (1,925) (11,296) (408,064)
Prepaid expenses and
other assets........... (37,619) 12,000 (22,514) (1,592,400)
Accounts payable........ 68,763 45,596 39,005 514,785
Accrued liabilities..... 149,687 (61,605) 275,000 2,054,452
Deferred revenue........ (141,000) (43,500) 1,000 (4,000)
--------- --------- ----------- ------------
Net cash used in operating
activities............... (408,177) (36,197) (1,445,304) (14,282,329)
Investing activities
Purchase of property and
equipment................ (39,029) (5,278) (190,113) (2,079,082)
Acquisitions, net of cash
acquired................. -- -- (2,198,083) (256,074)
Purchase of investments... -- -- (51,588) (234,100)
--------- --------- ----------- ------------
Net cash used in investing
activities............... (39,029) (5,278) (2,439,784) (2,569,256)
Financing activities
Capital contributions..... 242,737 -- -- --
Issuance of common stock.. -- -- 100,000 3,032,979
Issuance of mandatorily
redeemable preferred
stock.................... -- -- 2,000,000 --
Issuance of convertible
preferred stock.......... -- -- -- 29,509,487
Proceeds from revolving
loan due to stockholder.. -- -- 1,998,085 2,470,000
--------- --------- ----------- ------------
Net cash provided by
financing activities..... 242,737 -- 4,098,085 35,012,466
--------- --------- ----------- ------------
Net increase (decrease) in
cash and cash
equivalents.............. (204,469) (41,475) 212,997 18,160,881
Cash and cash equivalents
at beginning of the
period................... 257,825 53,356 -- 212,997
--------- --------- ----------- ------------
Cash and cash equivalents
at end of the period..... $ 53,356 $ 11,881 $ 212,997 $ 18,373,878
========= ========= =========== ============
Supplemental disclosure of
cash flow information:
Cash paid for:
Interest................ $ -- $ -- $ 33,605 $ 351,231
========= ========= =========== ============
Income taxes............ $ -- $ -- $ -- $ 2,400
========= ========= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Broadband Sports, Inc.
Consolidated Statements of Stockholders' (Deficit) Equity and the
Predecessor Companies Combined Statements of Owners' Equity
<TABLE>
<CAPTION>
Series C Series B
Preferred Stock Preferred Stock Common Stock Additional Deferred
---------------------- ---------------------- ------------------ Paid-in Stock Owners'
Shares Amount Shares Amount Shares Amount Capital Compensation Equity
---------- ----------- ---------- ----------- ---------- ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1997.. -- $ -- -- $ -- -- $ -- $ -- $ -- $ 909,257
Capital
contributions... -- -- -- -- -- -- -- -- 242,737
Deferred
incentives...... -- -- -- -- -- -- -- -- 1,051,034
Deferred stock
compensation.... -- -- -- -- -- -- -- (504,700) 504,700
Amortization of
deferred stock
compensation.... -- -- -- -- -- -- -- 127,872 --
Net loss........ -- -- -- -- -- -- -- -- (700,214)
---------- ----------- ---------- ----------- ---------- ------- ----------- ----------- ----------
Balance at
December 31,
1997............. -- -- -- -- -- -- -- (376,828) 2,007,514
Deferred
incentives...... -- -- -- -- -- -- -- -- 51,833
Deferred stock
compensation.... -- -- -- -- -- -- -- (61,800) 61,800
Amortization of
deferred stock
compensation.... -- -- -- -- -- -- -- 42,743 --
Net loss........ -- -- -- -- -- -- -- -- (156,697)
---------- ----------- ---------- ----------- ---------- ------- ----------- ----------- ----------
Balance at
February 27,
1998............. -- $ -- -- $ -- -- $ -- $ -- $ (395,885) $1,964,450
========== =========== ========== =========== ========== ======= =========== =========== ==========
Issuance of
common stock.... -- $ -- -- $ -- 20,000,000 $20,000 $ 80,000 $ --
Issuance of
common stock.... -- -- -- -- 1,703,750 1,704 6,815 --
Deferred
incentives...... -- -- -- -- -- -- 52,833 --
Deferred stock
compensation.... -- -- -- -- -- -- 3,760,680 (3,760,680)
Amortization of
deferred stock
compensation.... -- -- -- -- -- -- -- 1,956,491
Accretion of
dividends
payable for
mandatorily
redeemable
series A
preferred
stock........... -- -- -- -- -- -- (150,000) --
Net loss........ -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ---------- ------- ----------- -----------
Balance at
December 31,
1998............. -- -- -- -- 21,703,750 21,704 3,750,328 (1,804,189)
Issuance of
common stock.... -- -- -- -- 3,038,981 3,039 18,230,846 --
Issuance of
Series B
convertible
Preferred
Stock........... -- -- 29,166,663 16,519,487 -- -- -- --
Issuance of
Series C
convertible
Preferred
Stock........... 18,550,000 14,840,000 -- -- -- -- -- --
Issuance of
warrants........ -- -- -- -- -- -- 252,904 --
Deferred
incentives...... -- -- -- -- -- -- 2,585,308 --
Deferred stock
compensation.... -- -- -- -- -- -- 6,754,640 (6,754,640)
Amortization of
deferred stock
compensation.... -- -- -- -- -- -- -- 3,154,262
Accretion of
dividends
payable for
mandatorily
redeemable
series A
preferred
stock........... -- -- -- -- -- -- (180,000) --
Net loss........ -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ---------- ------- ----------- -----------
Balance at
December 31,
1999............. 18,550,000 $14,840,000 29,166,663 $16,519,487 24,742,731 $24,743 $31,394,026 $(5,404,567)
========== =========== ========== =========== ========== ======= =========== ===========
<CAPTION>
Receivable
from Accumulated
Stockholders Deficit Total
------------- ------------- -------------
<S> <C> <C> <C>
Balance at
January 1, 1997.. $ -- $ -- $ 909,257
Capital
contributions... -- -- 242,737
Deferred
incentives...... -- -- 1,051,034
Deferred stock
compensation.... -- -- --
Amortization of
deferred stock
compensation.... -- -- 127,872
Net loss........ -- -- (700,214)
============ ------------ ------------
Balance at
December 31,
1997............. -- -- 1,630,686
Deferred
incentives...... -- -- 51,833
Deferred stock
compensation.... -- -- --
Amortization of
deferred stock
compensation.... -- -- 42,743
Net loss........ -- -- (156,697)
============ ------------ ------------
Balance at
February 27,
1998............. $ -- $ -- $ 1,568,565
============ ============ ============
Issuance of
common stock.... $ -- $ -- $ 100,000
Issuance of
common stock.... -- -- 8,519
Deferred
incentives...... -- -- 52,833
Deferred stock
compensation.... -- -- --
Amortization of
deferred stock
compensation.... -- -- 1,956,491
Accretion of
dividends
payable for
mandatorily
redeemable
series A
preferred
stock........... -- -- (150,000)
Net loss........ -- (4,355,779) (4,355,779)
------------ ------------ ------------
Balance at
December 31,
1998............. -- (4,355,779) (2,387,936)
Issuance of
common stock.... (15,200,906) -- 3,032,979
Issuance of
Series B
convertible
Preferred
Stock........... -- -- 16,519,487
Issuance of
Series C
convertible
Preferred
Stock........... (1,500,000) -- 13,340,000
Issuance of
warrants........ -- -- 252,904
Deferred
incentives...... -- -- 2,585,308
Deferred stock
compensation.... -- -- --
Amortization of
deferred stock
compensation.... -- -- 3,154,262
Accretion of
dividends
payable for
mandatorily
redeemable
series A
preferred
stock........... -- -- (180,000)
Net loss........ -- (17,796,301) (17,796,301)
------------ ------------ ------------
Balance at
December 31,
1999............. $(16,700,906) $(22,152,080) $ 18,520,703
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements
December 31, 1999
1. Company Formation, Business and Basis of Presentation
Broadband Sports, Inc. ("Broadband Sports" or the "Company") was
incorporated in the state of Delaware on February 20, 1998 and commenced
operations on February 28, 1998. Athlete Direct LLC began operations in
September 1996. Pro Sports Xchange LLC began operations in February 1996.
In connection with the formation of Broadband Sports, Athlete Direct, Inc.
("Athlete Direct") and Pro Sports Xchange, Inc. ("Pro Sports Xchange") were
incorporated on February 27, 1998. On February 27, 1998, Athlete Direct LLC
was merged with and into Athlete Direct, Inc. and each 1% membership interest
was exchanged for 700,000 shares of common stock of Athlete Direct, Inc. On
February 27, 1998, Pro Sports Xchange LLC was merged with and into Pro Sports
Xchange, Inc. and each 1% membership interest was exchanged for 1,000,000
shares of common stock of Pro Sports Xchange, Inc. On February 27, 1998,
Broadband Sports purchased all of the outstanding common stock of Athlete
Direct, Inc. and Pro Sports Xchange, Inc. for a combined purchase price of
$2,209,964 (including acquisition costs of $169,964).
The acquisitions have been accounted for as purchase transactions;
accordingly, the fair market value assigned in each acquisition was allocated
to the net assets acquired based on their estimated fair market values. The
determination of the aggregate cost in excess of net assets acquired is set
forth below:
<TABLE>
<S> <C>
Current assets.................................................. $ 765,012
Non-current assets.............................................. 848,335
Cost in excess of net assets acquired........................... 877,516
Current liabilities............................................. 277,899
Non-current liabilities......................................... 3,000
</TABLE>
The cost in excess of net assets acquired in the acquisitions has been
allocated to goodwill and is being amortized using the straight-line method
over three years. The accompanying consolidated financial statements include
the results of operations since the effective date of the acquisitions.
Through its wholly-owned subsidiary, Pro Sports Xchange (now branded as
"SportsWritersDirect"), the Company, through its network of local and regional
sports writers, produces original, in-depth content covering major
professional sports (e.g. football, baseball, basketball, and hockey) as well
as major Division I College Sports (e.g. basketball and football). Through its
wholly owned subsidiary, Athlete Direct (now branded as "AthletesDirect"), the
Company develops and aggregates individual athlete sites under the
AthletesDirect branded network, creating an online destination for sports fans
to obtain information about, interact with, and purchase products relating to
their favorite athletes. The Company currently derives its revenue from four
major revenue streams: content syndication, advertising, electronic commerce
and subscriptions.
On February 26, 1999, the Company purchased certain assets and liabilities
of Manna Mir Research, Inc. ("Manna Mir") for $225,000 in cash and contingent
consideration of up to an additional $205,000. Manna Mir operates a fantasy
sports-related Web site under the name RotoNews.
F-7
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
1. Company Formation, Business and Basis of Presentation--(Continued)
The Company has only a limited operating history and its prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets. These risks include, among
others, the Company's ability to provide sports-related content and commerce,
maintain existing and develop new strategic relationships, successfully market
the www.athletesdirect.com Web site, achieve and maintain projected levels of
online traffic, build an electronic commerce infrastructure, increase its
fulfillment capabilities and extend its brands.
Basis of Presentation
The consolidated financial statements as of December 31, 1998 and 1999 and
for the ten months ended December 31, 1998 and the year ended December 31,
1999, include the accounts of Broadband Sports and its majority-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
The combined financial statements of Athlete Direct LLC and Pro Sports
Xchange LLC (the "Predecessor Companies") for the year ended December 31, 1997
and the two months ended February 27, 1998, have been prepared on a combined
basis due to the respective companies' common ownership. All capital
contributions to the Predecessor Companies from the LLC members have been
recorded as owner's equity in stockholders' equity. Earnings per share have
not been presented for the Predecessor Companies as the presentation would not
be meaningful due to the significant change in the capital structure of the
Predecessor Companies following their acquisitions. All significant balances
and transactions between the Predecessor Companies have been eliminated in the
combined financial statements. The financial statements of the Predecessor
Companies do not necessarily reflect the results of operations or financial
position that would have existed had the companies operated as a single
consolidated entity.
The pro forma stockholders' equity at December 31, 1999 has been presented
to reflect the conversion of 18,550,000 shares of series C convertible
preferred stock and 29,166,663 shares of series B convertible preferred stock
into an aggregate of 4,771,666 shares of common stock, the sale of 680,442
shares of common stock to DIRECTV for approximately $8.2 million in April
2000, the sale of 416,667 shares of common stock to an accredited investor for
approximately $5.0 million in April 2000, the exercise of options to purchase
312,133 shares of common stock for $452,000, and the redemption of the
mandatorily redeemable Series A preferred stock in connection with the change
in capitalization that will occur upon the occurrence of an initial public
offering with net proceeds to the Company that exceed $15,000,000 (for Series
B and Series C conversion) or $10,000,000 (for Series A redemption).
2. Significant Accounting Policies
Revenue Recognition
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition" which is effective
immediately. Staff Accounting Bulletin 101
F-8
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
2. Significant Accounting Policies--(Continued)
summarizes the staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. Management believes
that the issuance of the SAB will have no effect on the way the Company
reports revenues in the financial statements.
Content syndication revenue is recognized over the period of the content
syndication agreement as the Company delivers its content. Advertising revenue
is recognized ratably over the period in which the advertising is displayed,
provided that no significant obligations remain and collection of the
resulting receivable is probable. Company obligations may include guarantees
of a minimum number of "impressions" or times that an advertisement appears in
page views downloaded by users. In the event impressions are not delivered in
accordance with the contractual terms, the Company will provide additional
impressions to make up the shortfall. To date all impressions have been
delivered in accordance with the contractual commitments. Revenues from
electronic commerce is recognized once the product has been shipped and
collection of the resulting receivable is probable. Subscription revenue is
recognized ratably over the subscription period, which is often a professional
sports season. Subscriptions are charged directly to the customers' credit
card and are billed in advance. Accordingly, amounts received for which
services have not yet been provided are recorded as deferred revenues. During
the year ended December 31, 1999, the Company entered into certain agreements
whereby it received nonmonetary benefits. Revenues were recognized at fair
value based on the Company's history of receiving cash for similar
transactions. (See Note 11).
Advances
The Company and the Predecessor Companies have entered into licensing,
royalty, distribution, and consulting agreements with various online sites,
vendors, athletes and sports personalities. These agreements provide for a
specified percentage of advertising and merchandising revenue to be paid to
these athletes and sports personalities from whose web site the revenue is
derived. In addition, some of these agreements provide for advances of these
percentages or royalties. In some cases, these advances are paid before the
advertising and merchandising revenues are received and the marketing services
are provided. These advances are recoupable against future royalties, and the
Company records them as advances on its balance sheet and amortizes them
equally over the term of the contracts. The portion of the advances
attributable to the percentage of advertising and merchandising revenues
earned are recognized as a cost of revenues and any excess amortization is
recognized as sales and marketing expense. Under such agreements, these
individuals are required to provide various marketing and promotional
services. These marketing and promotional services include participating in
online and offline marketing campaigns, providing use of their image and voice
in our marketing efforts, making live appearances at which they promote their
involvement with the Company and providing authentic signatures on sports
related products the Company can use for promotional purposes.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
F-9
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
2. Significant Accounting Policies--(Continued)
Investments
At December 31, 1998 and 1999, short-term investments consist of debt
instruments with maturity dates less than one year. The Company accounts for
investments in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity
Securities. The Company's short-term investments are classified as held-to-
maturity as of the balance sheet date and are reported at amortized cost.
Inventory
Inventory consists primarily of licensed sports-related merchandise and
collectibles and is stated at the lower of cost, determined on a first-in,
first-out basis, or market.
Property and Equipment
Property, equipment and leasehold improvements are recorded at cost and
depreciated using the straight-line method over its estimated useful life,
ranging from three to seven years. Property and equipment consist primarily of
computers, software, furniture, and equipment. Upon the sale or retirement of
assets, the cost and accumulated depreciation are removed from the account and
any gain or loss is recognized. Maintenance and repairs are charged to expense
when incurred.
Product Development
Product development expenses consist of expenses incurred by the Company in
the development and creation of its Web sites. Product development expenses
include compensation and related expenses, and costs incurred in developing
features and functionality of the service. Product development costs are
expensed as incurred.
Advertising
Advertising costs are expensed as incurred. The Company incurred advertising
costs of $2,000, $345,000 and $612,000 for the year ended December 31, 1997,
the ten months ended December 31, 1998, and the year ended December 31, 1999,
respectively.
Income Taxes
Prior to the acquisitions, the federal and state taxable income or loss of
Athlete Direct LLC and Pro Sports Xchange LLC were recognized on the separate
tax returns of the LLC members. Current and deferred taxes have not been
provided on a pro forma basis because the effects are insignificant.
The Company adopted SFAS No. 109 "Accounting for Income Taxes" on February
20, 1998. Accordingly, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled.
F-10
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
2. Significant Accounting Policies--(Continued)
Impairment of Long-Lived Assets and Intangibles
In accordance with SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and Long-Lived Assets to Be Disposed Of," the Company
periodically reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows (on an undiscounted basis) expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Loss Per Share
Historical net loss per share is computed using the weighted average number
of shares of common stock and common stock equivalents outstanding. Due to the
anti-dilutive effects of common stock equivalents, historical basic and
diluted loss per share are the same.
Pro forma loss per share gives effect to the conversion of the series B and
series C convertible preferred stock into an aggregate of 4,771,666 shares of
common stock as having been outstanding from the issuance date of May 25, 1999
and November 24, 1999, respectively.
Stock Based Compensation
The Company is subject to SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). As allowed by SFAS No. 123, the Company
accounts for stock based compensation to employees in accordance with APB 25,
"Accounting for Stock Issued to Employees." In cases where exercise prices are
less than the fair value as of the grant date, compensation expense is
recognized over the vesting period. The Company accounts for options issued to
its vendors and non-employees based upon the fair value of the services
received or the fair value of options, whichever is more determinable.
Unaudited pro forma financial information, assuming that the Company had
adopted the measurement standards of SFAS No. 123, is included in Note 9.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and accounts receivable. Cash is
deposited with high-credit, quality financial institutions and may exceed
F.D.I.C. insured limits. The Company's accounts receivable are generally
unsecured and are derived from revenue earned from customers located in the
U.S. and are denominated in U.S. dollars.
America Online, Inc. ("AOL") accounted for approximately 47%, 49%, 46% and
44% of revenue for the year ended December 31, 1997, the two months ended
February 27, 1998, the ten months ended December 31, 1998, and the year ended
December 31, 1999, respectively. AOL accounted for approximately 59% and 14%
of accounts receivable at December 31, 1998 and 1999, respectively.
F-11
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
2. Significant Accounting Policies--(Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Segments and Related Information
The Company views its operations as principally one segment and the
financial information disclosed herein materially represents all of the
financial information related to the Company's principal operating segment.
The Company manages its media divisions as one combined entity, allocates
resources and analyzes information used to operate the business on a combined
basis.
Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income, establishes the standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income includes all changes in equity (net assets) during a
period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustments and unrealized gains/losses on available-for-
sale securities. The Company had no comprehensive income items to report for
any of the periods presented.
3. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Computers and equipment........................... $138,353 $1,609,290
Software and computer applications................ 96,036 669,299
Furniture and fixtures............................ 8,956 12,473
Capital leases.................................... -- 333,821
Leasehold improvements............................ -- 3,783
-------- ----------
243,345 2,628,666
Less accumulated depreciation and amortization.... (43,246) (502,988)
-------- ----------
$200,099 $2,125,678
======== ==========
</TABLE>
During the ten months ended December 31, 1998 and the year ended December
31, 1999, the Company wrote off fully amortized fixed assets with a gross
value of $21,653 and $29,582, respectively.
F-12
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
4. Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Accrued compensation............................... $ -- $ 341,785
Initial public offering costs...................... -- 501,432
Professional fees.................................. 69,030 464,625
Accrued royalties and content costs................ 317,906 325,630
Accrued facility costs............................. -- 678,136
Other.............................................. 51,604 625,937
-------- ----------
$438,540 $2,937,545
======== ==========
</TABLE>
5. Revolving Loan Due to Stockholder
On February 27, 1998, the Company entered into a Revolving Loan Agreement
("Revolving Loan") with a stockholder whereby the stockholder made available
to the Company $4,500,000. All amounts borrowed under the Revolving Loan are
secured by, among other things, accounts and notes receivable, inventory,
equipment, licensing agreements, and intellectual property of the Company.
Amounts borrowed under the Revolving Loan bear interest at the prime rate plus
1% (9.5% at December 31, 1999) and are payable monthly on the last day of the
month. All amounts borrowed under the Revolving Loan mature and are payable
the earlier of February 27, 2003 or upon the occurrence of other
reorganization transactions including an initial public offering which results
in net proceeds to the Company of at least $10 million. The Revolving Loan
contains covenants and other restrictions with which the Company must comply,
including, among others, restrictions on additional indebtedness and payment
of dividends. The Company was in compliance with these covenants at December
31, 1999. As of December 31, 1999, the Company had $31,915 available to be
drawn under the revolving loan agreement.
6. Preferred Stock
Mandatorily Redeemable Series A Preferred Stock
On February 27, 1998, the Company entered into a Series A Preferred Stock
Purchase Agreement with a shareholder whereby the Company agreed to sell and
issue to the shareholder 2,000,000 shares of the Company's Mandatorily
Redeemable Series A Preferred Stock ("Series A") at a purchase price of $1.00
per share. The Series A has no voting rights except on items that directly may
adversely impact the Series A stockholders. Dividends accumulate at $0.09 per
share per year from the date of issuance and are payable upon the occurrence
of a liquidation event, as defined. The Series A has a liquidation preference
of $1.00 per share, plus all declared, or undeclared but accumulated and
unpaid dividends on such shares. The Series A shall be redeemed for $1.00 per
share plus all declared, or undeclared but accumulated and unpaid dividends,
upon the occurrence of either i) a sale of a 50% interest of the Company, or
ii) an initial public offering of net proceeds of at least $10 million. The
Company increased the carrying value of the Series A by $150,000 and $180,000
for the ten months
F-13
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
6. Preferred Stock--(Continued)
ended December 31, 1998 and the year ended December 31, 1999, respectively, to
account for the accretion of undeclared but accumulated and unpaid dividends.
Series B Convertible Preferred Stock
In May 1999, the Company issued the series B convertible preferred stock
("Series B"), $0.001 par value which resulted in net proceeds of approximately
$16,500,000, representing 29,166,663 shares issued and outstanding at $0.60
per share. The holders of shares of Series B are entitled to receive dividends
at the rate of $0.054 per share per year if declared by the Board of
Directors. Such dividends are not cumulative. Each share of Series B is
convertible into fully paid and nonassessable shares of common stock on a
ratio of one Series B share for one tenth of a common share. In the event of a
public offering of the Company's common stock that exceeds $15,000,000 all
outstanding shares of series B preferred stock will automatically be converted
into common stock.
Series C Convertible Preferred Stock
In November 1999, the Company issued the series C convertible preferred
stock ("Series C"), $0.001 par value, consisting of 20,000,000 authorized
shares. The holders of shares of Series C are entitled to receive dividends at
the rate of $0.072 per share per year if declared by the Board of Directors.
Such dividends are not cumulative. The Company issued the Series C resulting
in net proceeds of $14,490,000, representing 18,550,000 shares issued and
outstanding at $0.80 per share. Each share of Series C is convertible to fully
paid and nonassessable shares of common stock on a ratio of one Series C share
for one tenth of a common share. In the event of a public offering of the
Company's common stock which results in net proceeds to the Company of at
least $15,000,000, all outstanding shares of Series C will automatically be
converted into common stock. The Company issued 4,375,000 shares valued at
$350,000 to third parties for services rendered.
Upon the occurrence of a liquidation event, as defined, any remaining assets
of the Company, after payment in full of the liquidation preference of the
Series A, will be distributed pro rata to holders of the Series B, Series C
preferred stock and common stock based on the number of shares of common stock
held by each (assuming full conversion of the Series B and the Series C).
7. Stockholders' Equity
On February 27, 1998, the Board of Directors approved the employment
agreements of two employees which included the issuance of 1,703,750 shares of
common stock on April 1, 1998 at a purchase price of $8,519. The fair value of
the shares issued in exchange for services provided to the Company was
recorded as compensation expense.
On December 4, 1998, the Company's Articles of Incorporation were amended
increasing the amount of shares the Company is authorized to issue to
235,294,118 shares reflecting a 20-for-1 common stock split approved by the
Board of Directors. Par value remained unchanged at $0.001 per share.
F-14
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
7. Stockholders' Equity--(Continued)
In May 1999, the Company amended its Certificate of Incorporation to, among
other matters, increase the authorized number of shares of common and
preferred stock to 300,000,000 and 50,000,000, respectively. In November,
1999, the Company further amended its Certificate of Incorporation to increase
the authorized number of shares of common and preferred stock to 306,000,000
and 56,000,000, respectively.
In November, 1999, the Company entered into an employment agreement with its
Chairman and Chief Executive Officer. In connection with the employment
agreement, the Company has issued 3,038,981 shares of common stock at $6.00
per share. The purchase price for the shares was paid in cash and through
issuance of a secured recourse promissory note ("Promissory Note") by the
Company in the amount of $15,200,906. The Promissory Note bears interest at a
rate of 6.02% per year. Principal and interest payments are due in full no
later than on the ten year anniversary of the Promissory Note. Of the
3,038,981 shares issued, 758,844 shares vested immediately and the remaining
2,280,137 shares will vest in equal monthly installments over the next four
years, allowing for certain exceptions.
The Company's Board of Directors has authorized management to file a
registration statement with the Securities and Exchange Commission to permit
the Company to sell shares of its common stock to the public. The Company's
Board of Directors intends to declare a 1 to 10 reverse stock split for each
share of common stock then outstanding to become effective upon the occurrence
of an initial public offering. Accordingly, the accompanying financial
statements and footnotes have been retroactively restated to reflect the
reverse stock split.
8. Income Taxes
The Predecessor Company was formed as a limited liability company and was
treated as a partnership for income tax purposes. As such, the individual LLC
members recorded on their individual tax returns their allocated portion of
federal and state taxable income and expenses and accordingly the Predecessor
Companies were not subject to federal and state income taxation.
The Company did not provide an income tax benefit for any of the periods
presented because it has experienced operating losses since inception. As a
result of the net operating losses, the provision for income taxes consists
solely of minimum state taxes which has been included in general and
administrative expense.
F-15
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
8. Income Taxes--(Continued)
The following is a reconciliation of the statutory federal income tax rate
to the Company's effective income tax rate.
<TABLE>
<CAPTION>
Ten months For the Year
ended ended
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Statutory federal income tax benefit............... (34)% (34)%
State income tax benefit........................... (2) (5)
Valuation allowance................................ 17 32
Non-deductible stock compensation.................. 16 6
Non-deductible goodwill amortization............... 3 1
--- ---
-- % -- %
=== ===
</TABLE>
The components of deferred tax assets and related valuation allowance are as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
----------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................... $ 648,000 6,030,000
Stock compensation................................... 363,000 1,083,000
Other................................................ 120,000 456,000
----------- ----------
1,131,000 7,569,000
Less valuation allowance............................. (1,131,000) (7,569,000)
----------- ----------
Net deferred tax assets................................ $ -- $ --
=========== ==========
</TABLE>
Due to the uncertainty surrounding the timing of realizing the net deferred
tax assets in future tax returns, the Company has placed a valuation allowance
equal to its net deferred tax assets.
At December 31, 1998 and 1999, the Company has net operating losses for both
federal and state income tax purposes of approximately $1.6 million and $15.0
million respectively, which are available to offset future taxable income, if
any, through 2020 and 2006, respectively.
9. Equity Incentive Plan
On December 4, 1998, the Board of Directors and stockholders of the Company
adopted the 1998 Equity Incentive Plan (the "Equity Incentive Plan"). The
Incentive Plan provides for the granting, at the discretion of an
administrator as appointed by the Board of Directors, of up to 15% of the
number of shares of the Company's common stock authorized for issuance. Each
grant of options under the Equity Incentive Plan vest on a case-by-case basis
as approved by the administrator, generally over a range of two to eight years
from the date of grant and expire not more than 10 years from the date of
grant.
F-16
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
9. Equity Incentive Plan--(Continued)
In January 2000, the Board of Directors and stockholders approved the 2000
Stock Incentive Plan (the "Stock Incentive Plan"). In January 2000, a total of
5,900,975 shares of common stock were reserved for issuance under the 2000
Stock Incentive Plan. This number will be increased annually by a number equal
to the lesser of three percent of the number of shares of common stock
outstanding as of December 31 of the immediately preceding calendar year or a
number to be determined by the Company's Board of Directors. The maximum term
of any stock option granted under the Stock Incentive Plan is ten years, with
certain exceptions. Employee grants generally become exercisable at the rate
of 25% per year over four years; non-employee grants generally become
exercisable at the rate of 20% per year over five years. The Stock Incentive
Plan will terminate in 2010, unless earlier terminated by the Board of
Directors.
In January 2000, the Board of Directors and stockholders approved the 2000
Employee Stock Purchase Plan (the "Stock Purchase Plan"). An aggregate of
400,000 shares of common stock were reserved for issuance under the Stock
Purchase Plan and made available for purchase thereunder, subject to
adjustment in the event of a stock split, stock dividend or other similar
change in the common stock or the Company's capital structure. All of the
Company's employees whose customary employment is for more than five months in
any calendar year and more than 20 hours per week are eligible to participate
in the Stock Purchase Plan.
Deferred stock compensation for employees and deferred incentives for non-
employees represent the fair value of options that have been granted to
employees and non-employees during 1998 and 1999. Such amounts were recorded
as deferred stock compensation in stockholders' equity for employees and in
assets as advances and deferred incentives for non-employees with the credit
going to additional paid in capital. The Company calculated the fair value of
each option to non-employees on the date of grant using an option pricing
model as prescribed by SFAS No. 123. The fair value of options granted to
non-employees is evenly amortized as an expense over the period the service is
provided.
All options granted during 1998 and 1999, except for the options granted at
an exercise price equal to the initial public offering price, were granted at
an exercise price less than the market price of the Company's common stock.
Options granted in 1998 and 1999 of 13,000 and 46,700, respectively, were
granted at an exercise price equal to the initial public offering price. For
the purpose of recognizing deferred compensation, the Company used an assumed
initial public offering price of $9.00 for the market value of the Company's
common stock. The weighted average fair value of options granted during 1998
and 1999 is as follows:
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
------ ------
<S> <C> <C>
Exercise price was less than the
the market price................................................ $5.30 $ 6.78
Exercise price was greater than
the market price................................................ 5.30 7.20
</TABLE>
F-17
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
9. Equity Incentive Plan--(Continued)
Amounts recorded for options granted to employees represent the difference
between the grant price and the fair value of the Company's common stock based
on a recent common stock equity transaction. The following table outlines
total deferred stock compensation for employees and deferred incentives for
non-employees for all periods presented:
<TABLE>
<CAPTION>
Predecessor Companies
-------------------------
Two months Ten months
Year ended ended ended Year ended
December 31, February 27, December 31, December 31,
1997 1998 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Employees............... $ 504,700 $ 61,800 $3,364,795 $6,754,640
Non-employees........... 1,051,034 51,833 52,833 2,585,308
---------- -------- ---------- ----------
Total................. $1,555,734 $113,633 $3,417,628 $9,339,948
========== ======== ========== ==========
</TABLE>
The above table excludes $395,885 of deferred compensation for employees
assumed in the acquisition of the predecessor companies.
All amortization of deferred stock compensation related to employees and
deferred incentives related to non-employees has been aggregated and shown as
a separate line item in the statements of operations.
A summary of changes in outstanding options under the Equity Incentive Plan
is as follows:
<TABLE>
<CAPTION>
Employees Non-employees Total
--------------------- --------------------- ---------------------
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
February 28, 1998...... -- $ -- -- $ -- -- $ --
Granted................. 791,235 0.16 426,250 0.15--9.00 1,217,485 0.15--9.00
Exercised............... -- -- -- -- -- --
Cancelled............... 24,000 0.15 -- -- 24,000 0.15
--------- ----------- --------- ----------- --------- -----------
Outstanding at
December 31, 1998...... 767,235 0.16 426,250 0.15--9.00 1,193,485 0.15--9.00
Granted................. 1,674,264 0.30--6.00 824,450 3.50--9.00 2,498,714 0.30--9.00
Exercised............... -- -- -- -- -- --
Cancelled............... 94,050 0.15--6.00 106,000 9.00 200,050 0.15--9.00
--------- ----------- --------- ----------- --------- -----------
Outstanding at December
31, 1999............... 2,347,449 $0.15--6.00 1,144,700 $0.15--9.00 3,492,149 $0.15--9.00
========= =========== ========= =========== ========= ===========
</TABLE>
Options available for future grant totaled 2,335,926 and 37,263 at December
31, 1998 and December 31, 1999, respectively.
F-18
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
9. Equity Incentive Plan--(Continued)
The weighted average exercise prices for options granted and exercisable and
the weighted average remaining contractual life for options outstanding, are
as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------- ---------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise of Contractual Exercise of Exercise
Price Shares Life (Years) Price Shares Price
- -------------------------- --------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1998
Employees
$0.15................... 767,235 9.3 $0.15 400,971 $ 0.15
Non-employees
$0.15-0.16.............. 379,500 8.2 $0.15 115,675 $ 0.15
1.20................... 10,000 8.2 1.20 2,000 1.20
3.50................... 23,750 9.6 3.50 -- --
9.00................... 13,000 9.4 9.00 -- --
December 31, 1999
Employees
$0.15................... 760,235 8.3 $0.15 507,890 $ 0.15
0.30................... 313,630 9.1 0.30 36,280 0.30
1.84................... 42,500 9.3 1.84 -- --
6.00................... 1,231,084 9.8 6.00 -- --
Non-employees
$0.15-0.16.............. 379,500 7.3 $0.15 264,425 $0. 15
1.20................... 10,000 7.2 1.20 4,000 1.20
3.50................... 61,750 9.1 3.50 3,250 3.50
5.30................... 50,000 9.4 5.30 50,000 5.30
6.00................... 566,250 9.8 6.00 -- --
9.00................... 77,200 9.4 9.00 -- --
</TABLE>
SFAS No. 123 requires disclosure of pro forma net loss and pro forma basic
and diluted loss per share based upon the fair value of the options issued.
The Company calculated the fair value of each option grant on the date of the
grant using an option pricing model as prescribed by SFAS No. 123 using the
following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate................. 5.5%
Expected life (in years)................ 5
Dividend yield.......................... 0%
Volatility.............................. 65%
</TABLE>
This option valuation model requires the input of highly subjective
assumptions including the expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing model does not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-19
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
9. Equity Incentive Plan--(Continued)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
Predecessor Companies
-------------------------
Two months Ten months
Year ended ended ended Year ended
December 31, February 27, December 31, December 31,
1997 1998 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Pro forma net loss........ $701,207 $157,029 $4,372,254 $20,926,594
Pro forma basic and
diluted loss per share... 0.20 0.96
</TABLE>
These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over
the vesting period, and additional options may be granted in future years.
10. Commitments and Contingencies
The Company leases office facilities and certain computer and communications
equipment under non-cancellable leases that expire at various dates through
December 31, 2006. Rent expense amounted to approximately $9,170, $8,431,
$155,163 and $415,333 for the year ended December 31, 1997, the two months
ended February 27, 1998 (the Predecessor Companies), the ten months ended
December 31, 1998 and the year ended December 31, 1999 (the Company),
respectively.
Future minimum lease payments for capital and operating leases at December
31, 1999 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ----------
<S> <C> <C>
2000................................................. 109,490 $1,395,389
2001................................................. 137,641 1,322,773
2002................................................. 126,172 1,359,716
2003................................................. -- 1,290,106
2004................................................. -- 1,339,864
Thereafter........................................... -- 2,624,328
------- ----------
373,303 $9,332,176
==========
Net minimum lease payments under capital leases......
Less amount representing interest.................... (39,482)
-------
Present value of net minimum lease payments under
capital leases...................................... 333,821
=======
</TABLE>
F-20
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
10. Commitments and Contingencies--(Continued)
The Company and the Predecessor Companies have entered into various
licensing, royalty, distribution, and consulting agreements with various
online sites, vendors and other non-employees. The remaining terms of these
agreements provide for the payment of royalties, bounties, and certain
guaranteed amounts on a per member and/or minimum dollar amount basis.
Additionally, some agreements provide for a specified percentage of
advertising and merchandising revenue to be paid to non-employees from whose
online site the revenue is derived. Advances required under such agreements at
December 31, 1999 are payable as follows:
<TABLE>
<S> <C>
Year ended December 31:
2000............................ $1,334,999
2001............................ 1,033,500
2002............................ 459,167
2003............................ 205,000
2004............................ 125,000
Thereafter...................... 125,000
----------
Total......................... $3,282,666
==========
</TABLE>
On August 9, 1999, the Company entered into a Reimbursement Agreement with a
lender whereby the lender agreed to provide a letter of credit in the amount
of $1,414,581. The average undrawn face amount of the letter of credit bears a
commitment fee of 1.5%. In connection with the Reimbursement Agreement, the
Company issued the lender a warrant to purchase 28,292 shares of the Company's
common stock at a purchase price of $6.00 per share, subject to adjustment as
provided in the Warrant Agreement. The fair value of the warrant of $144,288
was calculated using an option pricing model as prescribed by SFAS No. 123.
The maximum term of the warrant is ten years.
In October, 1999, the Company entered into an equipment master lease
agreement with a capacity to borrow up to $2.8 million. The term of the
agreement is for three years with an interest rate of 7.5%. As part of this
agreement, the lessor will receive a warrant to purchase 22,167 shares of the
Company's common stock at $8.00 per share. The fair value of the warrant of
$108,616 was calculated using an option pricing model as prescribed by SFAS
No. 123. The maximum term of the warrant is ten years.
On January 27, 2000, a complaint was filed in the United States District
Court of California by the National Football League Players Association and
the National Football League Players, Inc. against Athlete Direct. The
complaint alleges that by operating its Web site, Athlete Direct is violating
certain rights that the plaintiffs have to license the names, likenesses and
other attributes for groups of six or more football players for products that
are sold at retail or used as promotional items. The complaint also alleges
that by entering into contracts with football players with whom the plaintiffs
already have contracts, Athlete Direct is interfering with the plaintiffs'
contractual relationships with these football players. The complaint seeks
declaratory relief and unspecified damages. Approximately 80% of the athletes
who play in the National Football League and for whom the Company provides
individual Web sites have a relationship with the NFLPA. Although the Company
does not believe that the NFLPA's suit has merit, and although it intends to
contest the suit vigorously, if the NFLPA
F-21
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
10. Commitments and Contingencies--(Continued)
were to prevail on its claims and/or if athletes and agents determine not to
work with the Company because of the players' association claims or actions,
the Company's business would be adversely affected.
From time to time, the Company is involved in other litigation relating to
claims arising out of its operations in the normal course of business.
Management believes, however, that the ultimate outcome of all pending
litigation should not have a material adverse effect on the Company's
financial position and results of operations.
11. Significant Transactions
In January 1999, the Company entered into an interactive services agreement
with AOL. Under this agreement, the Company records a monthly license fee for
content and programming valued at approximately $288,000 per month. Such
content and programming includes the syndication of its Athlete Direct content
both within the AOL Sports Channel and the AOL Kids Channel as well as
providing content and programming for the professional and college team areas
within the AOL Sports Channel. AOL is also entitled to receive a percentage of
revenues derived from the sale of sports-related merchandise and subscription
products by the Company on AOL. The Company also receives guaranteed placement
and banner impressions from AOL for which it records a monthly expense valued
at approximately $232,000 per month. The agreement expires June 30, 2001 and
AOL has the option to extend the agreement for up to two additional one-year
terms.
In May 1999, the Company entered into a distribution agreement with Yahoo!
to syndicate its content and programming to Yahoo! Sports. In exchange for
delivery of this content and programming, the Company receives a monthly cash
payment of approximately $28,000 per month and guaranteed advertising
impressions, which are valued at approximately $61,000 per month. Yahoo!
receives a percentage of the electronic commerce sold by the Company on the
Yahoo! site. This agreement expires in June 2000 with both parties having
options to extend the agreement for one year under similar terms.
12. Defined Contribution Plan
Effective November 1, 1998, the Company adopted a 401(k) Plan covering all
of the Company's employees who are at least 21 years old. Employees may elect
to contribute up to 15% of their wages to the 401(k) Plan and are eligible to
enroll on the first day of every quarter. The Company, at its discretion, may
make contributions to the 401(k) Plan, which are allocated among the
participants. No contributions were made by the Company in 1998 or 1999.
13. Subsequent Events (Unaudited)
During January, February and March 2000 the Company granted options to
purchase approximately 2.7 million shares of common stock to employees and
non-employees. In connection with such options, the Company will record
approximately $4.9 million of deferred stock compensation and deferred
incentives. Such options generally vest over a four or five year period.
F-22
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
13. Subsequent Events (Unaudited)--(Continued)
In March 2000, AthletesDirect and SportsWritersDirect expanded and enhanced
their AOL distribution relationship by entering into a customized programming
agreement with AOL that becomes effective in June 2000. This agreement
supersedes the prior agreement between the Company and AOL that was entered
into in January 1999. Under this new programming agreement, AthletesDirect and
SportsWritersDirect will syndicate their athlete and team-related programming
to AOL and several of AOL's other brands, including AOL.com, CompuServe and
ICQ. Additionally, AthletesDirect will provide original programming for the
AOL Extreme Sports Area as well as create country specific areas for AOL
Australia, AOL Brazil, AOL Canada and AOL United Kingdom. Under the terms of
this agreement, AOL will pay AthletesDirect and SportsWritersDirect a license
fee of $15.0 million over the term of the agreement, paid in equal quarterly
installments. This agreement expires in June 2003. AOL has the right to extend
the agreement for two successive one-year periods.
In March 2000, the Company entered into an interactive services agreement
with AOL. Pursuant to this agreement, the Company will receive anchor tenancy
placement on the front of the AOL Sports, guaranteed banner impressions and
promotional commerce links within AOL Sports, and premier placement across
AOL.com, CompuServe and ICQ. Under the terms of this agreement, the Company
will pay AOL approximately $31.0 million in cash and $22.0 million of in-kind
value over the term of the agreement. The Company will make an initial payment
of $2.6 million in April 2000, a second payment of $2.6 million 60 days
thereafter, a third payment of $2.6 million 30 days thereafter and subsequent
payments of $2.6 million quarterly through September 2002. The in-kind value
will be delivered in equal annual installments over the term of the agreement.
This agreement expires in March 2003. AOL has the right, upon the achievement
of specific benchmarks, to extend the agreement for two successive one-year
periods under the same terms.
In March 2000, the Company entered into an Internet service agreement with
Dallas Cowboys Football Club, Ltd. In connection with this agreement, the
Company will issue a warrant to purchase 500,000 shares of the Company's
common stock at $12.00 per share to an affiliate of the Dallas Cowboys
Football Club, Ltd. The warrant vests over a five year period. In addition,
the Company issued 416,667 shares of the Company's common stock to this
affiliate at a purchase price of $12.00 per share.
In April 2000, the Company entered into a strategic agreement with DIRECTV,
Inc. This agreement calls for DIRECTV to provide the Company with a guaranteed
number of promotional spots on the DIRECTV satellite system for promotion of
the Company's programming and online media divisions. Additionally, under this
agreement, the Company will receive a guaranteed daily time period on the
DIRECTV satellite system for distribution of its sports programming. The
Company's programming will be located on a channel that is received by all
DIRECTV subscribers.
In addition to cash and in-kind compensation, in connection with this
agreement, 680,442 shares of common stock will be issued to DIRECTV at a
purchase price of $12.00 per share. DIRECTV also received warrants to purchase
1,360,883 shares of common stock at $14.00 per share, subject to adjustment.
The warrants vest over a three year period.
In April 2000, the Company entered into a separate advertising agreement
with DIRECTV. Under this agreement, DIRECTV will purchase $7.6 million of
advertising on the Company's web sites over
F-23
<PAGE>
Broadband Sports, Inc.
and
The Predecessor Companies
Notes to Consolidated and Combined Financial Statements--(Continued)
the next 27 months. DIRECTV can extend this agreement under similar terms for
an additional two years by committing to purchase $8.5 million of advertising
on the Company's web sites over this two-year period.
13. Subsequent Events (Unaudited)--(Continued)
In March 2000, the Company entered into a non-binding letter of intent with
the Major League Baseball Players Association to enter into a definitive
licensing agreement. Pursuant to the letter of intent, the Company has agreed
to issue the Major League Baseball Players Association a warrant to purchase
200,000 shares of the Company's common stock at $12.00 per share, immediately
upon issuance of a definitive license by the Major League Baseball Players
Association. If the definitive license is not entered into the warrant will
not be issued. The warrant shall terminate if the definitive licensing
agreement contemplated by this letter of intent is not executed.
In March 2000, the Company amended its Certificate of Incorporation to
increase the authorized number of shares of common stock to 406,000,000.
F-24
<PAGE>
Schedule II
Broadband Sports, Inc.
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
-------------------------------------------------------
Uncollectible
Balance at Charged to the Charged to balances written
beginning of statements of other off net or Balance at
period operations accounts recoveries end of period
------------ -------------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts
Year ended December
31, 1997............. -- -- -- -- --
Two months ended
February 27, 1998.... -- -- -- -- --
Ten months ended
December 31, 1998.... -- -- -- -- --
Year ended December
31, 1999............. -- 50,000 -- -- 50,000
Inventory reserve -- -- -- -- --
Year ended December
31, 1997.............
Two months ended
February 27, 1998.... -- -- -- --
Ten months ended
December 31, 1998.... -- -- -- -- --
Year ended December
31, 1999............. -- 75,000 -- -- 75,000
</TABLE>
F-25
<PAGE>
[LOGO OF BROADBANDSPORTS]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities hereunder other than
underwriting discounts and commissions.
<TABLE>
<CAPTION>
Amount to
be Paid
----------
<S> <C>
Registration fee................................................. $ 12,788
NASD filing fee.................................................. 5,100
Nasdaq National Market listing fee............................... 90,000
Printing and Engraving expenses..................................
Legal fees and expenses..........................................
Blue Sky qualification fees and expenses......................... 5,000
Accounting fees and expenses.....................................
Directors' and Officers' securities act liability insurance......
Transfer Agent and registrar fees................................
Miscellaneous....................................................
----------
Total........................................................ $1,000,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL") contains
detailed provisions on indemnification of directors and officers against
expenses, judgments, fines and amounts paid in settlement, actually and
reasonably incurred in connection with legal proceedings. Section 102(a)(7) of
the DGCL permits a provision in the certificate of incorporation of each
corporation organized thereunder, such as Broadband Sports, eliminating or
limiting, with certain exceptions, the personal liability of a director of the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. The Certificate of Incorporation of Broadband Sports
eliminates the liability of each of its directors to its stockholders or
Broadband Sports for monetary damages for breach of fiduciary duty to the full
extent provided by the DGCL, as such law exists or may hereafter be amended.
Indemnification applies to any threatened, pending or completed action, suit
or proceeding, whether, civil, criminal, administrative or investigative.
Indemnification may include all expenses (including attorneys' fees,
judgments, fines, ERISA excise taxes and amounts paid in settlement)
reasonably incurred by the indemnified person.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Exhibit
Document Number
-------- -------
<S> <C>
Form of Underwriting Agreement..................................... 1.1
Amended and Restated Certificate of Incorporation.................. 3.1
Certificate of Amendment to Amended and Restated Certificate of
Incorporation..................................................... 3.2
Form of Second Amended and Restated Certificate of Incorporation... 3.3
Amended and Restated Bylaws........................................ 3.4
Form of Indemnification Agreements................................. 10.9
</TABLE>
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
From February 1998 through April 13, 2000, Broadband Sports issued and sold
the following securities:
(a) In February 1998, we issued and sold an aggregate of 20,000,000 shares
of common stock to a group of stockholders for an aggregate purchase
price of $100,000, which transaction was deemed exempt from
registration under the Securities Act in reliance upon Section 4(2) of
the Securities Act.
(b) In February 1998, we issued and sold 2,000,000 shares of series A
preferred stock to NMSS, an institutional venture capital fund, for a
purchase price of $2,000,000, which transaction was deemed exempt from
registration under the Securities Act in reliance upon Section 4(2) of
the Securities Act.
(c) In April 1998, we issued and sold an aggregate of 1,703,750 shares of
common stock to Tyler J. Goldman and Ross Schaufelberger, two officers
of Broadband Sports, for an aggregate value of $8,519 which transaction
was deemed exempt from registration under the Securities Act in
reliance upon Section 4(2) of the Securities Act.
(d) In May 1999, we issued and sold an aggregate of 29,166,663 shares of
series B convertible preferred stock for $0.60 per share to
institutional venture capital funds and two accredited investors, for
an aggregate purchase price of approximately $17.5 million, which
transaction was deemed exempt from registration under the Securities
Act in reliance upon Section 4(2) of the Securities Act.
(e) In August 1999, we issued warrants to purchase up to 28,292 shares of
common stock at a purchase price of $6.00 per share to an institutional
lending and leasing company, which transaction was deemed exempt from
registration under the Securities Act in reliance upon Section 4(2) of
the Securities Act.
(f) In October 1999, we issued warrants to purchase up to 22,167 shares of
common stock at a purchase price of $8.00 per share to an institutional
lending and leasing company, which transaction was deemed exempt from
registration under the Securities Act in reliance upon Section 4(2) of
the Securities Act.
(g) In November 1999, we issued and sold an aggregate of 3,038,981 shares
of common stock to Richard D. Nanula, in connection with his employment
contract, at $6.00 per share, for an aggregate purchase price of
approximately $18,233,885, which transaction was deemed exempt from
registration under the Securities Act in reliance upon Section 4(2) of
the Securities Act.
(h) In November 1999, we issued and sold an aggregate of 18,550,000 shares
of series C convertible preferred stock for $0.80 per share to
accredited investors, for an aggregate purchase price of $14.8 million,
which transaction was deemed exempt from registration under the
Securities Act in reliance upon Section 4(2) of the Securities Act.
(i) In April 2000, we are issuing an aggregate of 1,097,109 shares of
common stock for $12.00 per share, and warrants to purchase 500,000 and
1,360,883 shares of common stock at a per share purchase price of
$12.00 and $14.00, subject to adjustment, respectively, to accredited
investors, which transactions were deemed exempt from registration
under the Securities Act in reliance upon Section 4(2) of the
Securities Act.
(j) From May 25, 1999 through March 24, 2000, we issued options to purchase
an aggregate of 1,402,000 shares of our common stock at per share
exercise prices ranging from $3.50 to $10.00. These issuances were made
to accredited investors (including our executive
II-2
<PAGE>
officers), which transactions were deemed exempt from registration under
the Securities Act in reliance upon Section 4(2) of the Securities Act.
The recipients of securities in each such transaction described in
paragraphs (a) through (k) above represented their intentions to acquire the
securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates issued in such transactions. All recipients had
adequate access to information about us.
From February 1998 through April 13, 2000, Broadband Sports issued options
to purchase an aggregate of 5,124,084 shares of our common stock at per share
exercise prices, ranging from $0.15 to the initial offering price to the
public. These issuances were made under a written compensatory benefit plan or
contract and were deemed exempt from registration under the Securities Act in
reliance upon Rule 701 of Regulation F adopted under the Securities Act.
Item 16. Exhibits and Financial Statements
(a) Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2* Certificate of Amendment to Amended and Restated Certificate of
Incorporation
3.3* Form of Second Amended and Restated Certificate of Incorporation
3.4* Amended and Restated Bylaws
4.1** Specimen Stock Certificate
5.1** Form of Opinion of Morrison & Foerster LLP
10.1* 1998 Equity Incentive Plan
10.2 2000 Stock Incentive Plan
10.3* Investors' Rights Agreement
10.4* Form of Warrant to Comdisco
10.5* Restricted Stock Purchase Agreement between the Registrant and
R. Nanula
10.6* Employment Agreement for R. Nanula
10.7* Employment Agreement for T. Goldman
10.8* Revolving Loan Agreement, dated February 27, 1998 between the
Registrant, Athlete Direct, Inc., Pro Sports Xchange and NMSS
Partners, LLC
10.9* Form of Indemnification Agreement
10.10* Standard Office Lease, dated January 10, 1996 as amended between LAOP
IV, LLC, and Smartalk Teleservices, Inc.
10.11* Sublease, dated April 1, 1998 between Smartalk Teleservices, Inc. and
The RHL Group, Inc.
10.12* Sub-Sublease Agreement, dated April 1, 1998 between The RHL Group,
Inc. and Registrant
10.13*+ Lease, dated July 30, 1999, between Spieker Properties, L.P. and
Registrant
10.13.1 First Amendment to Office Lease, dated October 1, 1999, between
Spieker Properties L.P. and Registrant
10.13.2 Second Amendment to Lease, dated December 29, 1999, between Spieker
Properties L.P. and Registrant
10.14+ Interactive Services Agreement, dated January 1, 1999, between
Registrant (and its wholly owned subsidiaries, Pro Sports Xchange,
Inc., and Athlete Direct, Inc.) and America Online, Inc.
10.15* Employment Agreement for R. Schaufelberger
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.16 Intentionally Omitted
10.17 2000 Employee Stock Purchase Plan
10.18+ Interactive Services Agreement, dated as of March 15, 2000, between
AOL and Registrant
10.19+ Customized Programming Agreement, dated as of June 15, 2000, between
AOL and Registrant
10.20+ Strategic Agreement, dated as of April 11, 2000, between DIRECTV
Enterprises, Inc. and DIRECTV, Inc. and Registrant
10.21+ Advertising Agreement, dated as of April 11, 2000, between DIRECTV,
Inc. and Registrant
10.22 Form of Warrant to DIRECTV
21.1* Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP
23.2** Consent of Morrison & Foerster LLP (included in the opinion filed
herewith as Exhibit 5.1)
24.1* Power of Attorney (See II-5 of the Registration Statement filed with
the SEC on November 26, 1999.)
27.1* Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed.
** To be filed by amendment.
+ Portions have been omitted pursuant to a confidential treatment request.
(b) Financial Statement Schedules
II-4
<PAGE>
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described under Item 14 above, or otherwise, the registrants has
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) That, 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 the form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
(c) That, 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 the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(d) To provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denomination and
registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized in
the City of Santa Monica, County of Los Angeles, State of California, on April
18, 2000.
BROADBAND SPORTS, INC.
By:
/s/ Richard D. Nanula
___________________________________
Richard D. Nanula
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized in
the City of Santa Monica, County of Los Angeles, State of California, on April
18, 2000.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard D. Nanula Chairman of the Board and April 18, 2000
____________________________________ Chief Executive Officer
Richard D. Nanula (Principal Executive
Officer)
/s/ Gregory S. Hebner Chief Financial Officer April 18, 2000
____________________________________ (Principal Financial and
Gregory S. Hebner Accounting Officer)
* President, Broadband Studios April 18, 2000
____________________________________ and Director
Tyler J. Goldman
* Director April 18, 2000
____________________________________
Ahmed O. Alfi
* Director April 18, 2000
____________________________________
W. Allen Beasley
* Director April 18, 2000
____________________________________
Frank J. Biondi, Jr.
* Director April 18, 2000
____________________________________
Stephen D. Greenberg
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director April 18, 2000
____________________________________
Douglas Leone
* Director April 18, 2000
____________________________________
Geoffery Y. Yang
</TABLE>
/s/ Richard D. Nanula
*By: ______________________________
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2* Certificate of Amendment to Amended and Restated Certificate of
Incorporation
3.3* Form of Second Amended and Restated Certificate of Incorporation
3.4* Amended and Restated Bylaws
4.1** Specimen Stock Certificate
5.1** Form of Opinion of Morrison & Foerster LLP
10.1* 1998 Equity Incentive Plan
10.2 2000 Stock Incentive Plan
10.3* Investors' Rights Agreement
10.4* Form of Warrant to Comdisco
10.5* Restricted Stock Purchase Agreement between the Registrant and
R. Nanula
10.6* Employment Agreement for R. Nanula
10.7* Employment Agreement for T. Goldman
10.8* Revolving Loan Agreement, dated February 27, 1998 between the
Registrant, Athlete Direct, Inc., Pro Sports Xchange and NMSS
Partners, LLC
10.9* Form of Indemnification Agreement
10.10* Standard Office Lease, dated January 10, 1996 as amended between LAOP
IV, LLC, and Smartalk Teleservices, Inc.
10.11* Sublease, dated April 1, 1998 between Smartalk Teleservices, Inc. and
The RHL Group, Inc.
10.12* Sub-Sublease Agreement, dated April 1, 1998 between The RHL Group,
Inc. and Registrant
10.13*+ Lease, dated July 30, 1999, between Spieker Properties, L.P. and
Registrant
10.13.1 First Amendment to Office Lease, dated October 1, 1999, between
Spieker Properties L.P. and Registrant
10.13.2 Second Amendment to Lease, dated December 29, 1999, between Spieker
Properties L.P. and Registrant
10.14+ Interactive Services Agreement, dated January 1, 1999, between
Registrant (and its wholly-owned subsidiaries, Pro Sports Xchange,
Inc., and Athlete Direct, Inc.) and America Online, Inc.
10.15* Employment Agreement for R. Schaufelberger
10.16 Intentionally Omitted
10.17 2000 Employee Stock Purchase Plan
10.18+ Interactive Services Agreement, dated as of March 15, 2000, between
AOL and Registrant
10.19+ Customized Programming Agreement, dated as of June 15, 2000, between
AOL and Registrant
10.20+ Strategic Agreement, dated as of April 11, 2000, between DIRECTV
Enterprises, Inc. and DIRECTV, Inc. and Registrant
10.21+ Advertising Agreement, dated as of April 11, 2000, between DIRECTV,
Inc. and Registrant
10.22 Form of Warrant to DIRECTV
21.1* Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP
23.2** Consent of Morrison & Foerster LLP (included in the opinion filed
herewith as Exhibit 5.1)
24.1* Power of Attorney (See II-5 of the Registration Statement filed with
the SEC on November 26, 1999.)
27.1* Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed.
** To be filed by amendment.
+ Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
EXHIBIT 10.2
BROADBAND SPORTS, INC.
2000 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
--------------------
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants and to promote the success of the
Company's business.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of the Committees appointed
-------------
to administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
(c) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "Award" means the grant of an Option, SAR, Dividend Equivalent
-----
Right, Restricted Stock, Performance Unit, Performance Share, or other right or
benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant
---------------
of an Award executed by the Company and the Grantee, including any amendments
thereto.
(f) "Board" means the Board of Directors of the Company.
-----
(g) "Cause" means, with respect to the termination by the Company or a
-----
Related Entity of the Grantee's Continuous Service, that such termination is for
"Cause" as such term is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee's: (i) refusal or failure to act
in accordance with any specific, lawful direction or order of the Company or a
Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any act
or failure to perform any act in bad faith and to the detriment of the Company
or a Related Entity; (iv) dishonesty, intentional misconduct or material breach
of any agreement with the Company or a Related Entity; or (v) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person. At least 30 days prior to the termination of the Grantee's
Continuous Service pursuant to (i) or (ii) above, the Administrator shall
provide the Grantee with notice of the Company's or such Related Entity's intent
to terminate, the reason therefor, and an opportunity for the Grantee to cure
such defects in his or her service to the Company's or such Related
1
<PAGE>
Entity's satisfaction. During this 30 day (or longer) period, no Award issued to
the Grantee under the Plan may be exercised or purchased.
(h) "Change in Control" means a change in ownership or control of the
-----------------
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
----
(j) "Committee" means any committee appointed by the Board to
---------
administer the Plan.
(k) "Common Stock" means the common stock of the Company.
------------
(l) "Company" means BroadBand Sports, Inc., a Delaware corporation.
-------
(m) "Consultant" means any person (other than an Employee or a
----------
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(n) "Continuing Directors" means members of the Board who either (i)
--------------------
have been Board members continuously for a period of at least thirty-six (36)
months or (ii) have been Board members for less than thirty-six (36) months and
were elected or nominated for election as Board members by at least a majority
of the Board members described in clause (i) who were still in office at the
time such election or nomination was approved by the Board.
(o) "Continuous Service" means that the provision of services to the
------------------
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related Entity, or
any successor, in any capacity of Employee, Director or
2
<PAGE>
Consultant, or (iii) any change in status as long as the individual remains in
the service of the Company or a Related Entity in any capacity of Employee,
Director or Consultant (except as otherwise provided in the Award Agreement). An
approved leave of absence shall include sick leave, military leave, or any other
authorized personal leave. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract.
(p) "Corporate Transaction" means any of the following transactions:
---------------------
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations);
(iii) approval by the Company's shareholders of any plan or
proposal for the complete liquidation or dissolution of the Company;
(iv) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger; or
(v) acquisition by any person or related group of persons (other
than the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities (whether or not in a transaction also
constituting a Change in Control), but excluding any such transaction that the
Administrator determines shall not be a Corporate Transaction.
(q) "Director" means a member of the Board or the board of directors
--------
of any Related Entity.
(r) "Disability" means that a Grantee is permanently unable to carry
----------
out the responsibilities and functions of the position held by the Grantee by
reason of any medically determinable physical or mental impairment. A Grantee
will not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.
(s) "Dividend Equivalent Right" means a right entitling the Grantee to
-------------------------
compensation measured by dividends paid with respect to Common Stock.
3
<PAGE>
(t) "Employee" means any person, including an Officer or Director, who
--------
is an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.
(u) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(v) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price was
reported on that date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock
of the type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
(w) "Good Reason" means the occurrence after a Corporate Transaction,
-----------
Change in Control or a Related Entity Disposition of any of the following events
or conditions unless consented to by the Grantee:
(i) (A) a change in the Grantee's position or responsibilities
which represents an adverse change from the Grantee's position or
responsibilities as in effect at any time within six (6) months preceding the
date of a Corporate Transaction, Change in Control or Related Entity Disposition
or at any time thereafter or (B) the assignment to the Grantee of any duties or
responsibilities which are inconsistent with the Optionee's position or
responsibilities as in effect at any time within six (6) months preceding the
date of a Corporate Transaction, Change in Control or Related Entity Disposition
or at any time thereafter;
(ii) reduction in the Grantee's base salary to a level below that
in effect at any time within six (6) months preceding the date of a Corporate
Transaction, Change in Control or Related Entity Disposition or at any time
thereafter; or
(iii) requiring the Grantee to be based at any place outside a
fifty-mile radius from the Grantee's job location or residence prior to the
Corporate Transaction, Change in Control or Related Entity Disposition, except
for reasonably required travel on business which is not materially greater than
such travel requirements prior to the Corporate Transaction, Change in Control
or Related Entity Disposition.
4
<PAGE>
(x) "Grantee" means an Employee, Director or Consultant who receives
-------
an Award pursuant to an Award Agreement under the Plan.
(y) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(z) "Non-Qualified Stock Option" means an Option not intended to
--------------------------
qualify as an Incentive Stock Option.
(aa) "Officer" means a person who is an officer of the Company or a
-------
Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
(bb) "Option" means an option to purchase Shares pursuant to an Award
------
Agreement granted under the Plan.
(cc) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(dd) "Performance Shares" means Shares or an Award denominated in
------------------
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
(ee) "Performance Units" means an Award which may be earned in whole or
-----------------
in part upon attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination
of cash, Shares or other securities as established by the Administrator.
(ff) "Plan" means this 2000 Stock Incentive Plan.
----
(gg) "Registration Date" means the first to occur of (i) the closing of
-----------------
the first sale to the general public of (A) the Common Stock or (B) the same
class of securities of a successor corporation (or its Parent) issued pursuant
to a Corporate Transaction in exchange for or in substitution of the Common
Stock, pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended; and (ii) in the event of a Corporate Transaction, the date of the
consummation of the Corporate Transaction if the same class of securities of the
successor corporation (or its Parent) issuable in such Corporate Transaction
shall have been sold to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended on or prior to the date of
consummation of such Corporate Transaction.
(hh) "Related Entity" means any Parent, Subsidiary and any business,
--------------
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
5
<PAGE>
(ii) "Related Entity Disposition" means the sale, distribution or other
--------------------------
disposition by the Company, a Parent or a Subsidiary of all or substantially all
of the interests of the Company, a Parent or a Subsidiary in any Related Entity
effected by a sale, merger or consolidation or other transaction involving that
Related Entity or the sale of all or substantially all of the assets of that
Related Entity, other than any Related Entity Disposition to the Company, a
Parent or a Subsidiary.
(jj) "Restricted Stock" means Shares issued under the Plan to the
----------------
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
(kk) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
----------
or any successor thereto.
(ll) "SAR" means a stock appreciation right entitling the Grantee to
---
Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(mm) "Share" means a share of the Common Stock.
-----
(nn) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan.
-------------------------
(a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards (including
Incentive Stock Options) is Seven Million One Hundred Thousand (7,100,000)
Shares, plus an annual increase to be added on the first day of the Company's
fiscal year beginning in 2001 equal to three percent (3%) of the number of
Shares outstanding as of such date or a lesser number of Shares determined by
the Administrator. Notwithstanding the foregoing, subject to the provisions of
Section 10, below, of the number of Shares specified above, the maximum
aggregate number of Shares available for grant of Incentive Stock Options shall
be Seven Million One Hundred Thousand (7,100,000) Shares, plus an annual
increase to be added on the first day of the Company's fiscal year beginning in
2001 equal to the lesser of (x) One Million Five Hundred Thousand (1,500,000)
Shares, (y) three percent (3%) of the number of Shares outstanding as of such
date, or (z) a lesser number of Shares determined by the Administrator. The
Shares to be issued pursuant to Awards may be authorized, but unissued, or
reacquired Common Stock.
(b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise price
for such Award or any withholding taxes due with respect to such Award, such
retained Shares subject to such Award shall become available for future
6
<PAGE>
issuance under the Plan (unless the Plan has terminated). Shares that actually
have been issued under the Plan pursuant to an Award shall not be returned to
the Plan and shall not become available for future issuance under the Plan,
except that if unvested Shares are forfeited, or repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Plan Administrator.
------------------
(i) Administration with Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.
(ii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Awards to Employees or Consultants who are
- ---------
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. The Board may authorize one or more
Officers to grant such Awards and may limit such authority as the Board
determines from time to time.
(iii) Administration Errors. In the event an Award is granted in
---------------------
a manner inconsistent with the provisions of this subsection (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and the
---------------------------
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom
Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the
Plan;
7
<PAGE>
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under
the Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan, including without limitation, any notice of Award
or Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be conclusive and binding on all
persons.
5. Eligibility. Awards other than Incentive Stock Options may be granted
-----------
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
6. Terms and Conditions of Awards.
------------------------------
(a) Type of Awards. The Administrator is authorized under the Plan to
--------------
award any type of arrangement to an Employee, Director or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions, or (iii) any other security with the value derived from the
value of the Shares. Such awards include, without limitation, Options, SARs,
sales or bonuses of Restricted Stock, Dividend Equivalent Rights, Performance
Units or Performance Shares, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
--------------------
Agreement. In the case of an Option, the Option shall be designated as either an
Incentive Stock
8
<PAGE>
Option or a Non-Qualified Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options, to the extent of the Shares covered thereby in excess of the foregoing
limitation, shall be treated as Non-Qualified Stock Options. For this purpose,
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be determined as of
the date the Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
-------------------
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Acquisitions and Other Transactions. The Administrator may issue
-----------------------------------
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.
(e) Deferral of Award Payment. The Administrator may establish one or
-------------------------
more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award. The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.
(f) Award Exchange Programs. The Administrator may establish one or
-----------------------
more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Administrator from time to time.
(g) Separate Programs. The Administrator may establish one or more
-----------------
separate programs under the Plan for the purpose of issuing particular forms of
Awards to one or more
9
<PAGE>
classes of Grantees on such terms and conditions as determined by the
Administrator from time to time.
(h) Early Exercise. The Award Agreement may, but need not, include a
--------------
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be subject
to a repurchase right in favor of the Company or a Related Entity or to any
other restriction the Administrator determines to be appropriate.
(i) Term of Award. The term of each Award shall be the term stated in
-------------
the Award Agreement, provided, however, that the term of an Incentive Stock
Option shall be no more than ten (10) years from the date of grant thereof.
However, in the case of an Incentive Stock Option granted to a Grantee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Award Agreement.
(j) Transferability of Awards. Incentive Stock Options may not be
-------------------------
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's Incentive
Stock Option in the event of the Grantee's death on a beneficiary designation
form provided by the Administrator. Other Awards shall be transferable to the
extent provided in the Award Agreement.
(k) Time of Granting Awards. The date of grant of an Award shall for
-----------------------
all purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
-----------------------------------------------------------------
Options.
- -------
(a) Exercise or Purchase Price. The exercise or purchase price, if
--------------------------
any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant; or
10
<PAGE>
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant unless otherwise determined by the
Administrator.
(iii) In the case of other Awards, such price as is determined by
the Administrator.
(iv) Notwithstanding the foregoing provisions of this Section
7(a), in the case of an Award issued pursuant to Section 6(d), above, the
exercise or purchase price for the Award shall be determined in accordance with
the principles of Section 424(a) of the Code.
(b) Consideration. Subject to Applicable Laws, the consideration to
-------------
be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following, provided that the portion of the
consideration equal to the par value of the Shares must be paid in cash or other
legal consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;
(iv) if the exercise or purchase occurs on or after the
Registration Date, surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall
be exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used to
pay the exercise price unless otherwise determined by the Administrator);
(v) with respect to Options, if the exercise occurs on or after
the Registration Date, payment through a broker-dealer sale and remittance
procedure pursuant to which the Grantee (A) shall provide written instructions
to a Company designated brokerage firm to effect the immediate sale of some or
all of the purchased Shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased Shares and (B) shall provide written
directives to the
11
<PAGE>
Company to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any Grantee
-----
or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax
--------------
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with terms identical to the Award
Agreement under which the Option was exercised, but at an exercise price as
determined by the Administrator in accordance with the Plan.
8. Exercise of Award.
-----------------
(a) Procedure for Exercise; Rights as a Stockholder.
-----------------------------------------------
(i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for the
Shares with respect to which the Award is exercised, including, to the extent
selected, use of the broker-dealer sale and remittance procedure to pay the
purchase price as provided in Section 7(b)(v). Until the issuance (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to Shares subject to an Award, notwithstanding the exercise
of an Option or other Award. The Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Award. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in the Award Agreement
or Section 10, below.
(b) Exercise of Award Following Termination of Continuous Service.
-------------------------------------------------------------
(i) An Award may not be exercised after the termination date of
such Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided in the
Award Agreement.
12
<PAGE>
(ii) Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on the
last day of the specified period or the last day of the original term of the
Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the
extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Service shall convert automatically to a Non-Qualified Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its terms
for the period specified in the Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Award previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
----------------------------------
(a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
------------------------------------------
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Shares, or
similar event affecting the Shares, (ii) any other increase or decrease in the
number of issued Shares effected without receipt of consideration by the
Company, or (iii) as the Administrator may determine in its discretion, any
other transaction with respect to Common Stock to which Section 424(a) of the
Code applies or a similar transaction; provided, however that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator and its determination shall be final, binding and conclusive.
Except as the Administrator determines, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason hereof shall be made with respect to,
the number or price of Shares subject to an Award.
13
<PAGE>
11. Corporate Transactions/Changes in Control/Related Entity
--------------------------------------------------------
Dispositions/Buyout. Except as may be provided in an Award Agreement:
- -------------------
(a) In the event of any Corporate Transaction, each Award which is at
the time outstanding under the Plan automatically shall become fully vested and
exercisable and be released from any restrictions on transfer (other than
transfer restrictions applicable to Options) and repurchase or forfeiture
rights, immediately prior to the specified effective date of such Corporate
Transaction, for all of the Shares at the time represented by such Award.
Effective upon the consummation of the Corporate Transaction, all outstanding
Awards under the Plan shall terminate. However, such Awards shall not terminate
to the extent the Awards are, in connection with the Corporate Transaction,
assumed by the successor corporation or Parent thereof. In addition, an
outstanding Award under the Plan shall not so fully vest and be exercisable and
released from such limitations if and to the extent: (i) such Award is, in
connection with the Corporate Transaction, either assumed by the successor
corporation or Parent thereof or replaced with a comparable Award with respect
to shares of the capital stock of the successor corporation or Parent thereof or
(ii) such Award is to be replaced with a cash incentive program of the successor
corporation which preserves the compensation element of such Award existing at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such Award; provided,
however, that such Award (if assumed), the replacement Award (if replaced), or
the cash incentive program automatically shall become fully vested, exercisable
and payable and be released from any restrictions on transfer (other than
transfer restrictions applicable to Options) and repurchase or forfeiture rights
immediately upon termination of the Grantee's Continuous Service (substituting
the successor employer corporation for "Company or Related Entity" for the
definition of "Continuous Service") if such Continuous Service is terminated by
the successor company without Cause or voluntarily by the Grantee with Good
Reason within twelve (12) months of the Corporate Transaction. The
determination of Award comparability above shall be made by the Administrator,
and its determination shall be final, binding and conclusive.
(b) Following a Change in Control (other than a Change in Control
which also is a Corporate Transaction) and upon the termination of the
Continuous Service of a Grantee if such Continuous Service is terminated by the
Company or Related Entity without Cause or voluntarily by the Grantee with Good
Reason within twelve (12) months of a Change in Control, each Award of such
Grantee which is at the time outstanding under the Plan automatically shall
become fully vested and exercisable and be released from any restrictions on
transfer (other than transfer restrictions applicable to Options) and repurchase
or forfeiture rights, immediately upon the termination of such Continuous
Service.
(c) Effective upon the consummation of a Related Entity Disposition,
for purposes of the Plan and all Awards, the Continuous Service of each Grantee
who is at the time engaged primarily in service to the Related Entity involved
in such Related Entity Disposition shall be deemed to terminate and each Award
of such Grantee which is at the time outstanding under the Plan automatically
shall become fully vested and exercisable and be released from any restrictions
on transfer (other than transfer restrictions applicable to Options) and
repurchase or forfeiture rights for all of the Shares at the time represented by
such Award and be exercisable in accordance with the terms of the Award
Agreement evidencing such Award. However, such
14
<PAGE>
Continuous Service shall not be deemed to terminate to the extent such Award is,
in connection with the Related Entity Disposition, assumed by the successor
entity or its Parent. In addition, such Continuous Service shall not be deemed
to terminate and an outstanding Award under the Plan shall not so fully vest and
be exercisable and released from such limitations if and to the extent: (i) such
Award is, in connection with the Related Entity Disposition, either to be
assumed by the successor entity or its parent or to be replaced with a
comparable Award with respect to interests in the successor entity or its parent
or (ii) such Award is to be replaced with a cash incentive program of the
successor entity which preserves the compensation element of such Award existing
at the time of the Related Entity Disposition and provides for subsequent payout
in accordance with the same vesting schedule applicable to such Award; provided,
however, that such Award (if assumed), the replacement Award (if replaced), or
the cash incentive program automatically shall become fully vested, exercisable
and payable and be released from any restrictions on transfer (other than
transfer restrictions applicable to Options) and repurchase or forfeiture rights
immediately upon termination of the Grantee's Continuous Service (substituting
the successor employer entity for "Company or Related Entity" for the definition
of "Continuous Service") if such Continuous Service is terminated by the
successor entity without Cause or voluntarily by the Grantee with Good Reason
within twelve (12) months of the Related Entity Disposition. The determination
of Award comparability above shall be made by the Administrator, and its
determination shall be final, binding and conclusive.
(d) The portion of any Incentive Stock Option accelerated under this
Section 11 in connection with a Corporate Transaction, Change in Control or
Related Entity Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. Effective Date and Term of Plan. The Plan shall become effective upon
-------------------------------
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
13. Amendment, Suspension or Termination of the Plan.
------------------------------------------------
(a) The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted, and such Awards shall remain in full force and effect as if the Plan
had not been amended, suspended
15
<PAGE>
or terminated, unless mutually agreed otherwise between the Grantee and the
Administrator, which agreement must be in writing and signed by the Grantee and
the Company.
14. Reservation of Shares.
---------------------
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment/Consulting Relationship. The Plan
--------------------------------------------------------
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.
16. No Effect on Retirement and Other Benefit Plans. Except as
-----------------------------------------------
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.
17. Stockholder Approval. The grant of Incentive Stock Options under the
--------------------
Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.
16
<PAGE>
EXHIBIT 10.13.1
FIRST AMENDMENT TO OFFICE LEASE
-------------------------------
This First Amendment to Office Lease ("Amendment") is made and entered into
as of this 1st day of October, 1999, by and between SPIEKER PROPERTIES, L.P., a
California limited partnership ("Landlord") and BROADBAND SPORTS, a Delaware
corporation ("Tenant"), with reference to the following facts:
A. Tenant and Landlord entered into that certain Office Lease dated as of
July 30, 1999 (the "Lease") for certain premises (the "Premises") located at
2120 Colorado Avenue, 2nd Floor, Santa Monica, California (the "Project")
(containing 26,635 rentable square feet).
B. Landlord and Tenant desire to, among other things, add to the Premises
4,607 rentable square feet comprising a portion of the balance of the first
floor of the Building (the "Expansion Premises"), as such space is further
identified on Exhibit "A" attached hereto.
C. All capitalized terms used herein not specifically defined in this
Amendment shall have the meanings ascribed to such terms in the Lease. The Term
"Lease" where used in the Lease shall hereinafter refer to the Lease, as amended
by this Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, Landlord and Tenant agree as follows:
1. Expansion Premises. Subject to the terms and conditions of this
------------------
Amendment, Landlord hereby leases to Tenant and Tenant leases from Landlord the
Expansion Premises. The square footage of the Expansion Premises set forth in
Recital Paragraph B above is hereby stipulated by Landlord and Tenant to be true
and correct. From and after the Expansion Premises Commencement Date (defined
below), all references in the Lease to the "Premises" shall be deemed to include
the Expansion Premises. The term of Tenant's lease of the Expansion Premises
shall be co-terminous with Tenant's lease of the Premises.
2. Expansion Premises Commencement Date. The "Expansion Premises
------------------------------------
Commencement Date" shall mean the earlier of (i) the date Tenant takes
possession of some or all of the Expansion Premises and commences business
therefrom, (ii) the date the improvements to be constructed or performed in the
Expansion Premises by Premises Tenant (the "Expansion Premises Tenant
Improvements") shall have been "Substantially Completed" (as such term is
defined in Paragraph 2 of the Lease) in accordance with the plans and
specifications relating thereto, and (iii) December 1, 1999.
3. Rent. In addition to Tenant's rental obligations with respect to the
----
Premises, for the period from the Expansion Premises Commencement Date until the
Expiration Date, Tenant's payments of Base Rent with respect to the Expansion
Premises only
<PAGE>
shall be in accordance with the following schedule (which shall be based upon
the monthly periods following the Term Commencement Date, as defined in the
Lease):
Monthly Base Rent
Monthly Period Monthly Base Rent Per Rentable Square Foot
-------------- ----------------- ------------------------
Months 1 - 12 $13,821.00 $3.00
Months 13 - 14 $14,281.70 $3.10
Months 25 - 36 $14,972.75 $3.25
Months 37 - 48 $15,433.45 $3.35
Months 49 - 60 $16,124.50 $3.50
Months 61 - 72 $16,585.20 $3.60
Months 73 - 84 $17,045.90 $3.70
4. Operating Expenses. Effective as of the Expansion Premises
------------------
Commencement Date, in addition to Tenant's obligations under Paragraph 7 of the
Lease with respect to the Premises, Tenant shall be responsible for Tenant's
Expansion Premises Proportionate Share (defined below) of increases in Operating
Expenses with respect to the Expansion Premises in accordance with the terms of
Paragraph 7 of the Lease. For purposes of this Paragraph 4, the term "Tenant's
Expansion Premises Proportionate Share" shall mean 3.45%.
5. As-Is: Tenant Improvements.
--------------------------
(a) The Expansion Premises shall be delivered to Tenant in its
"as-is, where-is condition," with all faults, subject to any punchlist items,
latent defects, structural defects and any covenants and/or representations set
forth in the Lease and Tenant's rights under any warranties assigned to Tenant
pursuant to the Improvement Agreement.
(b) Tenant shall have the right to construct the Expansion Premises
Tenant Improvements in the Expansion Premises in accordance with the terms of
Exhibit "C" attached to the Lease, except that (i) the reference in Section 4.1
to "50.35%" is hereby deleted and replaced with "46.29%"; (ii) the references to
"$3,792.60" and "$139,062.00" in the last sentence of Section 4.1 are hereby
deleted and replaced with "$600.90" and "$22,033.00," respectively; (iii) the
reference to "$1,033,914.00" in Section 4.2 is hereby deleted and replaced with
"$168,252.00"; (iv) all references to the term "Premises" shall mean and refer
to the "Expansion Premises"; and (v) Landlord shall not be responsible for
performing any additional Base Building Work.
-2-
<PAGE>
6. Estoppel. Tenant warrants, represents and certifies to Landlord that
--------
as of the date of this Amendment, (a) Landlord is not in default under the
Lease, and (b) Tenant does not have any defenses or offsets to payment of rent
and performance of its obligations under the Lease as and when same becomes due.
7. Prepaid Rent: Security Deposit. Concurrently with Tenant's execution
------------------------------
of this Amendment, Tenant shall (i) pay to Landlord an amount equal to
$13,821.00 on account of prepaid rent for the Expansion Premises for the second
full month following the Expansion Premises Commencement Date, and (ii) deposit
with Landlord an additional cash security deposit (or increase the Letter of
Credit in accordance with the terms of Paragraph 39 D of the Lease) of
$234,095.25. As a result, the reference in Paragraph 19A to (A) "$212,187.21" is
hereby deleted and replaced with "$237,870.21," (B) "$180,359.13" is hereby
deleted and replaced with "$206,042.13," (C) "$153,305.27" is hereby deleted and
replaced with "$178,988.27," (D) "$130,309.47" is hereby deleted and replaced
with "$155,992.47," (E) "$110,763.05" is hereby deleted and replaced with
"$136,446.05," and (F) "$94,148.59" is hereby deleted and replaced with
"$119,831.59." Furthermore, the reference in Paragraph 19B to "$250,000.00" is
hereby deleted and replaced with "$300,000.00."
8. Parking. Effective as of the Expansion Premises Commencement Date,
-------
the Lease is hereby amended to provide Tenant with the right to lease an
additional twenty (20) parking permits in the parking facility serving the
Building (the types and locations of which shall be subject to the mutual
approval of Landlord and Tenant) at the then prevailing rates for said parking
permits, as same may change from time to time.
9. Occupancy Density. Effective as of the Expansion Premises
-----------------
Commencement Date, the Occupancy Density is hereby increased from 213 people to
250 people. Furthermore, the reference to "186" in Paragraph 6 A of the Lease is
hereby deleted and replaced with "218."
10. Authority. Tenant and Landlord each has full power and authority to
---------
enter into this Amendment and the person signing on behalf of Tenant and
Landlord has been fully authorized to do so by all necessary corporate or
partnership action on the part of Tenant and Landlord, respectively.
11. Lease in Full Force. Except for those provisions which are
-------------------
inconsistent with this Amendment and those terms, covenants and conditions for
which performance has heretofore been completed, all other terms, covenants and
conditions of the Lease shall remain in full force and effect and Tenant hereby
ratifies the Lease, as amended hereby. Except as expressly set forth herein, the
Premises shall be deemed to include the Expansion Premises for all purposes
under the Lease.
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first written
above.
"LANDLORD" "TENANT"
SPIEKER PROPERTIES, L.P., a California BROADBAND SPORTS, a Delaware
limited partnership corporation
By: Spieker Properties, Inc., a By: /s/ Gregory S. Hebner
Maryland corporation ---------------------------------
Name: Gregory S. Hebner
--------------------------------
Title: Chief Financial Officer
------------------------------
By: /s/ Jose Royo
---------------------------------
By: /s/ Jeffrey K. Nickell Name: Jose Royo
-------------------------- -------------------------------
Name: Jeffrey K. Nickell Title: CTO
------------------------ -------------------------------
Title: Vice President
------------------------
<PAGE>
[EXHIBIT A - PREMISES (GROUND FLOOR PLAN)]
<PAGE>
EXHIBIT 10.13.2
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (this "Second Amendment") is made this 29th day
of December 1999 between Spieker Properties, L.P., a California limited
partnership, ("Landlord"), and Broadband Sports, Inc., a Delaware corporation
("Tenant").
WHEREAS, Landlord and Tenant entered into a Lease dated July 30, 1999, as
amended by that certain First Amendment to Lease (the "First Amendment") dated
as of October 1, 1999 (collectively, the "Lease"), for those certain premises
located at 2120 Colorado Avenue, 2nd Floor, Santa Monica, California (the
"Premises"), as more fully described in the Lease. Capitalized terms used but
not otherwise defined herein shall have the meanings given them in the Lease;
and
WHEREAS, Landlord and Tenant desire to modify the Lease as provided herein.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties hereby mutually agree as follows:
1. Term Commencement Date. Notwithstanding anything to the contrary contained
----------------------
in the Lease, the Term Commencement Date (as defined in Paragraph 2.A of
the Lease) with respect to the initial Premises (excluding the Expansion
Premises defined in the First Amendment) shall be November 15, 1999.
Tenant's obligation to pay Rent in accordance with the terms of the Lease
with respect to the initial Premises shall commence on November 15, 1999.
There shall be no extension of the Term Commencement Date as a result of
Force Majeure Delays or events as described in Paragraph 35 of the Lease or
Paragraph 7.1 of Exhibit C to the Lease, of for any other purpose
whatsoever. The Expansion Premises Commencement Date with respect to the
Expansion Space shall not be modified by this Second Amendment and shall
continue to be as defined in Paragraph 2 of the First Amendment.
2. Term Expiration Date. The expiration date for the Term with respect to each
--------------------
of the initial Premises under the Lease and the Expansion Premises under the
First Amendment shall be extended to November 14, 2006.
3. Security Deposit. At the end of the sixth (6th) sentence of Paragraph 19.A
----------------
of the Lease, after the words "three (3) occasions during the Term," insert
the following: "and provided that the Security Deposit held by Landlord is a
cash deposit (with the nature of the Security Deposit being cash not
affecting the reduction of the LOC Amount (as herein defined) when an LOC
(as defined herein) is provided by Tenant pursuant to Paragraph 39.D), and
further provided that the Security Deposit held hereunder has not been
reduced at any time pursuant to Paragraph 19.B below, then".
Except as expressly modified above, all terms and conditions of the Lease as
modified remain in full force and effect and are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have entered into this Second
Amendment as of the date first written above.
LANDLORD: TENANT:
Spieker Properties, L.P., Broadband Sports, Inc.,
a California limited partnership a Delaware corporation
By: Spieker Properties, Inc., By: Andrea N. Kirsch
a Maryland corporation _________________________________
its General Partner Its: Vice President, Legal Affairs
______________________________
By: ___________________________ By: ________________________________
Thomas A. Herta
Its: ___________________________ Its: ______________________________
Vice President
<PAGE>
EXHIBIT 10.14
Execution Copy
CONFIDENTIAL
INTERACTIVE SERVICES AGREEMENT
------------------------------
This agreement (the "Agreement"), effective as of January 1, 1999 (the
"Effective Date"), is made and entered into by and between America Online, Inc.
("AOL"), a Delaware corporation, with its principal offices at 22000 AOL Way,
Dulles, Virginia 20166, on the one hand, and E-Sport, Inc. ("E-Sport"), a
Delaware corporation, with its principal offices at 1640 S. Sepulveda Blvd.,
Suite 500, Los Angeles, California 90025, and its wholly-owned subsidiaries, Pro
Sports Xchange, Inc. ("PSX"), a Delaware corporation, successor-in-interest to
Pro Sports Xchange, a California limited liability company, with its principal
offices at 1640 S. Sepulveda Blvd., Suite 500, Los Angeles, California 90025 and
Athlete Direct, Inc. ("Athlete Direct"), a Delaware corporation, successor-in-
interest to Athlete Direct, LLC, a California limited liability corporation,
with its principal offices at 1640 S. Sepulveda Blvd., Suite 500, Los Angeles,
California 90025 (E-Sport, PSX and Athlete Direct shall be collectively referred
to herein as "Interactive Content Provider" or "ICP") (each of AOL and ICP shall
be referred to herein as a "Party" and collectively as the "Parties").
INTRODUCTION
------------
AOL and ICP each desires that ICP provide the Online Area (as defined
below), including ICP data feeds as specified herein and certain AOL
screens/pages through the AOL Network (as defined below), subject to the terms
and conditions set forth in this Agreement. Defined terms used but not defined
in the body of the Agreement or in Exhibits A or C shall be as defined on
Exhibit B attached hereto.
TERMS
-----
1. DISTRIBUTION; PROGRAMMING
1.1 Online Area. ICP shall work diligently to develop and implement the
Online Area, consisting of the specific Content described on Exhibit
A.1 attached hereto. ICP shall develop the design of the Online Area
in consultation with AOL and in accordance with any standard design
and content publishing guidelines provided to ICP by AOL (including,
without limitation, any HTML publishing guidelines). ICP shall not
authorize or permit any third party to distribute the Licensed Content
on ICP's behalf through the AOL Network absent AOL's prior written
approval. The inclusion of any additional Content in the Online Area
(including, without limitation, any features, functionality or
technology) not expressly described on Exhibit A shall be subject to
AOL's prior written approval.
1.2 Licenses.
1.2.1 License to Licensed Content (other than Feeds). ICP hereby
grants AOL a non-exclusive, worldwide license to use, market,
store, distribute, display, communicate, perform, transmit and
promote the Licensed Content (other than the Feeds), (or any
portion thereof) as provided herein, through such areas or
features of the AOL Network as AOL deems appropriate.
<PAGE>
1.2.2 License to Feeds. In addition, ICP hereby grants AOL a non-
exclusive, worldwide license (i) to use, market, store,
distribute, display, communicate, perform, transmit and promote
the Feeds (as defined in Exhibit A), (or any portion thereof),
through the AOL Service and AOL.com., AOL's primary site on the
World Wide Web portion of the Internet and all AOL branded and
co-branded Internet sites providing content and promotions for
AOL products and services, together with any mirrored or
similar versions of such site(s) (collectively, "AOL.com"), and
(ii) to sublicense its rights under this Section 1.2.2 to third
parties producing programming for AOL.com for the sole purpose
of enabling such third parties to produce such AOL-branded or
AOL co-branded programming for AOL.com as provided below. To
the extent that the Feeds (or any portion thereof) are
distributed by AOL on AOL.com or on non-AOL Service areas of
the AOL Network, AOL shall (a) ensure that the Feeds will be
distributed on pages that are predominantly AOL-branded
(including, for example,"AOL.com Sports Web Center powered by
____", "Presented By" and "AOL.com/___"), (b) credit ICP as the
source of such Content, (c) promote the Premium Information
Products as a part of such Content (e.g., minimum text link at
the bottom of an article), and (d) not place the Feeds in such
close proximity to a third party brand so as to reasonably lead
to the conclusion that the Feeds are Content of such third
party. Nothing contained in this Section 1.2.2 shall be
construed to prevent or limit the offer, license or sale of
Advertisements anywhere on the AOL Network. Subject to payment
by AOL pursuant to Section 1.6(iv) below, ICP agrees to grant
to AOL a license to distribute the Feeds (or any portion
thereof) on other sites or properties owned or controlled by
AOL or its Affiliates which are not covered herein.
1.2.3 Feeds. ICP represents and warrants to AOL that it has the
authority to grant the above licenses to AOL (either through
ownership or license) to use the Licensed Content as described
in this Agreement. ICP shall provide AOL the Licensed Content
in the form or media reasonably necessary for AOL to distribute
it on the AOL Network as further set forth on Exhibits A and E-
1 attached hereto. Without limiting the generality of the
foregoing, during the Term of this Agreement, AOL may store via
mirrored data centers, tape, optical disks, or magneto optical
disks backup copies of the Feeds solely for purposes of record-
keeping, defending against third-party claims, responding to
official inquiries, and fulfilling its obligations and
exploiting the rights granted to AOL pursuant to this
Agreement. Under no circumstances will AOL use such Feeds for
any other purpose during the Term of this Agreement. It is
expressly understood that following the expiration or
termination of this Agreement, AOL shall have the right to use
the Licensed Content, including without limitation, the Feeds,
for a runoff period not to exceed ninety (90) days in the same
manner as such Content is permitted to be used during the Term.
Nothing in this Agreement shall constitute a sale or other
transfer of title from ICP to AOL of the Licensed Content, or
any portion thereof. All rights with respect to the Licensed
Content not expressly granted to AOL herein are reserved to
ICP.
CONFIDENTIAL 2
<PAGE>
1.2.4 Ownership. AOL shall own, and ICP shall have no right, title
or interest in or to, all Top Level Screens. ICP shall own, and
AOL shall have no ownership right, title or interest in or to,
the Other Screens.
1.3 Other Interactive Areas.
1.3.1 AOL Approval. [*]. AOL hereby approves the links to the sites
set forth in Exhibit I, subject to AOL's right to withdraw its
approval if there are any substantive changes to the Content
contained in such linked sites. In addition, AOL may reasonably
restrict its approval (at any time) to specific portions of
Content, Products, or functionality within a Linked Interactive
Site, including without limitation, those sites set forth in
Exhibit I. In such case, establishment of the link from the
Licensed Content to the Linked Interactive Site will be subject
to mutual agreement of the Parties regarding the means by which
access will be restricted to the approved portions of the
Linked Interactive Site. AOL shall give ICP a five (5) day
period to remove any specific Content, Products or
functionality within a Linked ICP Interactive Site that AOL
restricts its approval to pursuant to this Section 1.3.1 before
terminating the link to such site. All Linked ICP Interactive
Sites shall comply with the Operating Standards set forth in
Exhibit E-2.
1.3.2 Management. AOL shall have no obligations of any kind with
respect to any Linked Interactive Site. ICP shall be
responsible for any hosting or communication costs associated
with any Linked Interactive Sites (including, without
limitation, the costs associated with (i) any agreed-upon
direct connections between the AOL Network and a Linked
Interactive Site or (ii) a mirrored version of a Linked
Interactive Site). Any Linked Interactive Sites shall be
subject to the license set forth in Section 1.2.1 above. ICP
will permit AOL Members to access and use any Linked ICP
Interactive Site free of charge during the Term if such Linked
ICP Interactive Site is generally available to users (other
than ICP employees, agents, contractors and partners) free of
charge. If such Linked ICP Interactive Site is not generally
provided to any such users free of charge, then the terms and
conditions for AOL Members shall be no less favorable than for
any other user. AOL Members shall not be required to go through
a registration process (or any similar process) in order to
access and use any Linked ICP Interactive Site; provided,
however, that the Parties agree and acknowledge that some
features or areas of the Linked ICP Interactive Site may
require a registration process for all users generally (e.g. a
premium service) and that such registration process for AOL
Members shall be no more burdensome than for any other user and
shall be upon terms and conditions no less favorable than for
any other user. For a period of two years after the expiration
or earlier termination of this Agreement, ICP will allow AOL
Members to access any non-Premium Information Products on any
former Linked ICP Interactive Site
CONFIDENTIAL 3
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
(or any successor thereto) on terms and conditions no less
favorable than the terms and conditions available to other
users of such ICP Interactive Site.
1.3.3 Excessive Traffic Diversion. ICP shall use commercially
reasonable efforts to ensure that AOL traffic is generally
either kept within a Linked ICP Interactive Site or channeled
back into the AOL Network. To the extent that AOL notifies ICP
in writing that, in AOL's reasonable judgment, links from the
Linked ICP Interactive Site cause an excessive amount of AOL
traffic to be diverted outside of such site and the AOL Network
in a manner that has a detrimental effect on the traffic flow
of the AOL audience, then ICP shall immediately reduce the
number of links out of such site(s). In the event that ICP
cannot or does not so limit diverted traffic from the Linked
ICP Interactive Site, AOL reserves the right to terminate the
links from the AOL Network to the Linked ICP Interactive Site
at issue if such failure remains uncured after thirty (30) days
written notice thereof.
1.4 Placements. ICP shall pay AOL (in accordance with Section 1.5 below),
and AOL shall provide to ICP the marketing and promotional rights
("Placements") set forth in Exhibit A.4. The Placements and any other
promotions or advertisements (other than AOL Advertisements which ICP
has a right to sell pursuant to Section 2.1 of this Agreement)
purchased from or provided by AOL pursuant to Exhibit A of this
Agreement will be used by ICP solely for its own benefit and will not
be resold, traded, exchanged, bartered, brokered or otherwise offered
to any third party.
1.5 Placements Payments. For the Placements, ICP shall pay AOL the
following amounts:
(i) First Year (January 1, 1999 to December 31, 1999). For the
first year of the Term, ICP shall pay AOL two million seven hundred
eighty thousand dollars ($2,780,000) for the Placements.
(ii) Second Year (January 1, 2000 to December 31, 2000). For the
second year of the Term, ICP shall pay AOL two million seven hundred
eighty thousand dollars ($2,780,000) for the Placements.
(iii) Last Six Months of Initial Term (January 1, 2001 to June 30,
2001). For the last six (6) months of the Initial Term, ICP shall pay
AOL one million three hundred ninety thousand dollars ($1,390,000) for
the Placements.
1.6 Content Payments. For the Licensed Content and production and other
services to be provided pursuant to this Agreement, AOL shall pay ICP
as follows:
(i) First Year (January 1, 1999 to December 31, 1999). For the
first year of the Term, AOL shall pay ICP [*].
CONFIDENTIAL 4
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
(ii) Second Year (January 1, 2000 to December 31, 2000). For the
second year of the Term: AOL shall pay ICP [*].
(iii) Last Six Months of Initial Term (January 1, 2001 to June 30,
2001). For the last six (6) months of the Initial Term: AOL shall pay
ICP [*].
(iv) Additional Payments. AOL shall pay ICP [*] for each additional
license granted to AOL by ICP pursuant to the final sentence of
Section 1.2.2 above. Such payment shall be added to the Content
Payments to be made by AOL pursuant to subsections 1.6(i)-(iii) above.
1.7 Net Payments. The Parties shall satisfy their obligations under
Sections 1.5 and 1.6 through net payments as follows: AOL shall pay to
ICP the following net amounts: (a) [*] for each of the first three (3)
months of the Initial Term, and (b) [*] for each of the remaining
months of the Initial Term.
1.8 Exclusivity. ICP shall comply with the exclusivity restrictions set
forth on Exhibit A.2.
2. ADVERTISING AND TRANSACTIONS
2.1 Advertising Sales. AOL owns all right, title and interest in and to
the advertising and promotional spaces within the AOL Network
(including, without limitation, advertising and promotional spaces on
any AOL forms or pages preceding, framing or otherwise associated with
the Licensed Content or preceding, following or framing any Linked
Interactive Sites). The specific advertising inventory within any AOL
forms or pages shall be as reasonably determined by AOL. AOL shall
have the [*] right to sell [*] on the [*]. AOL hereby grants ICP the
[*] right to license or sell AOL Advertisements on the [*] subject to
AOL's approval for each AOL Advertisement, which approval shall not be
unreasonably withheld.
2.2 Advertising Policies.
2.2.1 AOL Advertisements. Any AOL Advertisements sold by ICP or its
agents shall be subject to AOL's then-standard advertising
policies, exclusivity commitments, and other preferential
contractual commitments to third parties which are applicable
to AOL and those exclusivities that AOL grants to itself for
its own business(es). AOL's current list of exclusivity
commitments are set forth in Exhibit J (the "Exclusivity
List"). AOL may update the Exclusivity List from time to time
and Advertisements sold to entities in categories not on the
Exclusivity List at the time such Advertisement was sold shall
not be a breach of contract, but ICP shall immediately remove
such Advertisement upon notification from AOL that such
Advertisement violates an AOL exclusivity or other preferential
contractual commitment. ICP shall not sell an AOL Advertisement
to any entity reasonably construed to be in competition with
AOL.
CONFIDENTIAL 5
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
2.2.2 Linked Interactive Site Advertisements. ICP shall ensure that
AOL Members linking to any Linked ICP Interactive Site (other
than the Stars Web Area) from the AOL Network do not receive
advertisements, promotions or links (i) for any entity
reasonably construed to be in competition with AOL, (ii) in
violation of AOL's then-standard advertising policies, or (iii)
in violation of AOL's exclusivity or other preferential rights
or commitments [*] Online Area and/or the AOL Network. AOL
shall use commercially reasonable efforts to discuss any
reasonable ICP request for an exception to the preceding
subclause (iii). In the event that AOL notifies ICP in writing
that any advertising or promotional Content in or through any
Linked ICP Interactive Site (a "Linked ICP Interactive Site
Advertisement") is in violation of AOL's then-standard
advertising policies or this Section 2.2.2, then ICP shall take
[*] steps to block access by AOL Members to such advertising
using ICP's then-available ad server or other technology. In
the event that ICP cannot, through its [*], block access by AOL
Members to the advertising in question, then ICP shall provide
AOL prompt written notice of such fact. AOL may restrict access
from the AOL Network to the advertising in question using
technology available to AOL or, in the event such restricted
access is not reasonably practicable, as determined by AOL in
AOL's sole discretion, terminate the link from the AOL Network
to the Linked ICP Interactive Site until such time as the
advertising in question is no longer displayed. ICP will
cooperate with AOL's reasonable requests to the extent AOL
elects to implement any such access restrictions.
2.3 Advertising Registration Form. In connection with the sale by ICP or
its agents of an AOL Advertisement, ICP shall, in each instance,
provide AOL with a completed standard AOL Advertising Registration
Form relating to such AOL Advertisement. ICP shall take all
reasonable steps necessary to ensure that any AOL Advertisement sold
by ICP complies with all applicable federal, state and local laws and
regulations.
2.4 Advertising Revenues. AOL shall be entitled to [*] of all Advertising
Revenues generated by the license or sale of AOL Advertisements on the
[*]. ICP shall be entitled to [*] of Advertising Revenues generated by
the license or sale of AOL Advertisements on the [*].
2.5 Interactive Commerce. To the extent ICP desires to offer, sell or
license Products, such merchandising shall be subject to (i) the terms
of this Agreement, (ii) the requirements posted at keyword
"Marketplace Policy" on the America Online brand service (or such
other keyword as AOL may designate during the Term), (iii) approval by
AOL of all categories of Products to be offered, (iv) the payment to
AOL of [*] of all Transaction Revenues for Premium Information
Products, Sports Entertainment Products and Memorabilia Products and
[*] of Transaction Revenues for all other Products, (v) the then-
current requirements of AOL's merchant certification program, (vi) ICP
implementing sufficient procedures to protect the security of all
merchandising on a Linked ICP
CONFIDENTIAL 6
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
Interactive Site (i.e., ICP shall as of the Effective Date use 40-bit
SSL technology and, if requested by AOL upon thirty (30) days notice
thereof to ICP, 128-bit SSL), and (vii) the requirement that ICP take
all reasonable steps necessary to conform its promotion and sale of
Products through a Linked ICP Interactive Site to the then-existing
technologies identified by AOL which are optimized for the AOL Service
including, without limitation, any "quick checkout" tool which AOL may
implement to facilitate purchase of Products by AOL Members through
the ICP Linked Interactive upon thirty (30) days notice thereof to
ICP. For purposes of subsection (iii) above, AOL hereby approves the
categories of products set forth in Exhibit I, subject to AOL's right
to withdraw its approval of any category of Product which violates
AOL's exclusivity or preferential contractual commitments as specified
in Exhibit I. If, in accordance with Section 1.3.1, AOL approves a
link from the Online Area to a site on the World Wide Web portion of
the Internet where Products are sold, ICP and AOL shall agree upon an
appropriate revenue share for sales of Products to AOL Members at such
site. Until such time as an agreement is reached, AOL shall be
entitled to [*] of all Transaction Revenues generated from such site.
Third parties shall not be authorized or permitted to sell Products.
The preceding sentence shall not prevent ICP from selling Products it
buys or licenses from third parties.
2.6 Member Benefits. ICP will generally promote through the Online Area
any special or promotional offers related to the Licensed Content made
generally available by or on behalf of ICP through any other similar
or like distribution channel. In addition, ICP shall promote through
the Online Area on a regular and consistent basis special offers
exclusively available to AOL Members ("AOL Exclusive Offers"). ICP
shall, at all times, feature at least one AOL Exclusive Offer for AOL
Members (except as otherwise mutually agreed upon by the Parties).
The AOL Exclusive Offer made available by ICP shall provide a
substantial member benefit to AOL Members, either by virtue of a
meaningful price discount, product enhancement, unique service benefit
or other special feature. Specific AOL Exclusive Offers to be made
available by ICP shall include the following: discounts from regularly
priced sports memorabilia, licensed sports products, and sports
collectibles. ICP will provide AOL with reasonable prior notice of
AOL Exclusive Offers and other special offers so that AOL can, in its
editorial discretion, market the availability of such offers.
3. PRODUCTION AND SUPPORT
3.1 Production Work.
(i) AOL Pages. AOL shall build the Team Pages (as defined in
Exhibit A) and Star Pages (as defined in Exhibit A) and such pages
shall be programmed and populated by ICP in accordance with this
Agreement. The forms of the Team Pages and Star Pages shall be as
determined by AOL after consultation with ICP.
(ii) Production Responsibility. Except as otherwise provided
herein, ICP shall be responsible for all production, including
maintenance, of the Stars Online Area. Unless otherwise mutually
agreed upon in writing, ICP shall be responsible for all changes to
the Team Online Area or the Feeds. AOL shall bear the expense of any
production work performed by ICP (and AOL will not charge ICP for any
production work performed by AOL) relating to the Team Online Area or
the Feeds (a) which is not requested by ICP, or (b) which is mutually
agreed upon by the Parties in good faith within the parameters of this
Agreement. Any
CONFIDENTIAL 7
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
change requested by ICP shall require AOL's prior approval, but such
approval shall not signify mutual agreement of a change giving rise to
AOL's responsibility to bear the expense of such change unless so
stated in writing.
(iii) AOL Assistance with ICP's Production Responsibilities. In the
event that ICP requests AOL's production assistance relating to the
Stars Online Area in connection with (i) the initial development,
design and construction of the Stars Online Area, (ii) ongoing
programming and maintenance related to the Stars Online Area, (iii) a
redesign of or addition to the Stars Online Area (e.g., a change to an
existing screen format or construction of a new custom form), (iv)
construction and maintenance of an approved advertising, sponsorship
or promotional area or online "store," (v) production to modify work
performed by a third party provider or (vi) any other type of
production work, ICP shall work with AOL to develop detailed
production plans for the requested production assistance (the
"Production Plan"). Following receipt of the final Production Plan,
AOL shall notify ICP of (i) AOL's availability to perform the
requested production work, (ii) the proposed fee or fee structure for
the requested production and maintenance work and (iii) the estimated
development schedule for such work. To the extent the Parties reach
agreement regarding implementation of an agreed-upon Production Plan,
such agreement shall be reflected in a separate work order signed by
the Parties. All fees to be paid to AOL for any such production work
shall be paid in advance. To the extent ICP elects to retain a third
party provider to perform any such production work, work produced by
such third party provider must generally conform to AOL's production
standards available at Keyword "Styleguide." The specific production
resources which AOL allocates to any production work to be performed
on behalf of ICP shall be as determined by AOL in its sole discretion.
With respect to any routine production, maintenance or related
services which AOL reasonably determines are necessary for AOL to
perform in order to support the proper functioning and integration of
the Stars Online Area ("Routine Services"), ICP will pay the then-
standard fees charged by AOL for such Routine Services.
(iv) Third Party Content. AOL will work to facilitate securing
necessary rights for ICP to utilize certain Content (e.g., initially,
AP news and photographs, SportsTicker, or substitutes therefor)
necessary to produce the Team Online Area and AOL shall bear the
reasonable cost of providing ICP access to such Content; provided
that, the Parties acknowledge that certain third party consents may be
necessary to secure such rights and that AOL shall not be in breach of
contract if it is unable to secure such rights through reasonable
efforts and ICP shall not be in breach of contract if ICP's failure to
produce and program the Team Online Area is caused solely by AOL's
inability to secure such rights. ICP shall utilize such third party
Content solely to perform its obligations hereunder and for no other
purpose. In addition, ICP shall ensure that its utilization of any
news feeds and/or other third party Content provided by AOL to ICP
hereunder complies with any and all contractual terms and conditions
on use to which AOL is subject as communicated by AOL to ICP in
writing or by email.
3.2 Publishing and Production Tools. AOL shall provide to ICP, at no
cost to ICP, those of AOL's proprietary publishing tools (each a
"Tool") reasonably necessary (as determined by AOL) for ICP to develop
and implement the Licensed Content during the Term. ICP shall be
granted a nonexclusive license to use any such
CONFIDENTIAL 8
<PAGE>
Tool, which license shall be subject to: (i) ICP's compliance with all
rules and regulations relating to use of the Tools, as published from
time to time by AOL, (ii) AOL's right to withdraw or modify such
license at any time, and (iii) ICP's express recognition that AOL
provides all Tools on an "as is" basis, without warranties of any
kind. If any withdrawal or modification pursuant to (ii) above has a
material adverse effect upon ICP's ability to develop and implement
the Licensed Content, ICP shall not be in breach of this Agreement for
any consequent ICP failure to develop and implement the Licensed
Content as required by this Agreement.
3.3 Training and Support. AOL shall make available to ICP standard AOL
training and support programs related to ICP's management and
maintenance of the Licensed Content. ICP can select its training and
support program from the options then offered by AOL. ICP shall be
responsible to pay the fees associated with its chosen training and
support package. In addition, ICP will pay travel and lodging costs
associated with its participation in any AOL training programs
(including AOL's travel and lodging costs when training is conducted
at ICP's offices).
4. PROMOTION
4.1 Cooperation. Each Party shall cooperate with and reasonably assist
the other Party in supplying Content for marketing and promotional
activities which relate to the Online Area.
4.2 Interactive Site. The following promotions (collectively, the "AOL
Promos") shall be included within each Linked ICP Interactive Site and
any other ICP Interactive Site controlled by ICP and providing a
substantial portion of Content substantially the same as or similar
to, the Licensed Content or any Linked ICP Interactive Site, (i.e.,
currently, http://www.athletedirect.com and http://www.psx.com) and
all successors thereto : (i) a prominent promotional button (at least
90 x 30 pixels or 70 x 70 pixels in size) appearing on the main screen
of such ICP Interactive Site to promote such AOL products or services
as AOL may reasonably designate (for example, the America Online brand
service, the CompuServe brand service, the AOL.com site, the Digital
City services or the AOL Instant Messenger service); and (ii) a
prominent "Try AOL" feature (at least 90 x 30 pixels or 70 x 70 pixels
in size) through which users can obtain promotional information about
AOL products or services designated by AOL and, at AOL's option,
download or order the then-current version of client software for such
AOL products or services. AOL will provide the creative content to be
used in the AOL Promos. ICP shall post (or update, as the case may
be) the creative content supplied by AOL within the spaces for the AOL
Promos within five days of its receipt of such content from AOL.
Without limiting any other reporting obligations of the Parties
contained herein, ICP shall provide AOL with monthly written reports
specifying the number of impressions to the pages containing the AOL
Promos during the prior month. In the event that AOL elects to serve
the AOL Promos to such ICP Interactive Site from an ad server
controlled by AOL or its agent, ICP shall take all reasonable
operational steps necessary to facilitate such ad serving arrangement,
including without limitation, inserting HTML code designated by AOL on
the pages of such ICP Interactive Site on which the AOL Promos will
appear. In addition, within each such ICP Interactive Site, ICP
shall,
CONFIDENTIAL 9
<PAGE>
[*], provide (a) prominent promotion for the keywords associated with
ICP's Online Area, and (b) links from the Linked ICP Interactive Site
to the relevant topic areas on AOL's AOL.com site; provided that, ICP
shall provide substitute promotion, as mutually agreed upon by the
Parties, in instances in which such promotion is not commercially
practicable (i.e., given time and space constraints).
4.3 Other Media. In ICP's television, radio, print and "out of home"
(e.g., buses and billboards) advertisements relating to the Teams
Content and/or the Feeds and in any publications, programs, features
or other forms of media relating to the Teams Content and/or the Feeds
over which ICP exercises editorial control, ICP will include specific
references or mentions (verbally where possible) of the availability
of ICP's Online Area through the America Online brand service, [*], as
any references that ICP makes to the Teams Content and/or the Feeds or
any ICP Interactive Site controlled by ICP and providing a substantial
portion of Content substantially the same as or similar to, the
Licensed Content or any Linked ICP Interactive Site (i.e., currently,
http://www.athletedirect.com and http://www.psx.com) and all
successors thereto (by way of site name, related company name, URL or
otherwise). Without limiting the generality of the foregoing, [*],
ICP's listing of the "URL" for such Licensed Content or ICP
Interactive Site will be accompanied by a prominent listing of the
"keyword" term on AOL for the appropriate Online Area.
4.4 Preferred Access Provider. When promoting AOL, ICP shall promote AOL
as a preferred access provider through which a user can access ICP's
Content and shall use commercially reasonable efforts to promote AOL
as prominently as any other Internet service provider as part of ICP's
promotion of the Licensed Content hereunder.
4.5 Promotion of Athletes. ICP shall secure the promotional rights set
forth in Exhibit A.3 with respect to each Athlete and Columnist (as
defined in Exhibit A).
5. PAYMENTS AND REPORTING.
5.1 Payment Schedule. Except as otherwise specified in Section 1.7, each
Party agrees to pay the other Party all amounts received and owed to
the other Party as described herein on a quarterly basis within sixty
(60) days of the end of the quarter in which such amounts were
collected by such Party. The first quarter for which payment is to be
made shall begin on the first day of the month following the month of
execution of this Agreement and (ii) include the portion of the month
of execution following the Effective Date (unless the Agreement was
executed on the first day of a month, in which case the quarter begin
shall be deemed to begin on the first day of such month).
5.2 Reporting. On no less than a monthly basis, each Party shall supply
or make available to the other Party reports containing the following
information:
5.2.1 Usage Data. AOL shall make available to ICP a monthly report
specifying usage information for the Online Area for the prior
month in the format
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[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
which is generally made available to similarly situated
interactive content providers. In addition, for any Linked ICP
Interactive Site which AOL is caching, AOL shall supply ICP
with monthly reports reflecting aggregate impressions by AOL
Members to the cached version of the Linked ICP Interactive
Site during the prior month. For each Linked ICP Interactive
Site, ICP will supply AOL with monthly reports which reflect
total impressions by AOL Members to the Linked ICP Interactive
Site during the prior month.
5.2.2 Sales Reports. ICP will provide AOL in an automated manner
with a monthly report in an AOL-designated format, detailing
the following AOL Purchaser activity in such period (and any
other information mutually agreed upon by the Parties or
reasonably required for measuring revenue activity by ICP
through the Linked ICP Interactive Sites): (i) summary sales
information by day (date, number of Products, number of orders,
total Transaction Revenues); and (ii) detailed sales
information (order date/timestamp (if technically feasible),
AOL Purchaser name and screenname, SKU or Product description)
(information in clauses (i) and (ii), "Sales Reports"). AOL
will be entitled to use the Sales Reports in its business
operations, subject to the terms of this Agreement. More
generally, each payment to be made by ICP pursuant to Section
2.5 will be accompanied by a report containing information
which supports the payment, including information identifying
gross Transaction Revenues and all items deducted or excluded
from gross Transaction Revenues to produce Transaction
Revenues, including, without limitation, chargebacks and
credits for returned or canceled goods or services (and, where
possible, an explanation of the type of reason therefor, e.g.,
bad credit card information, poor customer service, etc.),
revenue sharing with an ICP Marketing Partner (as defined in
Exhibit B).
5.2.3. Promotional Commitments. ICP shall provide to AOL a monthly
report documenting its compliance with any promotional
commitments it has undertaken pursuant to Section 4 in the form
attached as Exhibit D hereto.
5.2.4. Exclusivity Restrictions. ICP shall submit to AOL a monthly
certification that it is in full compliance with all
exclusivity restrictions set forth in this Agreement in the
form attached as Exhibit D hereto.
6. TERM, TERMINATION AND COMMERCIAL LAUNCH.
6.1. Term. Unless earlier terminated as set forth herein, the initial
term of this Agreement shall be thirty (30) months from the Effective
Date ("Initial Term"). Upon the expiration of the Initial Term, AOL
shall have the right to renew this Agreement for up to two successive
one year terms (each, a "Renewal Term" and together with the Initial
Term, the "Term"). ICP shall have the option to terminate this
Agreement upon ninety (90) days notice within thirty (30) days after
the beginning of any Renewal Term. ICP's obligations with respect to
the Stars Online Area shall begin immediately; however, the Stars
Online Area shall be exclusive to AOL in the same manner as is
provided in the Athlete Direct Interactive Service Agreement (as
defined below) until and including March 31,
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<PAGE>
1999. Nothing contained in this Agreement shall modify or amend that
certain Interactive Services Agreement by and between AOL and Athlete
Direct, LLC, a California limited liability corporation, dated April
1, 1997 (the "Athlete Direct Interactive Services Agreement"),
including without limitation, the exclusivities set forth therein. The
Parties agree and acknowledge that the Athlete Direct Interactive
Services Agreement will expire on March 31, 1999. Upon the expiration
or earlier termination of this Agreement, AOL may, at its discretion,
continue to promote one or more "pointers" or links from the AOL
Network to an ICP Interactive Site and continue to use ICP's trade
names, trade marks and service marks in connection therewith.
6.2 Termination for Breach. Either Party may terminate this Agreement at
any time in the event of a material breach by the other Party which
remains uncured after thirty (30) days written notice thereof.
6.3 Termination for Bankruptcy/Insolvency. Either Party may terminate
this Agreement immediately following written notice to the other Party
if the other Party (i) ceases to do business in the normal course,
(ii) becomes or is declared insolvent or bankrupt, (iii) is the
subject of any proceeding related to its liquidation or insolvency
(whether voluntary or involuntary) which is not dismissed within
ninety (90) calendar days or (iv) makes an assignment for the benefit
of creditors.
6.4 Site and Content Preparation. ICP shall achieve Site and Content
Preparation of the Teams Online Area (as defined in Exhibit A) and the
Star Pages (as defined in Exhibit A) on or before March 15, 1999, the
Athlete Online Areas as defined and set forth in Exhibit A and the
rest of the Star Online Area (as defined in Exhibit A) on or before
March 31, 1999. "Site and Content Preparation" shall mean that ICP
shall have completed production of the Online Area and the Licensed
Content in accordance with this Agreement and completed all other
necessary work to prepare the Online Area and the Licensed Content and
any other related areas or screens to launch on the AOL Network as
contemplated hereunder. In the event ICP has not achieved Site and
Content Preparation on or before February 15, 1999, then AOL shall
work with ICP to identify any deficiencies in the Teams Online Area
and Stars Pages and specifying in writing or by email the work that
needs to be completed by ICP in order to achieve Site and Content
Preparation. If ICP has not completed such work by March 15, 1999 for
the Teams Online Area and the Star Pages, the dates provided in
Exhibit A for the Athlete Online Areas and by March 31, 1999 for the
rest of the Stars Online Area, then, in addition to any other remedies
available, AOL shall have the right to terminate this Agreement by
giving ICP written notice thereof. If ICP is delayed in achieving
Site and Content Preparation due to a failure by AOL to perform its
obligations under this Agreement and ICP notifies AOL in writing of
such failure and the resulting delay, then the timeframe referenced in
this Section shall each be extended by the amount of time of ICP's
delay solely attributable to such failure by AOL.
6.5 Termination of Prior Agreement. As of the Effective Date, the
following agreement shall terminate by mutual agreement: that certain
Content License Agreement by and between Extreme Fans, Inc., an
Illinois corporation d.b.a. Real Fans ("Real Fans") and PSX, dated as
of February, 1997, that certain First
CONFIDENTIAL 12
<PAGE>
Amendment to Content License Agreement, dated August 1, 1997 and that
certain Second Amendment to the Content License Agreement, dated as of
October 1, 1997 (collectively, "Content License Agreement"). PSX
acknowledges and agrees that (i) AOL and Real Fans have fulfilled all
of Real Fans' obligations to PSX under the Content License Agreement,
(ii) AOL has no further obligations to ICP in connection with or
related in any way to Real Fans, (iii) ICP does not have and will not
make any other claims against Real Fans or AOL, or their directors,
officers, employees or agents, for additional sums of money or
otherwise, in connection with or related in any way to Real Fans (iv)
upon payment of the [*] set forth below, Real Fans will have no
further obligations to ICP, (iv) upon payment of the [*] set forth
below, ICP does not have and will not make any other claims against
Real Fans, or its directors, officers, employees or agents, for
additional sums of money or otherwise. As of January 15, 1999, ICP
shall perform Real Fans' obligations to subscribers to fulfill the
Subscription Reports which obligations were made known to ICP by Real
Fans as of January 15, 1999 in exchange for [*] which amount shall be
paid upon full execution of this Agreement. As used herein,
"Subscription Reports" shall mean "PSX E-Mail Reports", "CSX E-Mail
Reports", "CSX Basketball E-Mail Reports" and "PSX Hockey E-Mail
Reports" (as defined in the Content License Agreement) sold by Real
Fans on a subscription basis to subscribers and packaged in several
different formats (e.g. all baseball teams, American League baseball
teams, etc.).
6.6 Termination for Change of Control/Ownership. At any time after a
Change of Control of ICP to a Prohibited Party, AOL may terminate this
Agreement upon [*] written notice thereof.
6.7 AOL Option. Without limiting any rights or remedies AOL may have
pursuant to this Agreement, including without limitation, any other
termination rights AOL may have, AOL shall have the option to
terminate this Agreement for any reason or no reason whatsoever at any
time after the first anniversary date of the Effective Date of this
Agreement upon six (6) months prior written notice thereof to ICP;
provided that, unless such written notice has been given in the first
ten (10) days of a calendar quarter (in which case such termination
shall be effective six (6) months after the first day of such
quarter), such termination shall not be effective until six (6) months
after the first day of the immediately following calendar quarter.
6.7.1 Option Fee. If AOL exercises its option to terminate this
Agreement pursuant to this Section 6.7, AOL shall (i) pay ICP
[*] in cash (the "Cash Fee") within thirty (30) days after the
date the termination becomes effective (the "Termination
Date"), (ii) provide ICP with the Additional Advertisements as
set forth herein (collectively, the "Option Fee"). Until the
Termination Date, AOL shall provide to ICP the Total
Impressions Commitment (as defined in Exhibit A.4) on a pro
rata basis. After the Termination Date, AOL shall provide to
ICP, within twenty-four (24) months of the Termination Date,
banner advertisements on a run of AOL Service basis (i.e.,
series of daily servings on the AOL Service) ("Additional
Advertisements") with guaranteed Impressions calculated as
follows: [*] the number of months between the Termination Date
and June 30, 2001 minus [*].
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[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
By way of example, if AOL gives notice to ICP on March 31, 2000
that it is terminating this Agreement pursuant to this Section
6.7, the Termination Date shall be September 30, 2000. AOL
would pay ICP the Cash Fee and provide Additional
Advertisements with guaranteed Impressions of 21,750,003. If
AOL gives such notice to ICP on April 15, 2000, the Termination
Date shall be December 31, 2000. AOL would owe ICP the Cash Fee
and Additional Advertisements with guaranteed Impressions of
13,000,002.
The Additional Advertisements (i) shall be used by ICP only to
promote ICP's Memorabilia Products, (ii) shall not be traded,
bartered, sold or otherwise provided by ICP to any third party,
and (iii) shall be subject to the terms of this Agreement
(including without limitation, the terms and conditions related
to banner advertisements provided pursuant to Promotion (3),
the Linked Site Terms (as defined below), all revenue sharing
and reporting obligations and all terms and conditions
contained in Exhibit C related thereto, which terms and
conditions shall survive the termination of this Agreement
until all Additional Advertisements are delivered unless such
provisions survive thereafter pursuant to other provisions of
this Agreement.), AOL's standard advertising and commerce
policies, and AOL's standard insertion order for advertisements
on the AOL Network, including all terms contained and
incorporated therein. Additional Advertisements shall not
promote, link or point to any entity reasonably construed to be
in competition with AOL or promote, link or point to any entity
or area in violation of AOL's exclusivity and other
preferential commitments.
6.7.2 Keyword(TM) Search Terms. In the event AOL terminates this
Agreement pursuant to this Section 6.7, for a period beginning
on the Termination Date and extending through June 30, 2001,
AOL shall provide to ICP the Keyword Search(TM) Terms "Athlete
Direct" and "AD" which shall link to
http://www.athletedirect.com. and "Pro Sports Xchange" and
"College Sports Xchange" which shall link to
http://www.psx.com,subject to all terms and conditions of this
Agreement related to (i) Keyword(TM) Search Terms
(collectively, "Keyword Terms"), and (ii) Linked ICP
Interactive Sites, including without limitation, the Operating
Standards, restrictions on Linked ICP Interactive Site
Advertisements and merchandising, and Content on Linked ICP
Interactive Sites (collectively "Linked Site Terms"). ICP shall
fully perform all of its obligations under the Keyword Terms
and the Linked Site Terms, including without limitation, all
revenue sharing and reporting obligations and all terms and
conditions contained in Exhibit C related thereto, and all such
terms and conditions shall survive the termination of this
Agreement until June 30, 2001 unless such provisions survive
thereafter pursuant to other provisions of this Agreement. ICP
shall have the option, exercisable upon ten (10) days written
notice thereof to AOL, to decline the provision of the
Keyword(TM) Search Terms to be provided pursuant to this
Section 6.7.2, in which case this Section 6.7.2 shall not
continue to apply.
CONFIDENTIAL 14
<PAGE>
7. TERMS AND CONDITIONS. The legal terms and conditions set forth on Exhibit
C attached hereto are hereby made a part of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the Effective Date.
AMERICA ONLINE, INC. E-SPORT, INC.
By: /s/ Lynne Crawford By: /s/ Ross Schafelberger
-------------------------------- --------------------------------
Print Name: Lynne Crawford Print Name: Ross Schafelberger
------------------------ ------------------------
Title: VP/CFO, Title: COO
AOL Interactive Services -----------------------------
-----------------------------
Date: Date: 2/18/99
------------------------------ ------------------------------
Tax ID/EIN#: 05-4673805
-----------------------
PRO SPORTS XCHANGE, INC. ATHLETE DIRECT, INC.
By: /s/ Ross Schafelberger By: /s/ Ross Schafelberger
-------------------------------- --------------------------------
Print Name: Ross Schafelberger Print Name: Ross Schafelberger
------------------------ ------------------------
Title: VP, Secretary Title: President
----------------------------- -----------------------------
Date: 2/18/99 Date: 2/18/99
------------------------------ ------------------------------
CONFIDENTIAL 15
<PAGE>
EXHIBIT A
---------
A.1 -- Description of the Online Area/Licensed Content. ICP shall provide the
following to AOL:
A.1.1 Online Area. AOL shall provide ICP with editorial guidelines
("Guidelines") for the Online Area within seventy-five (75) days after the
Effective Date. A sample of such Guidelines is attached to the Agreement as
Exhibit F. For a period of thirty (30) days after the date AOL provides the
Guidelines to ICP, AOL will discuss in good faith any modifications to such
Guidelines proposed by ICP. In providing the Online Area and the Licensed
Content, ICP shall comply with the Guidelines, as may be modified by AOL after
discussions with ICP. The Online Area shall consist of the following online
areas on the AOL Service:
A.1.1.1 Team Online Area. ICP shall program and produce the only
AOL-branded team online area on the AOL Service ("Team
Online Area") where AOL Members can access information
relating to all professional and collegiate sports teams
("collectively, "Teams" and singularly "Team") on a
team-by-team basis in each of the following sports
categories (collectively, "Sports Categories" and
singularly "Sports Category"): [*]. The Team Online
Area shall consist of the following:
(A) Team Pages. ICP shall program and produce the AOL
pages and screens consistent with the following
general descriptions ("Team Pages"): (i) an [*],
(ii) [*] and, Category and, at AOL's election and
subject to AOL's agreement to promote any such
pages and screens, [*] and (iii), [*]. The Team
Pages shall (a) contain the links specified in
Exhibit A.1.1.3 and feature regularly updated
"teaser" Content from the Team Deeper Content and
the Feeds (as defined below). The Team Pages shall
be in Rainman format on the AOL Service unless
otherwise mutually agreed upon by the Parties.
(B) Team Deeper Content. The Team Deeper Content shall
generally consist of the following Content on the
AOL Service: (a) the complete Feeds related to each
Sports Category and each Team, (b) other AOL-
approved Team Content, (c) other AOL-approved
dynamic Content such as weekly chats, updated
player information and multimedia elements, and (d)
additional Team features. The Team Deeper Content
shall be in Rainman format unless otherwise
mutually agreed upon by the Parties. The Parties
acknowledge that, subject to the terms of this
Agreement, including without limitation, Sections
1.3.1 and 2 of this Agreement, ICP intends to
advertise, offer, sell or license Products through
the Team Deeper Content.
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[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
(C) Updates. Unless otherwise requested by AOL, ICP
shall update the Team Pages to keep them dynamic
and robust as set forth on the schedule set forth
in Exhibit K.
A.1.1.2 Stars Online Area. ICP shall program and produce the
stars online area ("Stars Online Area"). The Stars
Online Area shall be designed as [*] interactive
and online home for mutually and reasonably agreed-upon
nationally recognized major professional athletes
("Athletes") in the following Sports Categories: [*]
and other mutually agreed upon Sports Categories. The
Stars Online Area shall consist of the following:
(A) Star Pages. ICP shall program and produce for AOL
the following pages and screens on the AOL Service
consistent with the following general descriptions
("Stars Pages"): [*]. The Stars Pages shall contain
the links specified in Exhibit A.1.1.3 and shall
feature regularly updated "teaser" Content from
Deeper Stars Content and the Feeds. The Star Pages
shall be in Rainman format unless otherwise
mutually agreed upon by the Parties.
(B) Deeper Stars Content. The Deeper Stars Content
shall generally consist of (a) individual athlete
online areas ("Athlete Online Areas") produced and
maintained by ICP, (b) other ICP star Content and
additional star features, and (c) other dynamic
Content such as weekly chats, updated player
information and multimedia elements. The Deeper
Stars Content shall be in Rainman format on the AOL
Service or, subject to all provisions of this
Agreement, in HTML format on a Linked ICP
Interactive Site, as elected by ICP after
consultation with AOL.
(C) Athlete Online Areas. ICP shall provide at least
at least [*] Athlete Online Areas upon the
Effective Date, [*] Athlete Online Areas within the
first six (6) months of the Term, [*] Athlete
Online Areas within the first year of the Term, [*]
Athlete Online Areas within the first eighteen (18)
months of the Term and [*] Athlete Online Areas
within the first two (2) years of the Term.
Beginning on the Effective Date, at least [*] of
the Athlete Online Areas shall be for Star Athletes
(as defined in Exhibit B) [*] Sports Categories,
for a total of [*] Star Athletes. The Athlete
Online Areas shall be in Rainman format on the AOL
Service or, subject to all provisions of this
Agreement, in HTML format on a Linked ICP
Interactive Site, as elected by ICP after
consultation with AOL. ICP shall provide to AOL a
list of all Athletes to be included in the Stars
Online Area, which list shall be subject to AOL's
approval pursuant to the terms set forth herein and
in Exhibit G. ICP recognizes and acknowledges the
importance to AOL of certainty and consistency with
respect to the Athlete Online Areas, and AOL
recognizes and acknowledges that ICP may need to
modify the list from time to time. As such, ICP
shall have the right to modify the list from time
to time to delete injured athletes or athletes no
longer under contract with ICP, or to add new
athletes under contract with ICP, or to address
other ICP business requirements; provided that, (a)
ICP shall replace Athletes deleted from
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[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
the list with Athletes of equal prominence, and (b)
ICP shall provide AOL seventy-five (75) days prior
written notice of such modifications.
(D) Programming. In addition to the above, the
programming of the Star Online Area, including
without limitation, the Athlete Online Areas, shall
include, at a minimum, those features and areas set
forth in Exhibit G hereto.
(E) Stars Web Area. To the extent the Deeper Stars
Content and/or the Athlete Online Areas are located
on a Linked ICP Interactive Site pursuant to
A.1.1.2 (B) and (C) in accordance with the terms
and conditions of this Agreement (the "Stars Web
Area"), ICP's obligations with respect to the Stars
Web Area viewed by AOL Members shall include all of
ICP's obligations with respect to the Online Area
and the Stars Online Area. The definition of the
"Stars Web Area" shall not include any Content on a
Linked ICP Interactive Site, including athlete
online areas, which are not provided by ICP to AOL
under this Agreement.
A.1.1.3 Look and Feel/Links. The look and feel of the Team Pages
and Stars Pages (collectively, the "AOL Pages" and
singularly, the "AOL Page") and the Team Deeper Content
shall be as determined by AOL after consultation with
ICP. AOL will determine, at its sole discretion, and ICP
will implement (a) the design and navigation of each AOL
Page; (b) the links from each AOL Page to news
schedules, scores and statistics packages provided by
AOL's other partners, and (c) any other links from an
AOL Page. Each AOL Page shall (i) contain at least [*]
AOL-approved ICP-designated links to the relevant Deeper
Content (i.e., Team Pages to Team Deeper Content and
Star Pages to Star Deeper Content) or commerce in
accordance with the provisions of this Agreement,
including without limitation, Sections 1.3.1, 2.2.2 and
2.5, and (ii) feature at least [*] links to AOL-
designated Content or commerce (including, without
limitation, other AOL content and/or commerce partners
and ICP Content and/or commerce at AOL's sole
discretion). AOL's approval for the ICP-designated links
to Team or Star Deeper Content or commerce (other than
the links which are approved pursuant to Section 1.3.1
of this Agreement) shall not be unreasonably withheld;
provided that, (i) such links are to [*] and such linked
Content is editorially relevant to and enhances the
Content contained in the Online Area from which it is
linked, and (ii) [*]. To the extent ICP is permitted to
sell Products through the Online Area in conformance
with Section 2.5 of this Agreement, [*].
A.1.1.4 Fantasy Content. At ICP's expense, including the expense
associated with integrating the following Content into
the AOL Service Sports Channel fantasy area ("Fantasy
Center"), ICP shall provide to AOL, in Rainman format,
the following Content:
(A) Headline Notes. ICP shall provide to AOL Headline
Notes for inclusion in the Fantasy Center news area
as follows : (a) for baseball and football as of
the Effective Date, and (b) for hockey and
basketball as of the next hockey and basketball
season (including, without limitation, the
shortened 1999 NBA basketball season),
respectively, after the Effective Date. During the
baseball and football Seasons, ICP shall provide at
CONFIDENTIAL 18
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
least five daily Headline Notes for each of these
sports. During the hockey and basketball Seasons
and the football and baseball Off-Seasons, ICP
shall provide Headline Notes for each of these
sports on an as-needed basis, but no less often
than once per week or as mutually agreed upon by
the Parties.
(B) Fantasy Articles. Fantasy articles ("Fantasy
Articles") written by Bob Nightengale or Tracy
Ringolsby or by a writer of similar caliber
approved by AOL for baseball, football, hockey and
basketball for inclusion in the Fantasy Center
analysis area as follows: (a) during the baseball
and football Seasons, ICP shall provide at least
one (1) Fantasy Article for each of these sports
per day, (b) during the hockey and basketball
Seasons and the football and baseball Off-Seasons,
ICP shall provide Fantasy Articles for each of
these sports on an as-needed basis, but no less
often than once per week or as mutually agreed upon
by the Parties.
A.1.1.5 Kids Programming and Content. ICP shall program an area
on the AOL Service Kids Only Channel ("ICP Kids Area")
consisting of the Content set forth in Exhibit G,
Paragraph (b) "Kids Channel." The ICP Kids Area shall be
a part of the Online Area. ICP shall comply with AOL's
policies regarding Content targeted to children under
twelve years of age ("AOL Kids Policies").
A.1.2 Talent and Athletes. ICP shall provide at least twenty-five (25)
athletes, including without limitation ten (10) Star Athletes per
year, and other talent for regular chats and live events in the
AOL Sports Live Online Area, based upon a mutually agreed upon
schedule. ICP agrees to work with AOL to create appropriate
promotional plans with respect to such chat and live events. ICP
agrees to use best efforts to give AOL at least twenty-four (24)
hours notice to cancel any scheduled athlete appearance on the
AOL Service.
A.1.3. Feeds. ICP shall provide to AOL the following data feeds as
defined herein (collectively, the "Feeds") via FTP, email or
other AOL-designated method: (i) Pro Sports Xchange Feed ("PSX
Feed"), and (ii) College Sports Xchange Feed ("CSX Feed").
Subject to all terms of this Agreement, including without
limitation Sections 1.3.1 and 2, ICP shall be entitled to promote
and market Premium Information Products through the inclusion of
a promotional link to http://www.psx.com at the end of each story
as mutually agreed upon by the Parties. Other than such
promotion, the Feeds shall contain no advertising, promotion or
merchandising. The Feeds shall consist of in-depth, team-by-team
information in a quality and delivered on a schedule similar to
the Feeds currently being delivered and displayed on the AOL
Service. The Feeds shall comply with the Operating Standards set
forth in Exhibit E-1 to the extent that the Feeds are delivered
via FTP. The Content of the Feeds shall be as currently being
provided as generally set forth in Exhibit H hereto. The Feeds as
described in Exhibit H shall be the best quality feeds for that
specific Content that ICP offers or provides to any third party
(e.g., the PSX NFL Football Team Reports shall be the best such
Content offered or provided by ICP to any third party). The Feeds
shall be one of the top two (2) sports feeds in terms of quality,
breadth and depth. If such Feeds are not one of the top two (2)
sports feeds in terms of quality, breadth and based upon a cross-
section of mutually agreed upon independent third-party reviewers
who are recognized authorities in such industry, without limiting
any right or remedy AOL may have pursuant to this Agreement, AOL
shall have the right to terminate this Agreement upon written
notice thereof to ICP; provided that, ICP shall have sixty (60)
days in which to cure by improving the Feeds so that they are one
of the top two (2) sports feeds as described above.
A.1.4 Supplemental Reports. ICP shall use commercially reasonable
efforts to make the PSX writer network available to AOL for
additional columns and features on a per-assignment basis (the
CONFIDENTIAL 19
<PAGE>
"Supplemental Reports"), the content and nature of which would be
determined at AOL's sole discretion. The cost of the Supplemental
Reports shall be no higher than the lowest commercially
reasonable cost offered to any other third party for
substantially similar columns and features.
A.2 -- Exclusivity Restrictions
The AOL Pages shall be owned by AOL and 100% exclusive to AOL in all media in
perpetuity.
A.3 -- Rights and Licenses in and related to Athlete Online Areas and Columns.
ICP represents and warrants that it shall have all necessary licenses to
distribute each individual Athlete Online Area and the Columns (as defined in
Exhibit H) and to grant AOL and AOL's successors, Affiliates, licensees, and
assigns the licenses set forth in Section 1.2 of the Agreement with respect to
each Athlete Online Area and the Columns.
In addition to, and without limiting the other rights in this Agreement, ICP
represents and warrants that it shall have all necessary licenses to grant to
AOL and AOL's successors, Affiliates, licensees, and assigns, for the Term, the
right to use the name, likeness, image, biography, and voice of the Athletes
through the AOL Network in and in connection with the Online Area and in
advertising and promotion of one or more Athlete Online Areas in any and all
forms of media now known or hereafter devised, including but not limited to the
Internet, broadcast, non-broadcast, pay, cable and network television, satellite
and closed circuit transmission, in-flight video, home entertainment (including
home video, CD-ROM in current and future formats, and online services, both
commercial and non-commercial) linear, digital and interactive formats and
printed transcripts as AOL deems appropriate in its sole discretion. Such
rights shall include [*].
A.4. -- Placements. AOL shall provide to ICP the following Placements subject
to ICP's payment obligations as set forth in Section 1.4 of the
Agreement:
CONFIDENTIAL 20
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Promotion Screens on the AOL Placements* Annual impressions
Service Commitment**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AOL Sports Category Screens: AOL [*] to the applicable Teams
Sports Pro Football, AOL Sports Aggregate Screen (e.g., AOL Sports
(1) Team Online Area College Football, AOL Sports Pro Pro Football Screen will link to [*]
Basketball, AOL Sports College the NFL Teams Aggregate Screen)
Basketball, AOL Sports Hockey, AOL
Sports Baseball, AOL Sports Soccer
- -----------------------------------------------------------------------------------------------------------------------------------
AOL Sports Category Screens: AOL [*] to the applicable Stars
Sports Pro Football, AOL Sports Aggregate Screen (e.g., AOL
(2) Stars Online Area College Football, AOL Sports Pro Sports Pro Football screen will [*]
Basketball, AOL Sports College link to the NFL Stars Aggregate
Basketball, AOL Sports Hockey, AOL Screen)
Sports Soccer, AOL Sports Auto
Racing, AOL Sports Golf
- -----------------------------------------------------------------------------------------------------------------------------------
(3) ICP Memorabilia Run of AOL Service Sports Channel Banner Advertisements linking to [*]
Products***** (i.e., series of daily servings on an ICP commerce area for ICP
the AOL Service Sports Channel) Memorabilia Products in an
AOL-approved Linked ICP
Interactive Site subject to the
terms of this Agreement, including
without limitation, Sections 1.3.1
and 2
- -----------------------------------------------------------------------------------------------------------------------------------
(4) ICP Memorabilia Any screen in AOL Sports Channel [*] to an ICP commerce area for [*]
Products chosen by AOL in AOL's sole ICP Memorabilia Products in an
discretion AOL-approved Linked ICP
Interactive Site subject to the
terms of this Agreement, including
without limitation, Sections 1.3.1
and 2
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL 21
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(5) ICP Kids Area AOL Kids Only Channel "News and [*]
Sports" Screen
- -----------------------------------------------------------------------------------------------------------------------------------
(6) Online Area AOL Sports Fan Central (or any [*] to an AOL-selected page of [*]
successor thereto) the Online Area
- -----------------------------------------------------------------------------------------------------------------------------------
(7) Premium Information AOL Sports Center Fantasy screen [*] to an ICP commerce area for [*]
Products**** containing Headline Notes ICP Premium Information Products
in an AOL-approved Linked ICP
Interactive Site subject to the
terms of this Agreement, including
without limitation Sections 1.3.1
and 2.
- -----------------------------------------------------------------------------------------------------------------------------------
(8) Premium Information Fantasy Articles (not screens) [*] at bottom of Fantasy Articles [*]
Products **** to an ICP commerce area for ICP
Premium Information Products in
an AOL-approved Linked ICP
Interactive Site subject to the
terms of this Agreement, including
without limitation Sections 1.3.1
and 2 sold
- -----------------------------------------------------------------------------------------------------------------------------------
(9) Teams Online Area Main Screen of AOL Sports [*] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* the exact form, placement, size and nature of all placements, including [*],
banner advertisements and [*] (as defined below), shall be determined by AOL in
its reasonable editorial discretion.
CONFIDENTIAL 22
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
** Both parties understand that, there is [*] above. AOL shall deliver
the Annual Impressions Commitment for Promotions (3) and (4) on the AOL Service
Sports Channel and for Promotion (5) from anywhere on the AOL Network as
provided below; provided that, in the last six months of the Initial Term, AOL
shall deliver half of each Annual Impressions Commitment. In the event that the
sum of all Annual Impressions Commitments ("Total Impressions Commitment") is
not met (or will not, in AOL's reasonable judgment, be met) during the Term, at
AOL's option either (a) AOL may provide the remaining Impressions to ICP for up
to six (6) months without additional carriage fees payable by ICP until the
Total Impressions Commitment is met, (b) AOL may, from time to time, provide ICP
with the remaining Impressions in the form of advertising space within the AOL
Network of comparable value to the undelivered Impressions (as reasonably
determined by AOL), or (c) some combination thereof. If ICP does not meet the
Guidelines, including without limitation, providing daily dynamic updates as set
forth in Exhibit K within the first year of the Term, then in addition to any
other rights or remedies AOL may have under this Agreement, AOL shall not be
obligated to provide the Annual Impressions Commitments or the Placements
related to Promotions [*], ICP shall not be entitled to a refund or reduction of
any of the amounts set forth in Section 1.5 of this Agreement, and AOL shall
have the right to engage a third party to provide such daily dynamic updates. In
the event AOL notifies ICP in writing that ICP has failed to follow the
Editorial Guidelines, the Operating Standards or the requirements of any other
Exhibit to this Agreement, including without limitation, providing the Content
specified therein, [*].
*** Provided ICP is in full compliance with the terms of this Agreement,
beginning on the launch date of the [*], AOL shall (a) [*] on the AOL Service
Kids Only Channel "News and Sports" Screen (or any specific successor thereof)
which [*] shall link to the ICP Kids Area. AOL shall provide ICP with the Annual
Impressions Commitment for Promotion (5) as provided above from ICP's Presence
on the AOL Network. For the purposes of this Agreement, an "ICP's Presence" on
an AOL screen shall mean a presence comprised of the following (other than from
Promotions (1), (2), (3) (4) (6) (7) (8) and (9)): (i) any ICP trademark or
logo, (ii) any headline or picture from ICP content, (iii) any teaser, icon,
link to the ICP Kids Area, and (iv) any other Content which originates from,
describes or promotes ICP or ICP's Content; provided that, only screens that
contain a link to the ICP Kids Area will count against the Annual Impressions
Commitment for Promotion (5). AOL shall have no obligation to provide Promotion
(5) if ICP does not perform its obligations pursuant to Exhibit.A.1.1.5. If AOL
does not provide Promotion (5), there shall be no refund or reduction of the
payments due to AOL pursuant to Section 1.5 of this Agreement.
**** AOL shall have no obligation to provide Promotion (7) if ICP does not
perform its obligations pursuant to Exhibit A.1.1.4. AOL shall have no
obligation to provide Promotion (8) if ICP does not perform its obligations
pursuant to Exhibit A.1.1.4. If AOL does not provide Promotions (7) and/or
(8), there shall be no refund or reduction of the payments due to AOL pursuant
to Section 1.5 this Agreement.
***** All banner advertisements shall be for purposes of promoting ICP's
Memorabilia Products, subject to the terms of this Agreement, AOL's standard
advertising and commerce policies, and AOL's standard insertion order for
advertisements on the AOL Network, including all terms contained and
incorporated therein.
A.5. -- Keywords. Subject to the terms of this Agreement, AOL shall provide to
ICP the following Keyword Search Term : "Athlete Direct". AOL shall also
initially provide ICP with the Keyword Search Term "AD" subject to AOL's right
to revoke such Keyword Search Term at any time. In addition, subject to the
terms of this
CONFIDENTIAL 23
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
Agreement, AOL shall provide AOL Keyword Search Terms for all professional teams
and AOL-approved athletes covered in the Online Area so long as ICP promotes
such Keyword Search Terms and the relevant Online Area (i.e., the Teams Online
Area for Team Keyword Search Terms and the Stars Online Area for Athlete Keyword
Search Terms) as set forth in Section 4. All Athlete Keyword Search Terms shall
link to the main Rainman page of the Athlete Online Area on the AOL Service.
A.6 -- Local and International Team and Star Content [*]. Prior to entering into
any arrangement with any [*].
CONFIDENTIAL 24
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
EXHIBIT B
---------
DEFINITIONS. The following definitions shall apply to this Agreement:
Advertisement. Any button, banner, promotion, advertisement, link, pointer,
sponsorships or similar service or right.
Advertising Revenues. Aggregate amounts collected by ICP, AOL or either Party's
agents, as the case may be, arising from the license or sale of AOL
Advertisements.
Affiliate. Any agent, distributor or franchisee of AOL, or an entity in which
AOL holds at least a nineteen percent (19%) equity interest.
AOL Advertisements. Any promotion, advertisement, link, pointer, sponsorships
or similar service or right on or through the Online Area and the Stars Web
Area.
AOL Look and Feel. The distinctive and particular elements of graphics, design,
organization, presentation, layout, user interface, navigation, trade dress and
stylistic convention (including the digital implementations thereof) which are
associated with online areas within the AOL Network and the total appearance and
impression substantially formed by the combination, coordination and interaction
of these elements.
AOL Member(s). Authorized users of the AOL Network, including any sub-accounts
using the AOL Network under an authorized master account.
AOL Purchaser. (i) AOL Members generating Transaction Revenues in the Online
Area, (ii) any person or entity who enters the Linked ICP Interactive Site
(including without limitation the Stars Web Area) from the AOL Network
including, without limitation, from any third party area therein (to the extent
entry from such third party area is traceable through both Parties' commercially
reasonable efforts), and generates Transaction Revenues (regardless of whether
such person or entity provides an e-mail address during registration or entrance
to the Linked ICP Interactive Site which includes a domain other than an
"AOL.com" domain); and (iii) any other person or entity who, when purchasing a
product, good or service through a Linked ICP Interactive Site (including
without limitation, the Stars Web Area), provides an AOL.com domain name as part
of such person or entity's e-mail address and provided that any person or entity
who has previously satisfied the definition of AOL Purchaser will remain an AOL
Purchaser, and any subsequent purchases by such person or entity (e.g., as a
result of e-mail solicitations or any off-line means for receiving orders
requiring purchasers to reference a specific promotional identifier or tracking
code) will also give rise to Transaction Revenues hereunder (and will not be
conditioned on the person or entity's satisfaction of clauses (i) or (ii)
above).
AOL Service. The narrow-band U.S. version of the America Online brand service,
specifically excluding (a) AOL.com or any other AOL Interactive Site, (b) the
international versions of an America Online service (e.g., AOL Japan), (c) the
CompuServe(R) brand service and any other CompuServe products or services, (d)
"ICQ," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital City(TM)",
"NetMail" , "Real Fans", Love@AOL, "Entertainment Asylum," "Hometown AOL" or any
similar independent product or service which may be offered by, through or with
the U.S. version of the America Online brand service, (e) any programming or
content area offered by or through the U.S. version of the America Online brand
service over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (f) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by or through the
U.S. version of the America Online brand service, (g) any property, feature,
product or service which AOL or its Affiliates may acquire subsequent to the
Effective Date and (h) any other version of an America Online service which is
materially different from the narrow-band U.S. version of the America Online
brand service, by virtue of its branding, distribution, functionality, Content
and services, including, without limitation, any co-branded version of the
service and any version distributed through any broadband distribution platform
or through any platform or device other than a desktop personal computer.
AOL Network. (i) The AOL Service and (ii) any other product or service owned,
operated, distributed or authorized to be distributed by or through AOL or its
Affiliates worldwide through which such party elects to offer the Licensed
Content (which may include, without limitation, AOL-related Internet sites,
"offline" information browsing products, international versions of the AOL brand
service, and CompuServe).
Athlete Online Area. The area within the Stars Online Area which is designated
as pertaining to an individual Athlete as determined and programmed by ICP.
Change of Control. (a) The consummation of a reorganization, merger or
consolidation or sale or other disposition of substantially all of the assets of
ICP; or (b) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1933,
as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than 50% of either (i) the then outstanding
shares of common stock of ICP; or (ii) the combined voting power of the then
outstanding voting securities of ICP entitled to vote generally in the election
of directors.
Confidential Information. Any information relating to or disclosed in the
course of negotiating and implementing the Agreement, which is, or should be
reasonably understood to be, confidential or proprietary to the disclosing
Party, including, but not limited to, the content of negotiations between the
Parties, the material terms of this Agreement, information about AOL Members,
technical processes and formulas, source codes, product designs, sales, cost and
other unpublished financial information, product and business plans, projections
and marketing data. "Confidential Information" shall not include information
(a) already lawfully known to or independently developed by the receiving Party,
(b) disclosed in published materials, (c) generally known to the public, (d)
lawfully obtained from any third party or (e) required or reasonably advised to
be disclosed by law.
Content. Text, images, video, audio (including, without limitation, music used
in time relation with text, images, or video), and other data, products,
services, advertisements, promotions, links, pointers, technology and software.
Deeper Content. Collectively, Team Deeper Content and Deeper Stars Content.
CONFIDENTIAL 25
<PAGE>
Headline Notes. Player-specific editorial notes, approximately 25-50 words in
length, which cover the latest news most important to fantasy players, in ICP's
reasonable judgment, on a given day.
ICP Interactive Site. Any interactive site or area (other than the Online Area)
which is managed, maintained or owned by ICP or its agents or to which ICP
provides and/or licenses Content , including, by way of example and without
limitation, (i) an ICP site on the World Wide Web portion of the Internet or
(ii) a channel or area delivered through a "push" product such as the Pointcast
Network or interactive environment such as Microsoft's proposed "Active
Desktop."
Impression. User exposure to (i) a page containing a Placement and, in the case
of the Anchor Tenant Button, an ICP Presence or the Anchor Tenant Button, or
(ii) a page of the ICP Kids Area or an ICP Interactive Site, as the context may
require, as such exposure may be reasonably determined and measured by the
reporting Party in accordance with its standard methodologies and protocols
Interactive Service. An entity offering one or more of the following: (i)
online or Internet connectivity services (e.g., an Internet service provider);
(ii) an interactive site or service featuring a broad selection of aggregated
third party interactive content or navigation thereto (e.g., an online service
or search and directory service) and/or marketing a broad selection of products
and/or services across numerous interactive commerce categories (e.g., an online
mall or other leading online commerce site); and (iii) communications software
capable of serving as the principal means through which a user creates, sends
and receives electronic mail or real time online messages.
Keyword Search Terms. The Keyword online search terms made available on the AOL
Service for use by AOL Members, combining AOL's Keyword online search modifier
with a term or phrase specifically related to ICP (and determined in accordance
with the terms of this Agreement).
Launch Date. The earliest date upon which the Online Area is made available
through the AOL Network.
Licensed Content. All Content provided by ICP or its agents to AOL or its
Affiliates for distribution through the AOL Network in connection with the
subject matter of this Agreement, including without limitation, the Teams
Content, the Stars Content, and the Feeds.
Linked Interactive Site. Any site or area outside of the AOL Service which is
linked to the Online Area (through a "pointer" or similar link) in accordance
with the terms and conditions of this Agreement.
Linked ICP Interactive Site. Any ICP Interactive Site which is also a Linked
Interactive Site.
Memorabilia Products. Products consisting of (i) Authentically autographed
(e.g., autograph not provided by machine or facsimile) sports products deriving
a portion of their value from the autograph, and (ii) commemorative, unique or
limited sports products related to a sport, sporting event, league, team,
players association or athlete.
New Member. Any person or entity (a) who registers for the AOL Network using
ICP's special promotion identifier and (b) who remains an AOL Member for two
paid billing cycles.
Notebook. An ICP standard product called the "Notebook."
Off Season. The period of the year which does not comprise the Season.
Online Area. The specific area within the AOL Network, as described in Exhibit
A, which shall be developed, managed or marketed by ICP pursuant to this
Agreement, including but not limited to the Licensed Content, message boards,
chat and other AOL Member-supplied content areas contained therein (but
excluding any Linked Interactive Sites other than sites which are exclusively
available to AOL Members).
Other Screens. All pages of the Online Area directly linked to from a Top Level
Screen.
Post-Season. Period of the Season which is comprised of playoff games after the
regular season.
Premium Information Products. Specialized electronic sports information
Products offered, licensed or sold for an amount charged by ICP to AOL
Purchasers in addition to the base membership fee charged by AOL to AOL Members.
Premium Information Products may include, but shall not be limited to,
electronically distributed informational items such as special event products
(e.g., special Super Bowl reports), special fantasy reports, team fan clubs,
seasonal specials, which Products shall be created and marketed to specialized
audiences subject to the restrictions, terms and conditions contained in this
Agreement. ICP shall be solely responsible for the Content of the Premium
Information Products. ICP hereby acknowledges that the Feeds, or any information
contained therein, shall not be considered a Premium Product.
Products. Any product, good or service which ICP offers, sells or licenses to
AOL Members and/or AOL Purchasers through (i) the Online Area, (ii) any Linked
ICP Interactive Site or (iii) an "offline" means (e.g., toll-free number) for
receiving orders related to specific offers within the Online Area requiring
purchasers to reference a specific promotional identifier or tracking code,
including, without limitation, products sold through surcharged downloads (to
the extent permitted hereunder).
Prohibited Party. (i) Any online service (e.g. Microsoft Network, AT&T WorldNet
and Prodigy Services Company), (ii) any Internet service provider, (iii) any
portal accessed by more than 1,000,000 Collective Users per month (e.g. Yahoo!
Inc., Infoseek, SNAP, Lycos and Excite), (iv) any party or entity who owns,
operates, manages or offers a commerce area marketing a broad selection of
products and/or services across numerous interactive commerce categories and
accessed by more than 1,000,000 Collective Users per month (e.g., online malls,
Amazon.com), or (v) any party offering, or having the technology to offer, cable
internet access services (e.g. @Home), email or instant messaging. As used
herein, "Collective Users" shall mean the aggregate number of users on all of a
party's web-based properties and interactive sites.
Season or In-Season. The regular season and the post-season playoffs in any
given Sports Category.
CONFIDENTIAL 26
<PAGE>
Sports Entertainment Products. Audio-based and or video-based sports-related
content offerings, (i.e., chats, broadcasts, interviews or shows) which feature
athletes, sports writers or other sports personalities.
Star Athlete. An Athlete who has been (a) selected as an All-Star/All-Pro or
similar recognition, (b) ranked as one of the top fifty Q-rated athletes, or (c)
paid among the top fifty athletes in endorsement income or salary, in each case
as it relates to his or her respective league or sport in the previous three-
year period, or an Athlete who was drafted in the first round of his or her
respective professional league, or any other Athlete mutually agreed upon by the
Parties.
Stars Content. Content provided by ICP at the Stars Online Area.
Teams Content. Content provided by ICP at the Teams Online Area.
Term. The period beginning on the Effective Date and ending upon the expiration
or earlier termination of the Agreement.
Top Level Screens. The AOL Pages and any other page of the Online Area linked
to directly from an AOL-based permanent promotion and/or used as a navigational
page.
Transaction Revenues. For Premium Information Products and Sports Entertainment
Products, aggregate amounts paid by AOL Purchasers in connection with the sale,
licensing, distribution or provision of Products, including, in each case,
handling, shipping, service charges, and excluding, in each case, (a) amounts
collected for sales or use taxes or duties and (b) credits and chargebacks for
returned or canceled goods or services, but not excluding cost of goods sold or
any similar cost. For all other Products, including without limitation,
Memorabilia Products, aggregate amounts received by ICP from the sale,
licensing, distribution or provision of any Products less amounts paid to third
parties for the development, manufacture (or the cost of goods sold when ICP
manufactures the Products), distribution and sale of Products, selling expenses,
order processing expenses, returns, taxes and other fees incurred in connection
with the sale, licensing, distribution or provision of the Products. In either
case, Transaction Revenues shall not include amounts received by ICP from the
sale, licensing, distribution or provision of any Products on a Linked ICP
Interactive Site to certain AOL Purchasers ("Excluded AOL Purchasers") if, and
only if (a) such AOL Purchaser did not access such Linked ICP Interactive Site
through the AOL Network but through a link from a third party site not on the
AOL Network, and (b) ICP has a Commercial Relationship with such third party
("ICP Marketing Partner"). As used herein, "Commercial Relationship" shall mean
a written agreement establishing a paid or significant barter marketing
relationship between ICP and the ICP Marketing Partner pursuant to which ICP
must pay or provide significant barter consideration (i.e., of a fair market
value at least equal to five percent (5%) of Transaction Revenues generated by
Excluded AOL Purchasers) to the ICP Marketing Partner.
Two Clicks. Two clicks from a given page shall mean (i) any page directly
linked to such page ("Directly Linked Page"), including without limitation, any
pop-ups or other Content viewed from a Directly Linked Page, and (ii) any page
directly linked to a Directly Linked Page ("Indirectly Linked Page") and any
pop-ups or other Content viewed from an Indirectly Linked Page.
CONFIDENTIAL 27
<PAGE>
EXHIBIT C
---------
I. ONLINE AREA
AOL Terms of Service; Unspecified Content. AOL shall have the right to remove,
or direct ICP to remove any Content from the Online Area which, as reasonably
determined by AOL: (i) violates AOL's then-standard Terms of Service (as set
forth on the America Online brand service), the terms of this Agreement or any
other standard, written AOL policy; or (ii) is not specifically described on
Exhibit A. To the extent ICP wishes to implement any rules of conduct or terms
of service related to the Online Area which are separate from or supplementary
to AOL's Terms of Service, ICP must obtain the prior written approval of the AOL
Legal Department.
Changes to AOL Service. AOL reserves the right to redesign or modify the
organization, structure, "look and feel," navigation and other elements of the
AOL Service. If AOL eliminates or modifies the screen(s) specified in Exhibit A
in a manner that substantially modifies the nature of the placements for ICP
described in Exhibit A in a material adverse fashion, AOL will work with ICP in
good faith to provide ICP with a comparable package of placements which are
reasonably satisfactory to ICP.
Contests. ICP shall take all steps necessary to ensure that any contest,
sweepstakes or similar promotion conducted or promoted through the Online Area
(a "Contest") complies with all applicable federal, state and local laws and
regulations. ICP shall provide AOL with (i) at least thirty (30) days prior
written notice of any Contest and (ii) upon AOL's request, an opinion from ICP's
counsel confirming that the Contest complies with all applicable federal, state
and local laws and regulations.
AOL Look and Feel. ICP acknowledges and agrees that AOL shall own all right,
title and interest in and to the AOL Look and Feel. In addition, AOL shall
retain editorial control over the portions of the AOL pages and forms which
frame the Licensed Content (the "AOL Frames"). AOL may, at its discretion,
incorporate navigational icons, links and pointers or other Content into such
AOL Frames.
Management. ICP shall review, delete, edit, create, update and otherwise manage
all Content available on or through the Online Area, including but not limited
to the Licensed Content and message boards, in a timely and professional manner
and in accordance with the terms of this Agreement, AOL's then-standard Terms of
Service and any generally applicable guidelines and service standards for
interactive content providers published by AOL. In managing the Online Area,
ICP agrees to refrain from editing or altering any opinion expressed by an AOL
Member within the Online Area, except in cases when ICP (i) has a good faith
belief that the Content in question violates an applicable law, regulation,
third party right or portion of AOL's Terms of Service or (ii) obtains AOL's
prior approval. ICP shall ensure that the Online Area is reasonably current and
well-organized, and shall employ all necessary procedures to insure the accuracy
of the Licensed Content. ICP warrants that the Online Area, the Licensed
Content, and any Linked ICP Interactive Sites: (i) will conform to AOL's
applicable Terms of Service; (ii) will not infringe on or violate any copyright,
trademark, U.S. patent or any other third party right, including without
limitation, any music performance or other music related rights; and (iii) will
not contain any Content which violates any applicable law or regulation. AOL
shall have no obligations with respect to the Content available on or through
the Online Area, including, but not limited to, any duty to review or monitor
any such Content.
Operations. AOL shall be entitled to require reasonable changes to Licensed
Content to the extent such Licensed Content will, in AOL's good faith judgment,
adversely affect technical operations of the AOL Network.
Duty to Inform. ICP shall promptly inform AOL of any information related to the
Licensed Content which could reasonably lead to a claim, demand or liability of
or against AOL and/or its Affiliates by any third party.
Response to Questions/Comments; Customer Service. ICP shall respond promptly
and professionally to questions, comments, complaints and other reasonable
requests regarding the Licensed Content by AOL Members or on request by AOL, and
shall cooperate and assist AOL in promptly answering the same.
Classifieds. To the extent ICP desires to implement any classifieds listing
features through the Online Area, ICP shall obtain AOL's prior written approval.
Such approval may be conditioned upon, among other things, ICP's conformance
with any then-applicable service-wide technical or other standards related to
online classifieds.
Message Boards. Any Content submitted by ICP or its agents within message
boards or any comparable vehicles will be subject to the license grant relating
to submissions to "public areas" set forth in the Proprietary Rights section of
the Terms of Service. ICP acknowledges that it has no rights or interest in AOL
Member submissions to message boards within the Online Area.
Statements Through AOL Network. ICP shall not make, publish, or otherwise
communicate through the AOL Network any deleterious remarks concerning AOL or it
Affiliates, directors, officers, employees, or agents (including, without
limitation, AOL's business projects, business capabilities, performance of
duties and services, or financial position) which remarks are based on the
relationship established by this Agreement or information exchanged hereunder.
This section is not intended to limit good faith editorial statements made by
ICP based upon publicly available information, or information developed by ICP
independent of its relationship with AOL and its employees and agents.
Accounts. ICP shall be granted two (2) accounts per athlete, plus twenty (20)
additional accounts for production purposes, for the exclusive purpose of
enabling ICP and its agents to perform ICP's duties hereunder. The accounts
shall be of the type determined by AOL to be necessary for ICP to perform its
duties hereunder. The twenty (20) accounts granted for production purposes
shall be free of charge, but the two (2) accounts per athlete shall be subject
to such monthly subscription charges as AOL shall determine shall be applied to
similarly-situated interactive service providers (not to exceed monthly
subscription charges generally available to the public for a similar type of
account). In any event, ICP shall be responsible for the actions taken under
or through its accounts, which actions are subject to AOL's then-standard Terms
of Service, and for any surcharges, including, without limitation, all premium
charges, transaction charges and any applicable communication charges incurred
by any such account. Upon the termination of
CONFIDENTIAL
<PAGE>
this Agreement, all accounts, related screen names and any associated usage
credits or similar rights shall automatically terminate. AOL shall have no
liability for loss of any data or content related to the proper termination of
any account.
Keyword. Any Keyword Search Terms granted to ICP hereunder shall be (i)
subject to availability for use by ICP (other than Keyword Search Terms "Athlete
Direct" and "AD") and (ii) limited to the combination of the Keyword search
modifier combined with a registered trademark of ICP. AOL reserves the right to
revoke at any time ICP's use of any Keyword Search Terms which do not
incorporate registered trademarks of ICP, including without limitation, the
Keyword Search Term "AD". ICP acknowledges that its utilization of a Keyword
Search Term will not create in it, nor will it represent it has, any right,
title or interest in or to such Keyword Search Term, other than the right, title
and interest ICP holds in ICP's registered trademark independent of the Keyword
Search Term. Without limiting the generality of the foregoing, ICP will not:
(a) attempt to register or otherwise obtain trademark or copyright protection in
the Keyword Search Term; or (b) use the Keyword Search Term, except for the
purposes expressly required or permitted under this Agreement. This Section
shall survive the completion, expiration, termination or cancellation of this
Agreement.
Launch Date. In the event that any terms contained herein relate to or depend
on the launch date of the online area or other property contemplated by this
Agreement, then it is the intention of the Parties to record such Launch Date in
a written instrument signed by both Parties promptly following such Launch Date.
II. TRADEMARKS
Trademark License. In designing and implementing the Promotional Materials and
subject to the other provisions contained herein, ICP shall be entitled to use
the following trade names, trademarks and service marks of AOL: the "America
Online" brand service, "AOL" service/software and AOL's triangle logo; and AOL
and its Affiliates shall be entitled to use the trade names, trademarks and
service marks of ICP associated with the Online Area (collectively, together
with the AOL marks listed above, the "Marks"); provided that each Party: (i)
does not create a unitary composite mark involving a Mark of the other Party
without the prior written approval of such other Party and (ii) displays symbols
and notices clearly and sufficiently indicating the trademark status and
ownership of the other Party's Marks in accordance with applicable trademark law
and practice.
Rights. Each Party acknowledges that its utilization of the other Party's Marks
will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.
Quality Standards. Each Party agrees that the nature and quality of its
products and services supplied in connection with the other Party's Marks shall
conform to quality standards communicated in writing by the other Party for use
of its trademarks. Each Party agrees to supply the other Party, upon request,
with a reasonable number of samples of any Materials publicly disseminated by
such Party which utilize the other Party's Marks. Each Party shall comply with
all applicable laws, regulations and customs and obtain any required government
approvals pertaining to use of the other Party's Marks.
Promotional Materials/Press Releases. Each Party will submit to the other
Party, for its prior written approval, which shall not be unreasonably withheld
or delayed, any marketing, advertising, press releases or other promotional
materials related to the Online Area and/or referencing the other Party and/or
its trade names, trademarks and service marks (the "Promotional Materials");
provided, however, that, following the initial public announcement of the
business relationship between the Parties in accordance with the approval and
other requirements contained herein, either Party's subsequent factual reference
to the existence of a business relationship between AOL and ICP, including,
without limitation, the availability of the Online Area on the AOL Network, or
use of screen shots of the Online Area (so long as the AOL Network is clearly
identified as the source of such screen shots) for promotional purposes shall
not require the approval of the other Party. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the Online Area and the content contained therein and reused for such purpose
until such approval is withdrawn with reasonable prior notice. In the event
such approval is withdrawn, existing inventories of Promotional Materials may be
depleted.
Infringement Proceedings. Each Party agrees to promptly notify the other Party
of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
III. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party that: (i) such Party has
the full corporate right, power and authority to enter into this Agreement, to
grant the licenses granted hereunder and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not violate any agreement to which such Party is a party or by which it is
otherwise bound; (iii) when executed and delivered by such Party, this Agreement
will constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms; (iv) such Party's
Promotional Materials will neither infringe on any copyright, U.S. patent or any
other third party right nor violate any applicable law or regulation and (v)
such Party acknowledges that the other Party makes no representations,
warranties or agreements related to the subject matter hereof which are not
expressly provided for in this Agreement. E-Sport, PSX and Athlete Direct shall
be jointly and severally liable for any breach of ICP's obligations hereunder.
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement. Each Party agrees that it will
take reasonable steps, at least substantially equivalent to the steps it takes
to protect its own proprietary information, during the term of this Agreement,
and for a period of three years following expiration or termination of this
Agreement, to prevent the disclosure of Confidential Information of the other
Party, other than to its employees, or its other agents who must have access to
such Confidential Information for such Party to perform its obligations
hereunder, who will each agree
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to comply with this section. Notwithstanding the foregoing, either Party may
issue a press release or other disclosure containing Confidential Information
without the consent of the other Party, to the extent such disclosure is
required by law, rule, regulation or government or court order. In such event,
the disclosing Party will provide at least five (5) business days prior written
notice of such proposed disclosure to the other Party. Further, in the event
such disclosure is required of either Party under the laws, rules or regulations
of the Securities and Exchange Commission or any other applicable governing
body, such Party will (i) redact mutually agreed-upon portions of this Agreement
to the fullest extent permitted under applicable laws, rules and regulations and
(ii) submit a request to such governing body that such portions and other
provisions of this Agreement receive confidential treatment under the laws,
rules and regulations of the Securities and Exchange Commission or otherwise be
held in the strictest confidence to the fullest extent permitted under the laws,
rules or regulations of any other applicable governing body.
V. MEMBER INFORMATION/SOLICITATION
(a) During the term of the Agreement and for a two year period thereafter, ICP
will not use the AOL Network (including, without limitation, the e-mail network
contained therein) to solicit AOL Members on behalf of another Interactive
Service. More generally, ICP will not send unsolicited, commercial e-mail
(i.e., "spam") through or into AOL's products or services, absent a Prior
Business Relationship. For purposes of this Agreement, a "Prior Business
Relationship" will mean that the AOL Member to whom commercial e-mail is being
sent has voluntarily either (i) engaged in a transaction with ICP or (ii)
provided information to ICP through a contest, registration, or other
communication, which included clear notice to the AOL Member that the
information provided could result in commercial e-mail being sent to that AOL
Member by ICP or its agents. Any commercial e-mail to be sent through or into
AOL's products or services shall also be subject to AOL's then-standard
restrictions on distribution of bulk e-mail (e.g., related to the time and
manner in which such e-mail can be distributed through or into the AOL product
or service in question).
(b) ICP shall ensure that its collection, use and disclosure of information
obtained from AOL Members under this Agreement ("Member Information") complies
with (i) all applicable laws and regulations and (ii) AOL's standard privacy
policies, available on the AOL Service at the keyword term "Privacy" (or, in the
case of ICP's Linked Interactive Site, ICP's standard privacy policies so long
as such policies are prominently published on the site and provide adequate
notice, disclosure and choice to users regarding ICP's collection, use and
disclosure of user information). ICP will not disclose Member Information
collected hereunder to any third party in a manner that identifies AOL Members
as end users of an AOL product or service or use Member Information collected
under this Agreement to market another Interactive Service.
(c) Any e-mail newsletters sent to AOL Members by ICP or its agents shall (i)
be subject to AOL's policies on use of the e-mail functionality, including but
not limited to AOL's policy on unsolicited bulk e-mail, (ii) be sent only to AOL
Members requesting to receive such newsletters, (iii) not contain Content which
violates AOL's Terms of Service, and (iv) not contain any advertisements,
marketing or promotion for any other Interactive Service.
(d) To the extent ICP is otherwise permitted to send communications to AOL
Members (in accordance with the other requirements contained herein): (i) any
solicitations in such communications to purchase products or services shall
promote the Online Area as the principal means through which to purchase any
such products or services; (ii) any direct links to specific offers within such
communications shall link to the Online Area or to AOL-approved Linked ICP
Interactive Sites where Products are sold and are subject to the revenue sharing
set forth in Section 2.5 of the Agreement; (iii) any sales arising from such
communications shall be subject to any revenue sharing provisions which may be
contained herein; and (iv) ICP shall limit the subject matter of such
communications to those categories of products, services and/or content which
are specifically contemplated by this Agreement.
VI. TREATMENT OF CLAIMS
Liability. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY" SECTION, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM THE USE OF OR
INABILITY TO USE THE AOL NETWORK OR ONLINE AREA OR ANY OTHER PROVISION OF THIS
AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS
OR LOST BUSINESS. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY" SECTION, AOL
SHALL NOT BE LIABLE TO ICP FOR MORE THAN THE AGGREGATE AMOUNTS PAYABLE BY AOL
HEREUNDER AS OF THE DATE LIABILITY ACCRUED. EXCEPT AS PROVIDED BELOW IN THE
"INDEMNITY" SECTION, ICP SHALL NOT BE LIABLE TO AOL FOR MORE THAN THE AGGREGATE
AMOUNTS PAYABLE BY ICP HEREUNDER AS OF THE DATE LIABILITY ACCRUED.
No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL NETWORK,
THE ONLINE AREA OR ANY AOL PUBLISHING TOOLS, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING
THE PROFITABILITY OF THE ONLINE AREA.
Indemnity. Either Party will defend, indemnify, save and hold harmless the
other Party and the officers, directors, agents, affiliates, distributors,
franchisees and employees of the other Party from any and all third party
claims, demands, liabilities, costs or expenses, including reasonable attorneys'
fees ("Liabilities"), resulting from the indemnifying Party's material breach of
any duty, representation, or warranty of this Agreement.
If a Party entitled to indemnification hereunder (the "Indemnified Party")
becomes aware of any matter it believes is indemnifiable hereunder involving any
claim, action, suit, investigation, arbitration or other proceeding against the
Indemnified Party by any third party (each an "Action"), the Indemnified Party
shall give the other Party (the "Indemnifying Party") prompt written notice of
such Action. Such notice shall (i) provide the basis on which indemnification
is being asserted and (ii)
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be accompanied by copies of all relevant pleadings, demands, and other papers
related to the Action and in the possession of the Indemnified Party. The
Indemnifying Party shall have a period of ten (10) days after delivery of such
notice to respond. If the Indemnifying Party elects to defend the Action or does
not respond within the requisite ten (10) day period, the Indemnifying Party
shall be obligated to defend the Action, at its own expense, and by counsel
reasonably satisfactory to the Indemnified Party. The Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, with the Indemnifying Party
and its counsel in the defense and the Indemnified Party shall have the right to
participate fully, at its own expense, in the defense of such Action. If the
Indemnifying Party responds within the required ten (10) day period and elects
not to defend such Action, the Indemnified Party shall be free, without
prejudice to any of the Indemnified Party's rights hereunder, to compromise or
defend (and control the defense of) such Action. In such case, the Indemnifying
Party shall cooperate, at its own expense, with the Indemnified Party and its
counsel in the defense against such Action and the Indemnifying Party shall have
the right to participate fully, at its own expense, in the defense of such
Action. Any compromise or settlement of an Action shall require the prior
written consent of both Parties hereunder, such consent not to be unreasonably
withheld or delayed.
Acknowledgment. AOL AND ICP EACH ACKNOWLEDGES THAT THE PROVISIONS OF THIS
AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED, VOLUNTARY ALLOCATION BETWEEN
THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN) ASSOCIATED WITH THE TRANSACTIONS
CONTEMPLATED HEREUNDER. THE LIMITATIONS AND DISCLAIMERS RELATED TO WARRANTIES
AND LIABILITY CONTAINED IN THIS AGREEMENT ARE INTENDED TO LIMIT THE
CIRCUMSTANCES AND EXTENT OF LIABILITY. THE PROVISIONS OF THIS SECTION VI SHALL
BE ENFORCEABLE INDEPENDENT OF AND SEVERABLE FROM ANY OTHER ENFORCEABLE OR
UNENFORCEABLE PROVISION OF THIS AGREEMENT.
VII. MISCELLANEOUS
Auditing Rights. Each Party shall maintain complete, clear and accurate records
of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, each Party shall have the right, at its expense,
to direct an independent certified public accounting firm subject to strict
confidentiality restrictions to conduct a reasonable and necessary copying and
inspection of portions of the Records of the other Party which are directly
related to amounts payable to the Party requesting the audit pursuant to this
Agreement. Any such audit may be conducted after twenty (20) business days
prior written notice, subject to the following. Such audits shall not be made
more frequently than once every twelve months. No such audit of AOL shall occur
during the period beginning on June 1 and ending October 1. In lieu of
providing access to its Records as described above, a Party shall be entitled to
provide the other Party with a report from an independent certified public
accounting firm confirming the information to be derived from such Records.
Excuse. Neither Party shall be liable for, or be considered in breach of or
default under this Agreement on account of, any delay or failure to perform as
required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.
Independent Contractors. The Parties to this Agreement are independent
contractors. Neither Party is an agent, representative or partner of the other
Party. Neither Party shall have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement shall not be interpreted or
construed to create an association, agency, joint venture or partnership between
the Parties or to impose any liability attributable to such a relationship upon
either Party.
Notice. Any notice, approval, request, authorization, direction or other
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname
"[email protected]" in the case of AOL) or by confirmed facsimile; (ii) on the
delivery date if delivered personally to the Party to whom the same is directed;
(iii) one business day after deposit with a commercial overnight carrier, with
written verification of receipt; or (iv) five business days after the mailing
date, whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no. 703-
265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of ICP, such notice will be provided to both the President and the Vice
President of Business and Legal Affairs (both at fax no. 310.996.1092), each at
the address of ICP set forth in the first paragraph of this Agreement.
No Waiver. The failure of either Party to insist upon or enforce strict
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
Return of Information. Upon the expiration or termination of this Agreement,
each Party shall, upon the written request of the other Party, return or destroy
(at the option of the Party receiving the request) all Confidential Information,
documents, manuals and other materials specified the other Party.
Survival. Sections 1.2.3 ,1.3.2, 6.7.1 and 6.7.2 of this Agreement, and
Sections IV, V, VI, and VII of this Exhibit C, shall survive the completion,
expiration, termination or cancellation of this Agreement. Additional sections
shall survive as set forth in Section 6.7.1 and 6.7.2.
Entire Agreement. Except as set forth in Section 6.1, this Agreement sets forth
the entire agreement and supersedes any and all prior agreements of the Parties
with respect to the transactions set forth herein. Neither Party shall be bound
by, and each Party specifically objects to, any term, condition or other
provision which is different from or in addition to the provisions of this
Agreement (whether or not it would materially alter this Agreement) and which is
proffered by the other Party in any correspondence or other document, unless the
Party to be bound thereby specifically agrees to such provision in writing.
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Amendment. No change, amendment or modification of any provision of this
Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
Further Assurances. Each Party shall take such action (including, but not
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by any other Party for the implementation or continuing
performance of this Agreement.
Assignment. ICP shall not assign this Agreement or any right, interest or
benefit under this Agreement without the prior written consent of AOL.
Assumption of this Agreement by any successor to ICP (including, without
limitation, by way of merger, consolidation or sale of all or substantially all
of ICP's stock or assets) shall be subject to AOL's prior written consent.
Subject to the foregoing, this Agreement shall be fully binding upon, inure to
the benefit of and be enforceable by the Parties hereto and their respective
successors and assigns.
Construction; Severability. In the event that any provision of this Agreement
conflicts with the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over the Parties to
this Agreement, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
Remedies. Except where otherwise specified, the rights and remedies granted to
a Party under this Agreement are cumulative and in addition to, and not in lieu
of, any other rights or remedies which the Party may possess at law or in
equity.
Applicable Law. This Agreement shall be interpreted, construed and enforced in
all respects in accordance with the laws of the Commonwealth of Virginia except
for its conflicts of laws principles. Each Party irrevocably consents to the
jurisdiction of the federal and state courts in the Commonwealth of Virginia and
the State of California. In addition, any action to enforce the provisions of
this Agreement, to recover damages or other relief for breach or default (i)
initiated by ICP against AOL shall be brought in the Commonwealth of Virginia,
and (ii) initiated by AOL against ICP shall be brought in the State of
California.
Export Controls. Both parties shall adhere to all applicable laws, regulations
and rules relating to the export of technical data and shall not export or re-
export any technical data, any products received from the other Party or the
direct product of such technical data to any proscribed country listed in such
applicable laws, regulations and rules unless properly authorized.
Headings. The captions and headings used in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
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EXHIBIT D
CERTIFICATION OF COMPLIANCE WITH COMMITMENTS
REGARDING PROMOTIONS AND EXCLUSIVITY
Pursuant to Section 4 of the Interactive Services Agreement between E-Sport,
Inc., Athlete Direct, Inc. and Pro Sports Xchange, Inc. (collectively, "ICP")
and America Online, Inc. ("AOL"), dated as of January 1, 1999 (the "Agreement"),
the following report is delivered to AOL for the month ending __________ (the
"Month"):
I. Promotional Commitments
ICP hereby certifies to AOL that ICP completed the following promotional
commitments during the Month:
Type of Date(s) of Duration/Circulation Relevant
Promotion Promotion of Promotion Contract
Section
- --------------------------------------------------------------------------------
1.
- --------------------------------------------------------------------------------
2.
- --------------------------------------------------------------------------------
3.
- --------------------------------------------------------------------------------
II. Exclusivity Commitments
ICP hereby certifies to AOL that ICP was in full compliance with the exclusivity
restrictions (if applicable) specified in Exhibit A of the Agreement throughout
the Month.
IN WITNESS WHEREOF, this Certificate has been executed this ________ day of
__________________, 199__.
___________________________________
By: _______________________________
Print Name: ______________________
Title: ____________________________
Date: _____________________________
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Exhibit E-1
Operating Standards for Feeds
-----------------------------
1. ICP Site Infrastructure. ICP will be responsible for all communications,
hosting and connectivity costs and expenses associated with the distribution of
data. ICP will provide all hardware, software, telecommunications lines and
other infrastructure necessary to meet any traffic demands.
2. Service Level Response. ICP agrees to use commercially reasonable efforts
to address material technical problems (over which ICP exercises control)
affecting AOL Members (an "ICP Technical Problem") promptly following notice
thereof. In the event that ICP is unable to promptly resolve an ICP Technical
Problem following notice thereof from AOL (including, without limitation,
infrastructure deficiencies producing user delays), AOL will have the right to
regulate the promotions it provides hereunder until such time as ICP corrects
the ICP Technical Problem at issue.
3. Monitoring. ICP will ensure that the performance and availability of the
FTP mechanism is monitored on a continuous basis. ICP will provide AOL with
contact information (including e-mail, phone, pager and fax information, as
applicable, for both during and after business hours) for ICP's principal
business and technical representatives, for use in cases when issues or problems
arise with respect to the FTP system.
4. Security. ICP will facilitate periodic reviews of the FTP system by AOL in
order to evaluate the security risks of such system. ICP will promptly remedy
any security risks or breaches of security as may be identified by AOL's
Operations Security team.
5. AOL Internet Services ICP Support. AOL will provide ICP with access to the
standard online resources, standards and guidelines documentation, technical
phone support, monitoring and after-hours assistance that AOL makes generally
available to similarly situated web-based ICPs. AOL support will not, in any
case, be involved with content creation on behalf of ICP or support for any
technologies, databases, software or other applications which are not supported
by AOL or are related to any ICP area other than the files received via FTP.
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EXHIBIT E-2
OPERATING STANDARDS FOR LINKED ICP INTERACTIVE SITES
----------------------------------------------------
1. Customization. ICP shall customize each Linked ICP Interactive Site for
AOL Members as follows:
(a) upon AOL's request, create a customized, co-branded home page "welcome
mat" for the AOL audience for each area on the Linked ICP Interactive Site
linked to from the AOL Network on a continuous basis (each a "Welcome
Mat"), which Welcome Mat(s) shall be subject to AOL approval;
(b) ensure that AOL Members linking to the Linked ICP Interactive Site do
not receive advertisements, promotions or links for any entity reasonably
construed to be in competition with AOL or otherwise in violation of AOL's
then-standard advertising policies or exclusivity or premier commitments to
third parties as provided in Section 2.2.2 of the Agreement; and
(c) provide continuous navigational ability for AOL Members to return to
an agreed-upon point on the AOL service (for which AOL shall supply the
proper address) from Linked ICP Interactive Site (e.g., the point on the
AOL service from which the Linked ICP Interactive Site is linked), which,
at AOL's option, may be satisfied through the use of a hybrid browser
format.
2. Links on Linked ICP Interactive Site. The Parties will work together on
mutually acceptable links (including links back to AOL) within the Linked
ICP Interactive Site in order to create a robust and engaging AOL member
experience. ICP shall use commercially reasonable efforts to ensure that
AOL traffic is generally either kept within a Linked ICP Interactive Site
or channeled back into the AOL Network. To the extent that AOL notifies ICP
in writing that, in AOL's reasonable judgment, links from the Linked ICP
Interactive Site cause an excessive amount of AOL traffic to be diverted
outside of such site and the AOL Network in a manner that has a detrimental
effect on the traffic flow of the AOL audience, then ICP shall immediately
reduce the number of links out of such site(s). In the event that ICP
cannot or does not so limit diverted traffic from the Linked ICP
Interactive Site, AOL reserves the right to terminate the links from the
AOL Network to the Linked ICP Interactive Site at issue if such failure
remains uncured after thirty (30) days written notice thereof, and ICP
shall only be responsible to pay a pro rata share of the carriage fees
otherwise owed by ICP hereunder for the period for which the links are in
place.
3. Hosting; Capacity. ICP will provide all computer hardware (e.g., servers,
routers, network devices, switches and associated hardware) in an amount
necessary to meet anticipated traffic demands, adequate power supply
(including generator back-up) and HVAC, adequate insurance, adequate
service contracts and all necessary equipment racks, floor space, network
cabling and power distribution to support the Linked ICP Interactive Site.
ICP is fully responsible for the maintenance and the day-to-day operation
of the Linked ICP Interactive Site. ICP will provide AOL with a detailed
Network diagram. In addition, ICP will provide AOL with detailed
information regarding separate file downloads available from the Linked ICP
Interactive Site, including file size, type and download/installation
procedures.
4. Speed; Accessibility. ICP will ensure that the performance and
availability of the Linked ICP Interactive Site (a) is monitored on a
continuous, 24/7 basis and (b) remains reasonably competitive in all
material respects with the performance and availability of other similar
sites based on similar form technology. ICP will use commercially
reasonable efforts to ensure that: (a) the functionality and features
within the Linked ICP Interactive Site are optimized for the client
software then in use by AOL Members; and (b) the Linked ICP Interactive
Site is designed and populated in a manner that minimizes delays when AOL
Members attempt to access such site. At a minimum, ICP will ensure that
Linked ICP Interactive Site's data transfer initiates within fewer than
fifteen (15) seconds on average. Prior to launch of any promotions
described herein, ICP will permit AOL to conduct performance and/or load
testing of the Linked ICP Interactive Site (in person or through remote
communications) until AOL is reasonably satisfied that launch can occur, to
include but not be limited to the following areas:
AOL Compatibility Testing (AOL Client V3.0, Windows 95/Macintosh, Browser:
MSIE 3.X/MSIE 2.1; AOL Client V4.0, Windows 95/Macintosh, Browser: MSIE
3.X); Caching Implementation; Graphics Quality; User Interface and
Functional Testing; Review of Advanced Web Technologies; Load Testing;
Website Architecture (Hardware, Network Configuration Software - Web
Servers, Databases, etc.); Network Redundancy and Reliability; Performance
Thresholds (Network Bandwidth, Web Server Capacity, Simultaneous Users);
and Electronic Commerce (Encryption Validation, Encryption Technology -SSL
V2/V3, PCT, Commerce Implementation Review - Cookies, iCat, Webforce, etc.,
Facility Physical Security, Safeguards Related to Private Customer
Information).
5. User Interface. ICP will maintain a graphical user interface within the
Linked ICP Interactive Site that is competitive in all material respects
with interfaces of other similar sites based on similar form technology.
AOL reserves the right to review and approve the user interface and site
design prior to launch of any link to the ICP Internet Site and to conduct
focus group testing to assess compliance with respect to such consultation
and with respect to ICP's compliance with the preceding sentence.
6. Service Level Response. ICP agrees to use commercially reasonable efforts
to provide the following service levels in response to problems with or
improvements to the Linked ICP Interactive Site:
(a) For material functions of software that are or have become substantially
inoperable (e.g., inability to access website or conduct transactions), ICP
will provide a bug fix or workaround within four (4) hours after the first
report of such error to AOL and the ICP.
(b) For functions of the software that are impaired or otherwise fail to
operate in accordance with agreed upon specifications (e.g., search
engine), ICP will provide a bug fix or workaround within twenty-four (24)
hours after the first report of such error to AOL and the ICP.
(c) For errors disabling only certain non-essential functions (e.g., broken
links or noncritical applications), ICP will provide a bug fix or
workaround within fourteen (14) days after the first report of such error
to AOL and the ICP.
(d) For all other errors, ICP will address these requests on a case-by-case
basis as soon as reasonably feasible.
7. Monitoring. ICP will provide AOL with ICP's detailed escalation procedures
(e.g., contact names and notification mechanisms such as email, phone,
page, etc.) and notification of any scheduled or unscheduled downtimes. AOL
Network Operations Center will work with ICP's designated
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technical contacts in the event of any performance malfunction or other
emergency related to the Linked ICP Interactive Site and will either assist
or work in parallel with ICP's contact using ICP tools and procedures, as
applicable. The Parties will develop a process to monitor performance and
member behavior with respect to access, capacity, security and related
issues both during normal operations and during special promotions/events.
8. Telecommunications. The Parties agree to explore encryption methodology to
secure data communications between the Parties' data centers such that no
private member information requested by the ICP will be transferred
unencrypted. The network between the Parties will be configured such that
no single component failure will significantly impact AOL Members. The
network will be sized such that no single line runs at more than 70%
average utilization for a 5-minute peak in a daily period.
9. Security Review. ICP and AOL will work together to perform an initial
security review of, and to perform tests of, the ICP system, network, and
service security in order to evaluate the security risks and provide
recommendations to ICP, including periodic follow-up reviews as reasonably
required by ICP or AOL. ICP will use commercially reasonable best efforts
to fix any security risks or breaches of security as may be identified by
AOL's Operations Security. Specific services to be performed on behalf of
AOL's Operations Security team will be as determined by AOL in its sole
discretion.
10. Technical Performance. ICP will perform the following technical
obligations (and any reasonable updates thereto from time to time by AOL):
(a) ICP will design the Linked ICP Interactive Site to support the Windows
version of the Microsoft Internet Explorer 3.0 and 4.0 browser, the
Macintosh version of the Microsoft Internet Explorer 2.1 and 3.0, and make
commercially reasonable efforts to support all other AOL browsers listed
at: "http://webmaster.info.aol.com/BrowTable.html."
(b) ICP will configure the server from which it serves the site to examine the
HTTP User-Agent field in order to identify the "AOL Member-Agents" listed
at: "http://webmaster. info.aol.com/Brow2Text.html."
(c) ICP will design its site to support HTTP 1.0 or later protocol as defined
in RFC 1945 (available at "http://ds.internic.net/rfc/rfc1945.text") and to
adhere to AOL's parameters for refreshing cached information listed at
http://webmaster.info.aol.com/CacheText.html.
11. AOL Internet Products Partner Support. AOL will provide ICP with access to
the standard online resources, standards and guidelines documentation,
technical phone support, monitoring and after-hours assistance that AOL
makes generally available to similarly situated web-based partners. AOL
support will not, in any case, be involved with content creation on behalf
of ICP or support for any technologies, databases, software or other
applications which are not supported by AOL or are related to any ICP area
other than the Linked ICP Interactive Site. Support to be provided by AOL
is contingent on ICP providing to AOL demo account information (where
applicable), a detailed description of the Linked ICP Interactive Site's
software, hardware and network architecture and access to the Linked ICP
Interactive Site for purposes of such performance and load testing as AOL
elects to conduct. As described elsewhere in this Agreement, ICP is fully
responsible for all aspects of hosting and administration of the Linked ICP
Interactive Site and must ensure that the site satisfies the specified
access and performance requirements as outlined in this Exhibit E-2.
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EXHIBIT F
---------
Sample Editorial Guidelines
---------------------------
The following is for purposes of general agreement & discussion only and shall
be used as the basis for creating definitive "Editorial Guidelines" as called
for in the Agreement between AOL and ICP. Notwithstanding the forgoing, the
definitive "Editorial Guidelines" shall in no way be limited to the following.
AOL SPORTS PROGRAMMING GUIDELINES: OUTLINE OF KEY COMPONENTS FOR AOL/ICP
INTEGRATED EDITORIAL RELATIONSHIP
Sports coverage must stress immediacy, depth, and interactivity. That is,
screens must be regularly updated to reflect game and news coverage; appropriate
links must be added to provide background and context to the stories; and
opportunities for interactivity must be linked to the stories.
1. Maintenance of Areas and Frequency of Programming
The Team Pages and Star Pages need to be changed as often as determined by AOL.
In general, this means for In-Season coverage of the major sports (Pro and
College Football, Pro and College Basketball, Baseball, Hockey), all promo slots
will be fresh each day by 7 a.m. and the top promo slots will change throughout
the day as mutually agreed by both parties. The top promo slots also will be
updated throughout the daytime as events or news warrant. During the off-season,
all sport-by-sport screens will change at least once daily.
The Team Pages and Star Pages should be checked by copy editors to make sure
that everything is accurate and that the links are working properly. The sports
screens need to be perfect when it comes to details such as scores, names of
teams, players and events, dates, spelling, grammar, and links to content and
photos. When a mistake is identified, it must be corrected immediately,
regardless of the time of day.
All screens must be checked constantly to make sure that the information is
timely and accurate. Changes must be made before something becomes outdated.
2. Promotions/Style and Guidelines
The text, headlines and captions should be written in a direct newspaper style
that is consistent with what is currently on the AOL Sports site. The writing
will reflect a consistent editorial attitude determined by AOL. It is important
that the AP editorial style guide be followed. There should never be more than
two hyperlinks within a story text field. The hyperlinks need to be written in a
clear manner and go directly to what is being promoted. Blind hyperlinks are not
acceptable; the member must always have a good idea of where the link will take
him before he clicks on it.
Links to commerce opportunities will not be inserted ad hoc. Instead, they will
be used in contextually appropriate areas as identified by AOL and ICP.
3. Escalation Procedures and Disputes
AOL Sports has final say on all editorial decisions.
4. Linking
ICP will receive the wingdings on the Team Pages and Star Pages that have been
agreed to in the Agreement. ICP cannot hyperlink or link to other ICP content or
commerce within a story without the approval of AOL Sports.
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5. Editorial Calls
There will be consistent, daily communication regarding editorial direction.
6. Timelines of Changes
Any changes to links should be made immediately by ICP.
7. Right to Modify Links
ICP does not have the right to modify the copy for AOL Sports or AOL Sports News
links. ICP does not have the right to update the links AOL Sports owns (unless
requested by AOL Sports). AOL Sports can modify the language on ICP links when
needed to conform to the AOL Sports style as indicated above.
8. Minimum Standards
At a minimum, the Programming Guidelines will provide that ICP shall not
include, without AOL's prior approval, any Content that (i) is sexually
explicit, (ii) contains profanity, (iii) is slanderous or libelous, (iv)
denigrates a particular group based on gender, race, creed, religion, sexual
preference or handicap, (v) violates AOL's terms of Service, or (vi) does not
comply with any provision of this Agreement.
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EXHIBIT G
Star Online Area Content
------------------------
(A) Athlete Online Areas. Each Athlete Online Area shall contain the following
at a minimum:
. Athlete Journals: Regular journals for each Athlete (during the Season
and the Post-Season), posted on a regular and timely basis. Journal
content shall be fresh, entertaining, and innovative, giving the
athlete's perspective on sports DIRECTLY to the fan. Whenever possible,
certain fans (AOL Members) will be highlighted to heighten the
interactivity of the Journals.
. Bulletin Boards and Chat Rooms: ICP shall produce, manage, and maintain
Athlete bulletin boards and Athlete Chat Rooms in which fans can
communicate to each other and in which Athletes (via ICP) will respond
to member questions within their own folders or chat room.
. Athlete "Themed Nights" and Regular Athlete Programming: Athletes will
be participants in regularly scheduled online programming as set forth
in this Agreement. These programs may involve live chats, question and
answer sessions, and unique content material submitted by the Athletes,
such as analyzing highlights from the past week's games while the
footage is shown on AOL. All "themed nights" and Athlete programming
must be pre-approved by AOL, which approval shall not be unreasonably
withheld or delayed.
. Content Links to other AOL sports sites: Links with other AOL sports
sites. Such links shall first be approved by both parties hereto, which
approval shall not be unreasonably withheld or delayed.
. Athlete Direct Fan Club: Online membership clubs, which may include but
not be limited to offering discounted Memorabilia Products, ticket
discounts to special events only accessible by the members, special one-
on-one chats, etc... to members based on usage and contest promotions.
. Athlete Buddy Lists: ICP shall use commercially reasonable efforts to
encourage each Athlete to log into the America Online brand service
under a published screenname (available by Buddy List), during which
time the Athlete can attend a chat room or auditorium chat event with
AOL members.
ICP warrants and represents that its failure to provide AOL with [*] within
one hundred eighty (180) days of execution shall be deemed a material
breach of this Agreement. In addition to any rights or remedies AOL may
have under this Agreement, if ICP fails to secure such Athletes within one
hundred eighty (180) days from execution of this Agreement, AOL shall be
entitled to immediately terminate this Agreement and recoup from ICP within
ten days (i) the entire (i.e. not pro-rated) amount of any fees paid by AOL
to ICP hereunder, and (ii) all reasonable production costs associated with
AOL's development of the Online Area to date.
(B) Other Programming. In addition, the Stars Online Area shall include
programming geared toward crossover usage with other AOL Channels. ICP and
AOL (to the extent its participation is required) shall use commercially
reasonable efforts to cause the Stars Online Area to include content which
will be suitable for links to and from the following channels:
. Kids Channel -- ICP shall produce and manage kids programming and
content, subject to the terms and conditions of the Kids Channel.
Subject to this condition, ICP shall provide to the AOL Kids Channel the
following features, at a minimum: an Aggregated Min Screen, updated
weekly;
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twelve (12) Athlete Journals, updated weekly; The Favre Files (or
similar slideshow-oriented fun series), updated weekly; the Sports
Station for Kids (scores, headlines, etc.), updated daily; Message
Boards for all Athlete Journals, screened daily; a Sports Stars section
which will contain a permanent link or links to Athlete Direct Athlete
Areas and programming designed for kids. ICP acknowledges that all such
Content is content targeted towards children aged 12 and under and ICP
agrees that such Content, including any advertising, commerce and
promotions, shall fully comply with AOL's Kids Policies. In addition,
there shall be public relations support for the Kids Only Channel from
the Athletes featured therein.
ICP agrees to use commercially reasonable efforts to create content and
programming which is suitable for other AOL channels upon the request of
AOL, subject to appropriate links from these channels to the Online
Area.
(C) Updates. ICP shall update the Stars Online Area in a commercially
reasonable manner so that the site is continually fresh on a daily basis as
agreed to by AOL.
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EXHIBIT H
Content of Feeds
----------------
A. PSX Feed. ICP shall provide the PSX Feed in general conformity with
the following description:
(I) PSX Team Reports. The following reports ("PSX Team Reports") shall
be approximately 1000 words per team in length. Each of the PSX Team
Reports will be provided two times each week during the Season and
once each week during the Off-Season. Each PSX Report shall include
a Season preview for each team (the "Season Preview"), a Post-Season
review for each team (the "Post Season Review") and a Draft Special
for NFL football in April and for NBA Basketball in June (the "Draft
Specials").
(A) PSX NFL Football Team Reports. Team-by-team reports for each
team in the NFL ("PSX NFL Football Team Reports") sorted as
follows:
(i) National Football Conference
(ii) American Football Conference
(B) PSX MLB Baseball Team Reports. Team-by-team reports for each
team in MLB ("PSX MLB Baseball Team Reports") sorted as follows:
(i) National League
(ii) American League
(C) PSX NBA Basketball Team Reports. Team-by-team reports for each
team in the NBA ("PSX NBA Basketball Team Reports") sorted as
follows:
(i) Eastern Conference
(ii) Western Conference
(D) PSX NHL Hockey Team Reports. PSX reports focusing on NHL inside
information, including insights into strategy and personnel in
the NHL ("PSX NHL Hockey Team Reports") during the NHL Season.
The PSX NHL Hockey Team Reports will be delivered in six weekly
conference files sorted as follows:
(i) Eastern Conference-Northeast
(ii) Eastern Conference-Atlantic
(iii) Eastern Conference-Southeast
(iv) Western Conference-Central
(v) Western Conference-Pacific.
(vi) Western Conference-Northwest
The PSX NHL Hockey Team Reports will not be as extensive as the
team-by team information found in PSX standard Reports, but will
provide analysis on all NHL teams on a weekly basis by PSX's
conference writers.
(II) PSX Editorial Package. Through its special feature columnists, ICP
shall provide to AOL, via the Feeds, seven (7) mutually agreed-upon
editorial columns ("Columns") per week from mutually agreed-upon
respected sports columnists ("Columnists"), including without
limitation, [*], and shall also include specials from nationally
known insiders ("PSX Editorial Package"). The Columns shall
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cover various mutually agreed-upon topics/issues in professional
sports. Certain of these Columns will be devoted to a mutually
agreed-upon consistent subject matter (such as fantasy) each week
during the course of the year, and others will highlight the key
topics of that week, with an emphasis on the sports then In-Season.
ICP will cover breaking stories and submit these if, in its
editorial judgment, they are newsworthy. The PSX Editorial Package
shall generally include, but not be limited to, the following
additional coverage for each professional sport, in a form
substantially similar to that which ICP and/or Pro Sports Xchange,
Inc. has previously produced for AOL:mid-season reports by sport,
all star game Notebooks by sport, playoff and championship coverage
by sport, Season review by sport, draft coverage by sport, and
additional breaking stories.
B. CSX Feed. ICP shall provide the CSX Feed in general conformity with the
following description ("CSX Team Reports"):
(I) NCAA Football Reports. The following reports which shall be
approximately 1000 words per team in length:
(A) NCAA Football Team Reports. Team-by-team reports for each team
in the following conferences ("NCAA Football Team Reports"),
which NCAA Football Team Reports shall be provided twice per
each week during the Season and once each week during the Off-
Season:
(i) ACC
(ii) Big East
(iii) Big Twelve
(iv) Big Ten
(v) Pac Ten
(vi) SEC
(vii) WAC
(viii) Conference USA conferences
(ix) Independent teams (e.g.,Notre Dame)
(B) College Football Conference Reports. Reports provided on a
weekly basis during the NCAA college football regular season
covering the six remaining NCAA Division I-A independent
schools and the Mid-American and Big West conferences on a
conference-by-conference basis ("College Football Conference
Report").
(C) Ivy Reports. Reports provided weekly covering the Ivy League
on a team-by-team basis during the Ivy League regular season
("Ivy Reports").
(II) CSX Football Editorial Package. CSX shall provide, on a regularly
scheduled basis, an editorial package ("CSX Football Editorial
Package"), which shall include from time to time:
(A) National Columns. National Columns focusing on current events
and topics in NCAA football. The columns shall be provided a
minimum of four (4) times per week during the NCAA college
football regular season ("NCAA Football Season"). When events
warrant (i.e., Bowl Games, recruiting results, etc.), ICCP will
supplement its Special Events Coverage (defined below) with
additional
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National Columns. National Columns will run twice a week in the
Off-Season.
(B) Game Previews. Game Previews analyzing the major upcoming
Division I-A college football games during each week of the
NCAA Football Season.
(C) Game Day Feature. During the NCAA Football Season, a CSX
column highlighting a game(s) from that week.
(D) Top 112. Every week during the NCAA Football Season, ICP shall
create a Top 112 Column, ranking every Division 1-A team in the
country.
(E) Special Reports. ICP will provide seven special reports that
focus on key events in NCAA football formatted on a team-by-
team or conference-by-conference basis. These Special Reports
shall include:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Name Coverage Date
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Season Previews Preview of all 11 conferences and Late August
independents (122 teams)
- ------------------------------------------------------------------------------------------------------------------------
Season Reviews A review of all 122 teams Early January
- ------------------------------------------------------------------------------------------------------------------------
Recruiting Preview Update on recruit's short lists Late January
- ------------------------------------------------------------------------------------------------------------------------
Recruiting Review Rating team and conference recruits Mid February
- ------------------------------------------------------------------------------------------------------------------------
Spring Football Preview Each team's primary focus Early April*
- ------------------------------------------------------------------------------------------------------------------------
Spring Football Review Spring practice review February
- ------------------------------------------------------------------------------------------------------------------------
Recruiting Features Focus on individual recruits April
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The actual dates for Spring Practice have not yet been determined by the
teams. These reports will begin in April and run until all conferences have
been reviewed.
(F) Special Events Coverage. ICP shall cover the NCAA Division 1-A
Bowl Games, including team-by team reports on bowl teams on a
weekly basis until their bowl game is concluded. ICP shall also
provide in-depth analysis of the Kick-Off Classic, Pigskin
Classic, Blue-Gray Game, East-West Shrine, Senior Bowl and Hula
Bowl.
(G) Regional Recruiting News. In addition to the recruiting
previews and reviews, ICP shall provide a weekly column on
Regional Recruiting News once a week May through July.
(III) NCAA Basketball Reports. The following reports which shall be
approximately 1000 words per team in length:
(A) NCAA Basketball Teams Reports. Team-by-team reports for each
team in the following conferences ("NCAA Basketball Team
Reports"),
(i) ACC
(ii) Big East
(iii) Big Twelve
(iv) Big Ten
(v) Pac Ten
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(vi) SEC
(vii) Atlantic 10
(viii) Conference USA
(ix) Ivy League
(x) Big West
(xi) Colonial
(xii) Missouri Valley
(xiii) WAC
(xiv) MAC
Under the current schedule, which is subject to PSX modification
with AOL's reasonable approval, the NCAA Basketball Team Reports for
teams (i) through (viii) above shall be provided each Monday
throughout the Season, with each team covered until it is eliminated
from post-season and weekly during the Post-Season. The NCAA
Basketball Team Reports shall be provided on Tuesday throughout the
Season, which each team covered until it is eliminated from Post-
Season and weekly during the Post-Season.
(B) Conference Reports. Team-by-Team reports for the remaining
sixteen (16) conferences and 156 Division I teams on a once-
per-week basis ("Basketball Conference Reports"). While
following the same editorial approach as the NCAA Basketball
Team Reports, these Conference Reports will not cover each team
as extensively. However, teams in this group that qualify for
the NCAA and/or NIT tournaments will be covered as extensively
as the NCAA Basketball Team Reports with twice weekly coverage
during the period from qualification until elimination in the
above tournaments. The Conference Reports shall be provided for
each team in the following conferences:
(i) Sun Belt
(ii) Midwest Collegiate
(iii) West Coast
(iv) Metro Atlantic
(v) Big Sky
(vi) America East
(vii) Ohio Valley
(viii) Southern
(ix) Big South
(x) TAAC
(xi) Northeast
(xii) SWAC
(xiii) Southland
(xiv) Mid-continent
(xv) Patriot
(xvi) MEAC
(IV) CSX Basketball Editorial Package. ICP shall provide CSX
perspectives by college basketball writers seven days per week
during the Season ("CSX Basketball Editorial Package"), including
the following:
(A) National Columns. CSX's National Columns focus on current
events and topical issues in college basketball. The National
Columns will appear throughout the week (a minimum of four
files per week during the Season). The National
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Columns will be bylined by college basketball writers from
across the country. Additional regional columns will be
delivered during the NCAA tournament and periods of increased
news activity (see NCAA/NIT Tournament Coverage). National
Columns will be delivered weekly during the Off-Season.
(B) Game Previews. CSX Game Previews will provide a profile of
major games during the season. Top weekday games will be
previewed in capsules delivered on Mondays. Top weekend games
will be profiled in capsules delivered on Thursdays.
(C) Top 100. Each Sunday, ICP will deliver the CSX Top 100 Column,
ranking the top Division I teams in the country, with
appropriate comments.
(D) Special Team Reports. Five Special Team Reports during the
year that focus on key events in college basketball,
particularly in the off-season, on a team-by-team basis. These
Special Team Reports include:
- -------------------------------------------------------------------------------
Name Coverage Date
- -------------------------------------------------------------------------------
Season Preview A preview of all teams covered by Mid-November
NCAA Basketball Team Reports and
CSX Basketball Conference Reports
("Basketball Teams")
- -------------------------------------------------------------------------------
Season Review A look back on the season for all April
Basketball Teams
- -------------------------------------------------------------------------------
Recruiting Review Analysis of every team and May
conference
- -------------------------------------------------------------------------------
Off-Season Spotlight Up close focus on an interesting May-October
coach, player or recruit from
major teams
- -------------------------------------------------------------------------------
Summer Update Report on progress of team and July, August
players during the Off-Season;
look ahead to Season
- -------------------------------------------------------------------------------
(E) NCAA/NIT Tournament Coverage. ICP will provide CSX analysis
and perspective on all teams remaining in both the NCAA and NIT
Tournament, with weekly coverage. Tournament coverage will
include the following elements:
- --------------------------------------------------------------------------------
Name Coverage
- --------------------------------------------------------------------------------
Team Reports Weekly Team Reports for all teams in each tournament
- --------------------------------------------------------------------------------
Live Notebooks Notebooks from writers at NCAA tournament sites
- --------------------------------------------------------------------------------
Special Columns Added columns for duration of tournaments
- --------------------------------------------------------------------------------
Match-Up Analysis Evaluation of personnel and strategies that will
decide each game
- --------------------------------------------------------------------------------
Historical Perspective Anthology of records, statistics and highlights
from previous NCAA tournaments
- --------------------------------------------------------------------------------
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(F) November and December Tournaments. CSX analysis of the regular
season tournaments, including Notebooks, from key tournaments
such as the Maui Invitational, Great Eight and Preseason NIT.
(G) Conference Tournaments. CSX Team Reports and Conference
Reports will analyze the conference tournaments on a team by
team basis for all teams playing in the 28 conference
tournaments. Additional coverage will include regional columns
and on-site Notebooks analyzing the major conference
tournaments.
(H) Recruiting Coverage. CSX Basketball Recruiting Updates will be
included in the weekly Team Reports and analyzed in Special
Team Reports after the late-signing period in May. During the
Off-Season, the CSX Off-Season Spotlight will focus on notable
recruits, delving into their lives on and off the court as well
as their significance to their respective college programs.
Throughout the year, ICP shall provide a bi-monthly National
Column covering regional recruiting news, including reports
from major high school all-star games and camps.
(I) Breaking Stories. Utilizing the exclusive CSX writer network,
updates of breaking NCAA basketball stories.
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EXHIBIT I
AOL Approval
------------
A. AOL-Approved Links
AOL hereby approves the following links, subject to all terms and
conditions contained in the Agreement, including without limitation, AOL's right
to withdraw its approval pursuant to the Agreement, including but not limited
to, Section 1.3 of the Agreement:
1. each Athlete Online Area at http://www.athlete direct.com for Athletes
approved by AOL pursuant to Exhibit A.1.1.2(C)
2. Stars Online Area Content set forth in Exhibit G located on the Star
Web Area at http://www.athletedirect.com in accordance with the terms
of this Agreement
3. commerce areas on, or through subpages on,
http://www.athletedirect.com and http://www.psx.com where only the
Products approved by AOL subject to this Agreement are offered, sold
and/or licensed by ICP in accordance with the terms of this Agreement
4. http://www.athletedirect.com home page
5. http:www.psx.com home page
The Content contained in http://www.athletedirect.com and http://www.psx.com, or
to be contained in such sites upon commercial launch of such sites or a
reasonable time thereafter, shall be as described below in Paragraph C. Without
limiting any other rights or remedies AOL may have under this Agreement, AOL
reserves the right to withdraw its approval to links to such site(s) if such
site(s) do not conform to the descriptions set forth below in Paragraph C.
B. AOL-Approved Product Categories*
AOL hereby approves ICP's offer or sale of the following categories of
sports-related Products in or through the Online Area:
[*]
[*]: Mass-produced, generally available team or league branded headgear,
footwear, swimwear, and apparel (i.e. sweaters, sweatshirts, jackets, shirts,
shorts, pants, sweatpants, and undergarments).
* Notwithstanding AOL's approval of the above categories of Products, the
Placements and any Content or Links on the AOL Network (including the Welcome
Mats and the hybrid browsers) shall not advertise or promote music or books,
without AOL's prior approval.
** Notwithstanding the foregoing, these categories of Products which are
licensed and sold on a Linked ICP Interactive Sites in accordance with the terms
of this Agreement shall not be subject to AOL's right to revoke its approval
for ICP to sell or license such Products in or through such Linked ICP
Interactive Site based upon exclusivities or other contractual commitments
granted by AOL after the Effective Date.
*** Each of the categories of sports merchandise shall be subject to AOL's
right to revoke its approval based upon its exclusivity or other contractual
commitments, including without limitation, those granted by AOL after
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the Effective Date, but AOL shall not exercise such right with respect to all
such categories.
C. Description of Content
A. http://www.athletedirect.com
1. General Description of Content and Commerce
Athlete-oriented content, including content designed to provide
Athlete-user interaction
Athlete-related commerce
Member Generated Content: None. Intent to include content such as:
chat rooms; live participation by athletes through text, audio, and
video by athletes; interaction between athletes and fans in real-time
application; message boards featuring questions from users and answers
from athletes to a limited number of posts; member-designed web pages
and content; member-designed contests and activities; fan clubs
centered around athletes including community activities; member-driven
commerce.
Premium Content: Intent to include content such as: audio, video, and
text programming involving athletes on a pay-per-view, pay-per-use, or
subscription basis; fan clubs which may involve registration fees;
information and other special content which may be charged for.
Update Frequency: No less than on a day-part basis on many screens;
daily on most screens, no less than weekly on all non-generic screens.
2. Features
Integrated Features or Links to Such Features: Intent for features to
include: official home pages of athletes; other athlete-related and
sport-related content; content directly from athletes; celebrity
related content. Regular features include first-person account from
athletes, Q and A, chats, games, contests, news, and sports
information. Multimedia content. Sports stores.
Integrated Search Engines: Intent for site to contain internal search
features (not search capacity for other interactive areas). To the
extent the site contains external search features, such features shall
be Two Clicks away from the AOL Network. No integrated search engine
shall contain the branding of any other Interactive Service or any
entity reasonably construed to be in competition with AOL component
products.
Integrated Community: Intent to operate communities using chat,
message boards, fan clubs, and other interactivities.
Instant Messaging or Other Integrated Communications: Intent for site
to contain integrated communication features; provided that, ICP shall
use AOL products for all instant messaging services and other
integrated communications features viewed by, available to or utilized
by AOL Members. ICP shall not enter into any contractual arrangement
with any third party for the provision of instant messaging services
or other integrated communications features to be viewed by, available
to or utilized by non-AOL Members without giving prior written notice
thereof to AOL and, for a period of thirty (30) days thereafter,
negotiating in good faith with AOL the terms and conditions upon which
AOL would provide such services to ICP.
Free Email: None.
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3. Technologies Employed: Server & Operating System: The operating
system and database of choice for the Athlete Direct system is planned
to be UNIX operating system (Solaris) on Sun hardware with an Oracle
relational database design.
Application Server: The application server for the Athlete Direct
system is planned to be implemented in an open systems design using
open standards, a mature technology which provides API's for third
party vendor solutions, is scalable, customizable and supports
standard commerce and encryption requirements.
B. http://www.psx.com
1. General Description of Content and Commerce
Sports league, game, team and player information
Sale and promotion of Premium Information Products
Sports-related commerce
Member Generated Content (e.g., chat, live events, message boards,
personals and classifieds): Intent for site to include content such
as: member-driven team clubs centered around specific sports teams or
groups; chat rooms; member-driven commerce live participation by
sports personalities through text, audio, and video by athletes;
interaction between sports personalities and fans in real-time
application; message boards featuring questions from users and answers
from sports personalities to a limited number of posts; member-
designed web pages and content; member-designed contests and
activities.
Premium Content: Intent to include content such as: audio, video, and
text programming involving sports personalities on a pay-per-view,
pay-per-use, or subscription basis; clubs which may involve
registration fees; information and other special content which may be
charged for, to include such products as My Baseball Daily, My
Football Daily, derivatives of such products in other sports; Fred
Edelstein's Football Insider; derivatives of such products involving
other sports and/or sports personalities.
Update Frequency: Premium Content offerings will be updated, dependent
upon the nature of the offering, intra-daily, daily, weekly, monthly,
as a one-time product, or any variable therein. The main page will be
updated no less than weekly.
2. Features
Integrated Features or Links to Such Features: Intent to include
sports editorial information, columns, news, scores, statistics, links
to relevant sports information or sites of interest, links to all
premium content offerings available by or through PSX. Sports stores
Integrated Search Engines: Intent for site to contain internal search
features (not search capacity for other interactive areas). To the
extent the site contains external search features, such features shall
be Two Clicks away from the AOL Network. No integrated search engine
shall contain the branding of any other Interactive Service or any
entity reasonably construed to be in competition with AOL component
products.
Integrated Community: Intent to establish communities including team
fan clubs and related offerings using chat, message boards, and other
interactivities and involving participation by sports personalities
and deep editorial information
Instant Messaging or Other Integrated Communications: Intent for site
to contain integrated communication features; provided that, ICP shall
use AOL products for all instant messaging services and
CONFIDENTIAL
<PAGE>
other integrated communications features viewed by, available to or
utilized by AOL Members. ICP shall not enter into any contractual
arrangement with any third party for the provision of instant
messaging services or other integrated communications features to be
viewed by, available to or utilized by non-AOL Members without giving
prior written notice thereof to AOL and, for a period of thirty (30)
days thereafter, negotiating in good faith with AOL the terms and
conditions upon which AOL would provide such services to ICP.
Free Email: None.
3. Technologies Employed: Server & Operating System: The operating
system and database of choice for the PSX system is intended to be
UNIX operating system (Solaris) on Sun hardware with an Oracle
relational database design.
Application Server: The application server for the PSX system is
intended to be implemented in an open systems design using open
standards, a mature technology which provides API's for third party
vendor solutions, is scalable, customizable and supports standard
commerce and encryption requirements.
In addition, PSX uses commercial software such as Netscape Publishing
System to create its subscription products.
CONFIDENTIAL
<PAGE>
EXHIBIT J
---------
[*]
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
Exhibit K
---------
AOL Team Pages Update Schedule
------------------------------
I. All Teams in Three Major Professional Sports plus Key (up to 10) Hockey
Teams
In-Season: Editorial: Daily, plus day-part programming for breaking
stories of major import as reasonably determined by AOL with
consultation of E-Sport .
Photos: Daily, plus in conjunction with breaking stories
above.
Links: Daily
Off-season: Editorial: Three times per week, plus breaking stories of
major import as reasonably determined by AOL with
consultation of E-Sport
Photos: Three times per week, plus in conjunction with
breaking stories above.
Links: Daily sweep
II. Major College Pages - One combined page per major college team - (Up to
60)
August 1 - April 7: Editorial: Daily, plus day-part programming for
breaking stories of major import as reasonably
determined by AOL with consultation of E-Sport
Photos: Daily, plus in conjunction with breaking
stories above.
Links: Daily
April 7 - August 1: Editorial: Twice per week, plus breaking stories of
major import as reasonably determined by AOL with
consultation of E-Sport
Photos: twice per week, plus in conjunction with
breaking stories above.
Links: Four times per week
III. Minor College Pages -- One combined page per minor college team -remaining
Division I football and selected Division I basketball (Up to 60)
August 1 - April 7: Editorial: Three times per week, plus breaking
stories of major import as reasonably determined by
AOL with consultation of E-Sport
Photos: Three times per week, plus in conjunction
with breaking stories above.
Links: Four times per week
* non major hockey teams will use this schedule in-season
April 7 - August 1: Editorial: Once per week, plus breaking stories of
major import as reasonably determined by AOL with
consultation of E-Sport
Photos: Once per week, plus in conjunction with
breaking stories above.
Links: Three times per week
* non major hockey teams will use this schedule off-season
<PAGE>
EXHIBIT 10.17
BROADBAND SPORTS,INC.
---------------------
2000 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of Broadband Sports, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Parents or Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll deductions. It
is the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Code. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means either the Board or a committee of the
-------------
Board that is responsible for the administration of the Plan as is designated
from time to time by resolution of the Board.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of employee stock purchase plans, if any, under applicable
provisions of federal securities laws, state corporate and securities laws, the
Code, the rules of any applicable stock exchange or national market system, and
the rules of any foreign jurisdiction applicable to participation in the Plan by
residents therein.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Change in Control" means a change in ownership or control of
-----------------
the Company effected through the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
----
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means Broadband Sports, Inc., a Delaware corporation.
-------
(h) "Compensation" means an Employee's base salary from the Company
------------
or one or more Designated Parents or Subsidiaries, including such amounts of
base salary as are deferred by the Employee (i) under a qualified cash or
deferred arrangement described in Section
1
<PAGE>
401(k) of the Code, or (ii) to a plan qualified under Section 125 of the Code.
Compensation does not include overtime, bonuses, annual awards, other incentive
payments, reimbursements or other expense allowances, fringe benefits (cash or
noncash), moving expenses, deferred compensation, contributions (other than
contributions described in the first sentence) made on the Employee's behalf by
the Company or one or more Designated Parents or Subsidiaries under any employee
benefit or welfare plan now or hereafter established, and any other payments not
specifically referenced in the first sentence.
(i) "Corporate Transaction" means any of the following transactions:
---------------------
(1) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;
(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the
capital stock of the Company's subsidiary corporations) in
connection with complete liquidation or dissolution of the Company;
(3) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons
different from those who held such securities immediately prior to
such merger; or
(4) acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit
plan) of beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's
outstanding securities (whether or not in a transaction also
constituting a Change in Control), but excluding any such
transaction that the Administrator determines shall not be a
Corporate Transaction
(j) "Designated Parents or Subsidiaries" means the Parents or
----------------------------------
Subsidiaries which have been designated by the Administrator from time to time
as eligible to participate in the Plan.
(k) "Effective Date" means the later of July 1, 2000 or the
--------------
effective date of the Registration Statement relating to the Company's initial
public offering of its Common Stock. However, should any Designated Parent or
Subsidiary become a participating company in the Plan after such date, then such
entity shall designate a separate Effective Date with respect to its employee-
participants.
(l) "Employee" means any individual, including an officer or
--------
director, who is an employee of the Company or a Designated Parent or Subsidiary
for purposes of Section 423 of the Code. For purposes of the Plan, the
employment relationship shall be treated as
2
<PAGE>
continuing intact while the individual is on sick leave or other leave of
absence approved by the individual's employer. Where the period of leave exceeds
ninety (90) days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship will be deemed to
have terminated on the ninety-first (91st) day of such leave, for purposes of
determining eligibility to participate in the Plan.
(m) "Enrollment Date" means the first day of each Offer Period.
---------------
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(o) "Exercise Date" means the last day of each Purchase Period.
-------------
(p) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(1) Where there exists a public market for the Common Stock,
the Fair Market Value shall be (A) the closing price for a share of
Common Stock for the last market trading day prior to the time of
the determination (or, if no closing price was reported on that
date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Administrator to
be the primary market for the Common Stock or the Nasdaq National
Market, whichever is applicable or (B) if the Common Stock is not
traded on any such exchange or national market system, the average
of the closing bid and asked prices of a share of Common Stock on
the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on
the last date on which such prices were reported), in each case, as
reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(2) In the absence of an established market of the type
described in (1), above, for the Common Stock, and subject to (3),
below, the Fair Market Value thereof shall be determined by the
Administrator in good faith; or
(3) If the Effective Date of the Plan is the effective date of
the Company's initial public offering of its Common Stock, on the
initial Effective Date of the Plan, the Fair Market Value shall be
the price at which the Board, or if applicable, the Pricing
Committee of the Board, and the underwriters agree to offer the
Common Stock to the public in the initial public offering of the
Common Stock.
(q) "Offer Period" means an Offer Period established pursuant to
------------
Section 4 hereof.
(r) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
3
<PAGE>
(s) "Participant" means an Employee of the Company or Designated
-----------
Parent or Subsidiary who is actively participating in the Plan.
(t) "Plan" means this Employee Stock Purchase Plan.
----
(u) "Purchase Period" means a period of approximately six months,
---------------
commencing on March 1 and September 1 of each year and terminating on the next
following August 31 or the last day of February, respectively; provided,
however, that the first Purchase Period shall commence on the Effective Date and
shall end on February 28, 2001.
(v) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(w) "Reserves" means the sum of the number of shares of Common
--------
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(x) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Eligibility.
-----------
(a) General. Any individual who is an Employee on a given
-------
Enrollment Date shall be eligible to participate in the Plan for the Offer
Period commencing with such Enrollment Date.
(b) Limitations on Grant and Accrual. Any provisions of the Plan to
--------------------------------
the contrary notwithstanding, no Employee shall be granted an option under the
Plan (i) if, immediately after the grant, such Employee (taking into account
stock owned by any other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
Parent or Subsidiary, or (ii) which permits the Employee's rights to purchase
stock under all employee stock purchase plans of the Company and its Parents or
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. The determination of the accrual of the right to
purchase stock shall be made in accordance with Section 423(b)(8) of the Code
and the regulations thereunder.
(c) Other Limits on Eligibility. Notwithstanding Subsection (a),
---------------------------
above, the following Employees shall not be eligible to participate in the Plan
for any relevant Offer Period: (i) Employees whose customary employment is 20 or
fewer hours per week; (ii) Employees whose customary employment is for not more
than 5 or fewer months in any calendar year; (iii)
4
<PAGE>
Employees who have been employed for fewer than six (6) months; and (iv)
Employees who are subject to rules or laws of a foreign jurisdiction that
prohibit or make impractical the participation of such Employees in the Plan.
4. Offer Periods.
-------------
(a) The Plan shall be implemented through overlapping or
consecutive Offer Periods until such time as (i) the maximum number of shares of
Common Stock available for issuance under the Plan shall have been purchased or
(ii) the Plan shall have been sooner terminated in accordance with Section 19
hereof. The maximum duration of an Offer Period shall be twenty-seven (27)
months. Initially, the Plan shall be implemented through overlapping Offer
Periods of twelve (12) months' duration commencing each March 1 and September 1
following the Effective Date (except that the initial Offer Period shall
commence on the Effective Date and shall end on August 31, 2001.
(b) A Participant shall be granted a separate option for each Offer
Period in which he or she participates. The option shall be granted on the
Enrollment Date and shall be automatically exercised in successive installments
on the Exercise Dates ending within the Offer Period.
(c) If on the first day of any Purchase Period in an Offer Period
in which a Participant is participating, the Fair Market Value of the Common
Stock is less than the Fair Market Value of the Common Stock on the Enrollment
Date of the Offer Period (after taking into account any adjustment during the
Offer Period pursuant to Section 18(a)), the Offer Period shall be terminated
automatically and the Participant shall be enrolled automatically in the new
Offer Period which has its first Purchase Period commencing on that date,
provided the Participant is eligible to participate in the Plan on that date and
has not elected to terminate participation in the Plan.
(d) Except as specifically provided herein, the acquisition of
Common Stock through participation in the Plan for any Offer Period shall
neither limit nor require the acquisition of Common Stock by a Participant in
any subsequent Offer Period.
5. Participation.
-------------
(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the designated payroll office of
---------
the Company at least ten (10) business days prior to the Enrollment Date for the
Offer Period in which such participation will commence, unless a later time for
filing the subscription agreement is set by the Administrator for all eligible
Employees with respect to a given Offer Period.
(b) Payroll deductions for a Participant shall commence with the
first partial or full payroll period beginning on the Enrollment Date and shall
end on the last complete payroll period during the Offer Period, unless sooner
terminated by the Participant as provided in Section 10.
5
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a Participant files a subscription agreement, the
Participant shall elect to have payroll deductions made during the Offer Period
in amounts between one percent (1%) and not exceeding fifteen percent (15%) of
the Compensation which the Participant receives during the Offer Period.
(b) All payroll deductions made for a Participant shall be credited
to the Participant's account under the Plan and will be withheld in whole
percentages only. A Participant may not make any additional payments into such
account.
(c) A Participant may discontinue participation in the Plan as
provided in Section 10, or may increase or decrease the rate of payroll
deductions during the Offer Period by completing and filing with the Company a
change of status notice in the form of Exhibit B to this Plan authorizing an
---------
increase or decrease in the payroll deduction rate. Any increase or decrease in
the rate of a Participant's payroll deductions shall be effective with the first
full payroll period commencing ten (10) business days after the Company's
receipt of the change of status notice unless the Company elects to process a
given change in participation more quickly. A Participant's subscription
agreement (as modified by any change of status notice) shall remain in effect
for successive Offer Periods unless terminated as provided in Section 10. The
Administrator shall be authorized to limit the number of payroll deduction rate
changes during any Offer Period.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
Participant's payroll deductions shall be decreased to 0%. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement, as amended, at the time when permitted under Section 423(b)(8) of the
Code and Section 3(b) herein, unless such participation is sooner terminated by
the Participant as provided in Section 10.
7. Grant of Option. On the Enrollment Date, each Participant shall be
---------------
granted an option to purchase (at the applicable Purchase Price) One Thousand
Shares (1,000) shares of the Common Stock, subject to adjustment as provided in
Section 18 hereof; provided (i) that such option shall be subject to the
limitations set forth in Sections 3(b), 6 and 12 hereof, and (ii) the maximum
number of shares of Common Stock a Participant shall be permitted to purchase in
any Purchase Period shall be Five Hundred (500) shares, subject to adjustment as
provided in Section 18 hereof. Exercise of the option shall occur as provided in
Section 8, unless the Participant has withdrawn pursuant to Section 10, and the
option, to the extent not exercised, shall expire on the last day of the Offer
Period.
8. Exercise of Option. Unless a Participant withdraws from the Plan as
------------------
provided in Section 10, below, the Participant's option for the purchase of
shares will be exercised automatically on each Exercise Date, by applying the
accumulated payroll deductions in the Participant's account to purchase the
number of full shares subject to the option by dividing such Participant's
payroll deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the applicable Purchase Price.
No fractional
6
<PAGE>
shares will be purchased; any payroll deductions accumulated in a Participant's
account which are not sufficient to purchase a full share shall be carried over
to the next Purchase Period or Offer Period, whichever applies, or returned to
the Participant, if the Participant withdraws from the Plan. Notwithstanding the
foregoing, any amount remaining in a Participant's account following the
purchase of shares on the Exercise Date due to the application of Section
423(b)(8) of the Code or Section 7, above, shall be returned to the Participant
and shall not be carried over to the next Offer Period or Purchase Period.
During a Participant's lifetime, a Participant's option to purchase shares
hereunder is exercisable only by the Participant.
9. Delivery. Upon receipt of a request from a Participant after each
--------
Exercise Date on which a purchase of shares occurs, the Company shall arrange
the delivery to such Participant, as promptly as practicable, of a certificate
representing the shares purchased upon exercise of the Participant's option.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A Participant may either (i) withdraw all but not less than all
the payroll deductions credited to the Participant's account and not yet used to
exercise the Participant's option under the Plan or (ii) terminate future
payroll deductions, but allow accumulated payroll deductions to be used to
exercise the Participant's option under the Plan at any time by giving written
notice to the Company in the form of Exhibit B to this Plan. If the Participant
---------
elects withdrawal alternative (i) described above, all of the Participant's
payroll deductions credited to the Participant's account will be paid to such
Participant as promptly as practicable after receipt of notice of withdrawal,
such Participant's option for the Offer Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offer Period. If the Participant elects withdrawal alternative (ii)
described above, no further payroll deductions for the purchase of shares will
be made during the Offer Period, all of the Participant's payroll deductions
credited to the Participant's account will be applied to the exercise of the
Participant's option on the next Exercise Date, and after such Exercise Date,
such Participant's option for the Offer Period will be automatically terminated.
If a Participant withdraws from an Offer Period, payroll deductions will not
resume at the beginning of the succeeding Offer Period unless the Participant
delivers to the Company a new subscription agreement.
(b) Upon termination of a Participant's employment relationship (as
described in Section 2(k)) at a time more than three (3) months from the next
scheduled Exercise Date, the payroll deductions credited to such Participant's
account during the Offer Period but not yet used to exercise the option will be
returned to such Participant or, in the case of his/her death, to the person or
persons entitled thereto under Section 14, and such Participant's option will be
automatically terminated. Upon termination of a Participant's employment
relationship (as described in Section 2(k)) within three (3) months of the next
scheduled Exercise Date, the payroll deductions credited to such Participant's
account during the Offer Period but not yet used to exercise the option will be
applied to the purchase of Common Stock on the next Exercise Date, unless the
Participant (or in the case of the Participant's death, the person or persons
entitled to the Participant's account balance under Section 14) withdraws from
the Plan by
7
<PAGE>
submitting a change of status notice in accordance with subsection (a) of this
Section 10. In such a case, no further payroll deductions will be credited to
the Participant's account following the Participant's termination of employment
and the Participant's option under the Plan will be automatically terminated
after the purchase of Common Stock on the next scheduled Exercise Date.
11. Interest. No interest shall accrue on the payroll deductions
--------
credited to a Participant's account under the Plan.
12. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 18, the maximum number of shares of Common Stock
which shall be made available for sale under the Plan shall be 400,000 shares,
plus an annual increase to be added on the first day of the Company's fiscal
year beginning in 2001 equal to the lesser of (i) 100,000 shares, or (ii) a
lesser number of shares determined by the Administrator. If the Administrator
determines that on a given Exercise Date the number of shares with respect to
which options are to be exercised may exceed (x) the number of shares then
available for sale under the Plan or (y) the number of shares available for sale
under the Plan on the Enrollment Date(s) of one or more of the Offer Periods in
which such Exercise Date is to occur, the Administrator may make a pro rata
allocation of the shares remaining available for purchase on such Enrollment
Dates or Exercise Date, as applicable, in as uniform a manner as shall be
practicable and as it shall determine to be equitable, and shall either continue
all Offer Periods then in effect or terminate any one or more Offer Periods then
in effect pursuant to Section 19, below.
(b) Participant will have no interest or voting right in shares
covered by the Participant's option until such shares are actually purchased on
the Participant's behalf in accordance with the applicable provisions of the
Plan. No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date of such purchase.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his or her spouse.
13. Administration. The Plan shall be administered by the Administrator
--------------
which shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Administrator shall, to the full extent permitted by
Applicable Law, be final and binding upon all persons.
14. Designation of Beneficiary.
--------------------------
(a) Each Participant will file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
Participant's account under the Plan in the event of such Participant's death.
If a Participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
8
<PAGE>
(b) Such designation of beneficiary may be changed by the
Participant (and the Participant's spouse, if any) at any time by written
notice. In the event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living (or in existence) at
the time of such Participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Administrator), the Administrator shall deliver such shares and/or cash to
the spouse (or domestic partner, as determined by the Administrator) of the
Participant, or if no spouse (or domestic partner) is known to the
Administrator, then to the issue of the Participant, such distribution to be
made per stirpes (by right of representation), or if no issue are known to the
Administrator, then to the heirs at law of the Participant determined in
accordance with Section 27.
15. Transferability. Neither payroll deductions credited to a
---------------
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Administrator may treat such act as an election to
withdraw funds from an Offer Period in accordance with Section 10.
16. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
-------
Participant in the Plan. Statements of account will be given to Participants at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustments Upon Changes in Capitalization. Subject to any
------------------------------------------
required action by the stockholders of the Company, the Reserves, the Purchase
Price, the maximum number of shares that may be purchased in any Offer Period or
Purchase Period, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, (ii) any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company,
or (iii) as the Administrator may determine in its discretion, any other
transaction with respect to Common Stock to which Section 424(a) of the Code
applies; provided, however that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator and its
determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance by the Company of shares of stock of any
9
<PAGE>
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
Reserves and the Purchase Price.
(b) Corporate Transactions. In the event of a proposed Corporate
----------------------
Transaction, each option under the Plan shall be assumed by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Administrator determines, in the exercise of its sole discretion and in lieu of
such assumption, to shorten the Offer Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Administrator shortens the Offer
Period then in progress in lieu of assumption in the event of a Corporate
Transaction, the Administrator shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, that the Exercise Date for
the Participant's option has been changed to the New Exercise Date and that the
Participant's option will be exercised automatically on the New Exercise Date,
unless prior to such date the Participant has withdrawn from the Offer Period as
provided in Section 10. For purposes of this Subsection, an option granted under
the Plan shall be deemed to be assumed if, in connection with the Corporate
Transaction, the option is replaced with a comparable option with respect to
shares of capital stock of the successor corporation or Parent thereof. The
determination of option comparability shall be made by the Administrator prior
to the Corporate Transaction and its determination shall be final, binding and
conclusive on all persons.
19. Amendment or Termination.
------------------------
(a) The Administrator may at any time and for any reason terminate
or amend the Plan. Except as provided in Section 18, no such termination can
affect options previously granted, provided that the Plan or any one or more
Offer Periods may be terminated by the Administrator on any Exercise Date or by
the Administrator establishing a new Exercise Date with respect to any Offer
Period and/or any Purchase Period then in progress if the Administrator
determines that the termination of the Plan or such one ore more Offer Periods
is in the best interests of the Company and its stockholders. Except as provided
in Section 18 and this Section 19, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any Participant
without the consent of affected Participants. To the extent necessary to comply
with Section 423 of the Code (or any successor rule or provision or any other
Applicable Law), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Administrator shall be entitled to limit the frequency and/or number of changes
in the amount withheld during Offer Periods, change the length of Purchase
Periods within any Offer Period, determine the length of any future Offer
Period, determine whether future Offer Periods shall be consecutive or
overlapping, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions, permit payroll withholding in excess of the amount designated by
a Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment
10
<PAGE>
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the Participant's Compensation, and
establish such other limitations or procedures as the Administrator determines
in its sole discretion advisable and which are consistent with the Plan.
20. Notices. All notices or other communications by a Participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Administrator at the location,
or by the person, designated by the Administrator for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all Applicable Laws
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. As a condition to the exercise of an option, the
Company may require the Participant to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned Applicable Laws. In addition, no options shall be exercised
or shares issued hereunder before the Plan shall have been approved by
stockholders of the Company as provided in Section 23.
22. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 19.
23. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws.
24. No Employment Rights. The Plan does not, directly or indirectly,
--------------------
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company or
a Designated Parent or Subsidiary, and it shall not be deemed to interfere in
any way with such employer's right to terminate, or otherwise modify, an
employee's employment at any time.
25. No Effect on Retirement and Other Benefit Plans. Except as
-----------------------------------------------
specifically provided in a retirement or other benefit plan of the Company or a
Designated Parent or Subsidiary, participation in the Plan shall not be deemed
compensation for purposes of computing benefits or contributions under any
retirement plan of the Company or a Designated Parent or Subsidiary, and shall
not affect any benefits under any other benefit plan of any kind or any benefit
plan subsequently instituted under which the availability or amount of benefits
is related to level of compensation. The Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.
11
<PAGE>
26. Effect of Plan. The provisions of the Plan shall, in accordance
--------------
with its terms, be binding upon, and inure to the benefit of, all successors of
each Participant, including, without limitation, such Participant's estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.
27. Governing Law. The Plan is to be construed in accordance with and
-------------
governed by the internal laws of the State of California (as permitted by
Section 1646.5 of the California Civil Code, or any similar successor provision)
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of
California to the rights and duties of the parties, except to the extent the
internal laws of the State of California are superseded by the laws of the
United States. Should any provision of the Plan be determined by a court of law
to be illegal or unenforceable, the other provisions shall nevertheless remain
effective and shall remain enforceable.
28. Dispute Resolution. The provisions of this Section 28 (and as
------------------
restated in the Subscription Agreement) shall be the exclusive means of
resolving disputes arising out of or relating to the Plan. The Company and the
Participant, or their respective successors (the "parties"), shall attempt in
good faith to resolve any disputes arising out of or relating to the Plan by
negotiation between individuals who have authority to settle the controversy.
Negotiations shall be commenced by either party by notice of a written statement
of the party's position and the name and title of the individual who will
represent the party. Within thirty (30) days of the written notification, the
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to resolve the dispute. If the dispute
has not been resolved by negotiation, the parties agree that any suit, action,
or proceeding arising out of or relating to the Plan shall be brought in the
United States District Court for the Southern District of California (or should
such court lack jurisdiction to hear such action, suit or proceeding, in a
California state court in the County of Los Angeles) and that the parties shall
submit to the jurisdiction of such court. The parties irrevocably waive, to the
fullest extent permitted by law, any objection the party may have to the laying
of venue for any such suit, action or proceeding brought in such court. THE
PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF
ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this
Section 28 shall for any reason be held invalid or unenforceable, it is the
specific intent of the parties that such provisions shall be modified to the
minimum extent necessary to make it or its application valid and enforceable.
12
<PAGE>
Exhibit A
---------
Broadband Sports, Inc. 2000 Employee Stock Purchase Plan
SUBSCRIPTION AGREEMENT
Effective with the Offer Period beginning on:
[_] ESPP Effective Date [_] March 1, 200__ or [_] September 1, 200__
<TABLE>
<S> <C> <C> <C>
1. Personal Information
Legal Name (Please Print)
------------------------------------------------------- ----------------- ----------
(Last) (First) (MI) Location Department
Street Address
------------------------------------------------------------------- ---------------------------------
Daytime Telephone
City, State/Country, Zip
--------------------------------------------------------- --------------------------------
E-Mail Address
Social Security No. __ __ __ - __ __ - __ __ __ __ Employee I.D. No.
-------- ---------------------------------
Manager Mgr. Location
</TABLE>
2. Eligibility Any Employee whose customary employment is more than 20 hours
per week and more than 5 months per calendar year, who has been an Employee
for more than 6 months and who does not hold (directly or indirectly) five
percent (5%) or more of the combined voting power of the Company, a parent
or a subsidiary, whether in stock or options to acquire stock is eligible
to participate in the Broadband Sports, Inc. 2000 Employee Stock Purchase
Plan (the "ESPP"); provided, however, that Employees who are subject to the
rules or laws of a foreign jurisdiction that prohibit or make impractical
the participation of such Employees in the ESPP are not eligible to
participate.
3. Definitions Each capitalized term in this Subscription Agreement shall
have the meaning set forth in the ESPP.
4. Subscription I hereby elect to participate in the ESPP and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the ESPP. I have received a complete copy of the
ESPP and a prospectus describing the ESPP and understand that my
participation in the ESPP is in all respects subject to the terms of the
ESPP. The effectiveness of this Subscription Agreement is dependent on my
eligibility to participate in the ESPP.
5. Payroll Deduction Authorization I hereby authorize payroll deductions from
my Compensation during the Offer Period in the percentage specified below
(payroll reductions may not exceed 15% of Compensation nor $21,250 per
calendar year):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage to be Deducted (circle one) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
11% 12% 13% 14% 15%
- -----------------------------------------------------------------------------------------------
</TABLE>
6. ESPP Accounts and Purchase Price I understand that all payroll deductions
will be credited to my account under the ESPP. No additional payments may
be made to my account. No interest will be credited on funds held in the
account at any time including any refund of the account caused by
withdrawal from the ESPP. All payroll deductions shall be accumulated for
the purchase of Company Common Stock at the applicable Purchase Price
determined in accordance with the ESPP.
7. Withdrawal and Changes in Payroll Deduction I understand that I may
discontinue my participation in the ESPP at any time prior to an Exercise
Date as provided in Section 10 of the ESPP, but if I do not withdraw from
the ESPP, any accumulated payroll deductions will be applied automatically
to purchase Company Common Stock. I may increase or decrease the rate of my
payroll deductions in whole percentage increments to not less than one
percent (1%) on one occasion during any Purchase Period by completing and
timely filing a Change of Status Notice. Any increase or
A-1
<PAGE>
decrease will be effective for the full payroll period occurring after ten
(10) business days from the Company's receipt of the Change of Status
Notice.
8. Perpetual Subscription I understand that this Subscription Agreement shall
remain in effect for successive Offer Periods until I withdraw from
participation in the ESPP, or termination of the ESPP.
9. Taxes I have reviewed the ESPP prospectus discussion of the federal tax
consequences of participation in the ESPP and consulted with tax consultants
as I deemed advisable prior to my participation in the ESPP. I hereby agree
to notify the Company in writing within thirty (30) days of any disposition
(transfer or sale) of any shares purchased under the ESPP if such
disposition occurs within two (2) years of the Enrollment Date (the first
day of the Offer Period during which the shares were purchased) or within
one (1) year of the Exercise Date (the date I purchased such shares), and I
will make adequate provision to the Company for foreign, federal, state or
other tax withholding obligations, if any, which arise upon the disposition
of the shares. In addition, the Company may withhold from my Compensation
any amount necessary to meet applicable tax withholding obligations incident
to my participation in the ESPP, including any withholding necessary to make
available to the Company any tax deductions or benefits contingent on such
withholding.
10. Dispute Resolution The provisions of this Section 10 and Section 28 of the
ESPP shall be the exclusive means of resolving disputes arising out of or
relating to the Plan. The Company and I, or our respective successors (the
"parties"), shall attempt in good faith to resolve any disputes arising out
of or relating to the Plan by negotiation between individuals who have
authority to settle the controversy. Negotiations shall be commenced by
either party by notice of a written statement of the party's position and
the name and title of the individual who will represent the party. Within
thirty (30) days of the written notification, the parties shall meet at a
mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to resolve the dispute. If the dispute has not
been resolved by negotiation, the Company and I agree that any suit, action,
or proceeding arising out of or relating to the Plan shall be brought in the
United States District Court for the Southern District of California (or
should such court lack jurisdiction to hear such action, suit or proceeding,
in a California state court in the County of Los Angeles) and that we shall
submit to the jurisdiction of such court. The Company and I irrevocably
waive, to the fullest extent permitted by law, any objection we may have to
the laying of venue for any such suit, action or proceeding brought in such
court. THE COMPANY AND I ALSO EXPRESSLY WAIVE ANY RIGHT WE HAVE OR MAY HAVE
TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more
provisions of this Section 10 or Section 28 of the ESPP shall for any reason
be held invalid or unenforceable, it is the specific intent of the Company
and I that such provisions shall be modified to the minimum extent necessary
to make it or its application valid and enforceable.
11. Designation of Beneficiary In the event of my death, I hereby designate the
following person or trust as my beneficiary to receive all payments and
shares due to me under the ESPP: [_] I am single [_] I am married
<TABLE>
<S> <C>
Beneficiary (please print) Relationship to Beneficiary (if any)
-----------------------------------
(Last) (First) (MI)
Street Address
------------------------------------------------- ---------------------------------
City, State/Country, Zip
---------------------------------------
</TABLE>
12. Termination of ESPP I understand that the Company has the right, exercisable
in its sole discretion, to amend or terminate the ESPP at any time, and a
termination may be effective as early as an Exercise Date, including the
establishment of an alternative date for an Exercise Date within each
outstanding Offer Period.
<TABLE>
<S> <C>
Date: Employee Signature:
-------------------- ---------------------------------------------------------
---------------------------------------------------------
spouse's signature (if beneficiary is other than spouse)
</TABLE>
A-2
<PAGE>
Exhibit B
---------
Broadband Sports, Inc. 2000 Employee Stock Purchase Plan
CHANGE OF STATUS NOTICE
- -----------------------------------------
Participant Name (Please Print)
- -----------------------------------------
Social Security Number
================================================================================
[_] Withdrawal From ESPP
I hereby withdraw from the Broadband Sports, Inc. 2000 Employee Stock
Purchase Plan (the "ESPP") and agree that my option under the applicable
Offer Period will be automatically terminated and all accumulated payroll
deductions credited to my account will be refunded to me or applied to the
purchase of Common Stock depending on the alternative indicated below. No
further payroll deductions will be made for the purchase of shares in the
applicable Offer Period and I shall be eligible to participate in a future
Offer Period only by timely delivery to the Company of a new Subscription
Agreement.
[_] Withdrawal and Purchase of Common Stock
Payroll deductions will terminate, but your account balance will be applied
to purchase Common Stock on the next Exercise Date. Any remaining balance
will be refunded.
[_] Withdrawal Without Purchase of Common Stock
Entire account balance will be refunded to me and no Common Stock will be
purchased on the next Exercise Date provided this notice is submitted to
the Company ten (10) business days prior to the next Exercise Date.
================================================================================
Change in Payroll Deduction
I hereby elect to change my rate of payroll deduction under the ESPP as
follows (select one):
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage to be Deducted (circle one) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
11% 12% 13% 14% 15%
- -----------------------------------------------------------------------------------------
</TABLE>
An increase or a decrease in payroll deduction will be effective for the
first full payroll period commencing no fewer than ten (10) business days
following the Company's receipt of this notice, unless this change is
processed more quickly.
===============================================================================
B-1
<PAGE>
===============================================================================
[_] Change of Beneficiary [_] I am single [_] I am married
This change of beneficiary shall terminate my previous beneficiary
designation under the ESPP. In the event of my death, I hereby designate
the following person or trust as my beneficiary to receive all payments and
shares due to me under the ESPP:
<TABLE>
<CAPTION>
<S> <C>
Beneficiary (please print) Relationship to Beneficiary(if any)
----------------------------
(Last) (First) (MI)
Street Address
---------------------------------------- -------------------------------
City, State/Country, Zip
-------------------------------
===========================================================================================
Date: Employee Signature:
------------------- -------------------------------------------------------
-------------------------------------------------------
Spouse's signature (if beneficiary is other than spouse)
</TABLE>
B-2
<PAGE>
EXHIBIT 10.18
Execution Copy
CONFIDENTIAL
INTERACTIVE SERVICES AGREEMENT
------------------------------
This Interactive Services Agreement (this "Agreement"), effective as of
March 15, 2000 (the "Effective Date"), is made and entered into by and between
America Online, Inc. ("AOL"), a Delaware corporation, with its principal offices
at 22000 AOL Way, Dulles, Virginia 20166 and Broadband Sports, Inc.
("Interactive Content Provider" or "ICP"), a Delaware corporation, with its
principal offices at 2120 Colorado Avenue, Suite 200, Santa Monica, California
90404 (each a "Party" and collectively the "Parties").
INTRODUCTION
------------
AOL and ICP each desires that AOL provide Promotions of ICP Content through
the AOL Network, subject to the terms and conditions of this Agreement.
Capitalized terms used but not otherwise defined in this Agreement shall be as
defined on Exhibit B attached hereto.
TERMS
-----
1. DISTRIBUTION; PROGRAMMING
-------------------------
1.1 Promotion and Distribution. Beginning on a mutually agreed upon
date(s) after the Effective Date, AOL shall provide ICP with the
Promotions as set forth on Exhibit A. The promotions described on
Exhibit A-1 and any other promotions provided by AOL to ICP shall be
referred to as the "Promotions." Except to the extent expressly
described herein, the exact form, placement and nature of the
Promotions shall be determined by AOL in its reasonable editorial
discretion. The Parties hereby acknowledge that AOL has an existing
exclusive agreement with a third party that will preclude AOL from
providing ICP with [*] until AOL's obligations under that agreement
end. If AOL is unable to provide ICP with [*] within one (1) year from
the Effective Date, ICP shall be entitled to a reduction in the
Carriage Fee equal to $5,000,000.00. The Carriage Fee shall be lowered
by reducing the in-kind commitments and cash components of the
Carriage Fee equally on a going forward basis (i.e., no refund of
payments made) for a total of $5,000,000.00 (i.e., a $2,500,000.00
reduction for each of the remaining two years).
1.2 License. ICP hereby grants AOL a nonexclusive, nontransferable
(except to AOL Affiliates) worldwide license to use, market, license,
store, distribute, reproduce, display, adapt, communicate, perform,
translate, transmit, and promote the Customized Site, Customized
Programming and the Licensed Content (or any portion thereof) through
the AOL Network as set forth in Exhibit A and/or as AOL may determine
in its sole discretion by integrating Content from the Customized Site
and/or Customized Programming by linking to specific areas of the
Customized Site and/or Customized Programming, provided that the link
to any such Content on the AOL Network shall conform to the
specifications of an ICP Presence. Any Linked ICP Interactive Sites
shall be subject to the foregoing license. Subject to the rights and
License described herein, ICP retains all right, title and interest in
and to the Licensed Content. AOL's use of the Licensed Content shall
be subject to the express requirements of this Agreement.
1.3 Promotion of Athletes. ICP shall secure the promotional rights set
forth in Exhibit A with respect to each athlete and columnist
described in Exhibit A.
1.4 Carriage Fee. ICP shall pay AOL [*] as follows:
1.4.1 Cash Payment. ICP shall pay AOL [*] in cash as follows: [*] on
the Effective Date, [*] within Sixty (60) days of the Effective
Date, and
1
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
[*] on or before the date that is three (3) months, six (6)
months, nine (9) months, twelve (12) months, fifteen (15)
months, eighteen (18) months, twenty one (21) months, twenty
four (24) months, twenty seven (27) months, and thirty (30)
months respectively after the Effective Date. ICP shall also
make in-kind payments totaling [*] as set forth below.
1.4.2 In-Kind Programming and Promotion. ICP shall provide AOL with
the equivalent of [*] of in-kind commitments which shall be
subject to the following: (i) AOL Keyword Guidelines attached
hereto as Exhibit G; (ii) AOL approval over any creative
treatment of an AOL Presence; (iii) a media plan/schedule to be
mutually agreed upon at the beginning of each year of the Term;
(iv) Western Media (or another independent third party
determined by AOL) valuation of all in-kind commitments; and
(v) a minimum of [*] of the in-kind commitments in the form of
[*] (the "ICP In-Kind Commitments"). The ICP In-Kind
Commitments shall be evenly distributed over the initial term
of this Agreement or Extension Term (as the case may be),
unless otherwise mutually agreed upon between the Parties. The
ICP In-Kind Commitments shall total [*] per year and ICP shall
use commercially reasonable efforts to provide the foregoing
commitments evenly during each quarter of the year (i.e., [*]
per quarter). If AOL determines that ICP has failed to deliver
[*] of ICP In-Kind Commitments during the first year of the
initial term based on a valuation provided by Western Media,
then ICP shall have sixty (60) days from its receipt of written
notice from AOL to make up such ICP In-Kind Commitment
shortfall. If ICP is unable to make up such shortfall during
the period described in the preceding sentence, then ICP shall
immediately [*] in an amount equal to the ICP In-Kind
Commitment shortfall. If AOL determines that ICP has failed to
deliver [*] of ICP In-kind Commitments during the second year
of the initial term based upon the same valuation methods
described herein, ICP shall have sixty (60) days from its
receipt of written notice from AOL to make up such ICP In-Kind
Commitment shortfall. If ICP is unable to make up any such
shortfall during the period described in the preceding
sentence, then ICP shall immediately [*]. If AOL determines
that ICP has failed to deliver [*] of ICP In-Kind Commitments
by the end of the tenth quarter of the initial term [*] of ICP
In-Kind Commitments during either of the eleventh or twelfth
quarter of the initial term, AOL may require ICP to [*] to
satisfy such shortfall within thirty (30) days of receiving
written notice from AOL regarding such shortfall. The ICP In-
Kind Commitments are not intended to satisfy ICP's cross-
promotion obligations under Section 2 except as otherwise
agreed to herein.
1.5 Management. ICP shall design, create, edit, manage, review, update
(on a daily basis or as otherwise specified herein), and maintain the
Customized Site, Customized Programming and the Licensed Content in a
timely and professional manner and in accordance with the terms of
this Agreement and shall keep the Licensed Content current, accurate
and well-organized at all times. ICP shall ensure that the Licensed
Content within the Customized Site and Customized Programming in
aggregate is equal to or better than any non-surcharge Content (i.e.,
Content for which no third party pays ICP) dedicated to athlete and/or
team Content distributed by ICP through any other ICP Interactive Site
in all material respects, including without limitation, quality,
breadth, depth, timeliness, functionality, features, prices of
products and services and terms and conditions, provided that any
changes to the Customized Programming or the Licensed Content
necessary to comply with this sentence shall be subject to AOL's
review and approval and the terms of this Agreement. ICP shall not be
in breach of the preceding sentence (i) where ICP has material
technical limitations in implementing the foregoing with respect to a
specific AOL Property or (ii) where ICP has included a specific
athlete on another Interactive Site but not on the Customized Site or
Customized Programming, provided that ICP is otherwise in compliance
with the athlete requirements set forth in Exhibit A. ICP shall
provide the necessary
2
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
technical support in order to optimize ICQ tools and functionality in
a manner that AOL requests. Except as specifically provided for
herein, AOL shall have no obligations of any kind with respect to the
Customized Site or Customized Programming. ICP shall be responsible
for any hosting or communication costs associated with the Customized
Site and Customized Programming (including any Linked Interactive
Sites), including, without limitation, the costs associated with (i)
any agreed-upon direct connections between the AOL Network and the
ICP. AOL Members shall not be subject to a registration process (or
any similar process) in order to access and use the Customized Site,
Customized Programming (including any Linked ICP Interactive Site) or
the Licensed Content; provided, however, that the Parties agree and
acknowledge that some features or areas of the Linked ICP Interactive
Site may require a registration process for all users generally (e.g.,
a premium service) and that such registration process for AOL Members
shall be no more burdensome than for any other user and shall be upon
terms and conditions no less favorable than for any other user. During
the Term and for the two (2) year period after the expiration or
termination thereof, ICP shall allow AOL Members to access and use any
non-Premium Information Products on any Linked ICP Interactive Site on
terms and conditions no less favorable than the terms and conditions
available to other users of such ICP Interactive Site. In the event
ICP fails to comply with any material term of this Agreement,
including without limitation ICP's obligations under this Section 1.5
or its promotional obligations under Section 2, AOL will have the
right (in addition to any other remedies available to AOL hereunder)
to decrease the promotion it provides to ICP hereunder and/or to
decrease or cease any other contractual obligation of AOL hereunder
until such time as ICP corrects its non-compliance, in which event AOL
will be relieved of the proportionate amount of any promotional
commitment made to ICP by AOL hereunder corresponding to such decrease
in promotion.
1.6 Impressions Target. AOL shall provide ICP with at least [*]
Impressions from placement of an ICP Presence on the AOL Network as
set forth in Exhibit A-1 (the "Impressions Target"), provided that
only ICP Presences that contain a link to the Customized Site or
Customized Programming will count against the Impressions Target. AOL
will make commercially reasonable efforts to distribute the
Impressions evenly during the Term. ICP shall receive at least (a) [*]
Impressions annually on the Scoreboards Screens, (b) [*] banner ad
Impressions annually on the Sub-Scoreboards Screens on Saturdays and
Sundays during the active seasons of the sports relating to such
scoreboards, and (c) at least [*] Impressions annually from run of
sports banner ad placements. In the event AOL provides an excess of
any annual Impressions target in any year, the Impressions target for
the subsequent year shall be reduced by the amount of such excess up
to [*]. Any shortfall in any of the foregoing Impressions targets at
the end of a year will not be deemed a breach of this Agreement by
AOL; instead such shortfall will be added to the Impressions targets
for the subsequent year. In the event that the any of the forgoing
Impressions target is not met (or will not, in AOL's reasonable
judgment, be met) during the Term, then as ICP's sole remedy, AOL may
either (a) extend the Term for up to six (6) months without additional
carriage fees payable by ICP, (b) provide ICP with the remaining
Impressions in the form of advertising space within the AOL Network of
comparable value to the undelivered Impressions (as reasonably
determined by AOL) from time to time, or (c) some combination thereof.
If AOL chooses option (a) and is unable to meet any of the Impressions
target, AOL shall be required to provide the undelivered Impressions
within three (3) months as provided for in (b) above. If AOL is unable
to deliver Impressions as set forth in the preceding sentence, AOL
shall make a [*] refund of ICP [*] payments made to AOL [*].
1.7 Site and Programming Preparation. Provided that ICP has achieved Site
and Programming Preparation for the carriage it will receive on the
main screen and scoreboards of the Sports Channel within the AOL
Service within five (5) days from the Effective Date, AOL will provide
carriage within the AOL Service for such Customized Programming within
sixty (60) days from the Effective Date. Provided that ICP has
achieved Site and Programming Preparation by a mutually agreed upon
date, AOL shall substantially provide Promotions on all Covered
Properties,
3
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
except for Netscape pursuant to Section 1.1,within 180 days from the
Effective Date. "Site and Programming Preparation" shall mean that ICP
shall have completed all necessary production work (including
completion of all necessary training for AOL's proprietary "Rainman"
publishing tool) for the Customized Programming and any other related
areas or screens (including programming all Content thereon);
customized and configured the Customized Programming in accordance
with this Agreement; and completed all other necessary work
(including, without limitation, undergone all AOL site testing set
forth on Exhibit F) to prepare the Customized Programming and any
other related areas or screens to launch on the AOL Network as
contemplated hereunder.
1.8 Member Benefits. ICP will generally promote through the Customized
Site and Customized Programming any special or promotional offers made
available by or on behalf of ICP through any ICP Interactive Site or
any other distribution channel. In addition, ICP shall promote through
the Customized Site or Customized Programming on a regular and
consistent basis special offers exclusively available to AOL Members
("AOL Exclusive Offers"). ICP shall, at all times, feature at least
one AOL Exclusive Offer for AOL Members (except as otherwise mutually
agreed upon by the Parties). The AOL Exclusive Offer made available by
ICP shall provide a substantial member benefit to AOL Members, either
by virtue of a meaningful price discount, product enhancement, unique
service benefit or other special feature. Specific AOL Exclusive
Offers to be made available by ICP shall include the following:
specially-priced sports memorabilia. ICP will provide AOL with
reasonable prior notice of AOL Exclusive Offers and other special
offers so that AOL can, in its editorial discretion, market the
availability of such offers. Inadvertent omissions of such offers
shall not be deemed a breach of this Agreement.
1.9 Teams Premier Status. So long as ICP [*], ICP shall have the premier
status rights described herein. In the event that ICP is not [*],
then, in addition to any other available remedies, AOL may give ICP
written notice thereof and, if ICP fails to cure such [*], then AOL
may suspend or terminate ICP's premier status in whole or in part or
invoke any other available remedy under this Agreement. On the [*],
AOL shall not feature [*] or any portion thereof other than a [*],
except as specifically provided for below in this Section. The
prominence of the link to the Team Aggregation Pages from the Main
Screen and Department Screens of the AOL Service Sports Channel shall
generally be equal to the prominence of such links as they exist on
the Effective Date. The Main Screen and Department Screens within the
Sports Channels of each Covered Property will all include a prominent
link to the Team Aggregation Page. AOL shall in no way be precluded
from providing [*]. Any navigational links labeled "teams" [*] within
the Sports Channel of such Covered Property shall link to the Team
Aggregation Page or Team Pages. AOL shall not specifically target [*].
AOL will not act in bad faith to circumvent ICP's premier status under
this paragraph by [*]. AOL shall not be deemed to be in violation of
this Section 1.9 as a result of any placements, advertisements or
promotions as to which AOL has not received written notice from ICP so
long as AOL removes such placements, advertisements or promotions
within a reasonable time after receiving notice thereof, unless such
violation is [*] or intentional (i.e., with the specific intent of
violating the applicable provision).
1.10 Stars Premier Status. So long as ICP is in all material respects in
compliance with this Agreement, ICP shall have the premier status
rights described herein. In the event that ICP is not in compliance
with any material term of this Agreement, then, in addition to any
other available
4
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
remedies, AOL may give ICP written notice thereof and, if ICP fails to
cure such material non-compliance within thirty (30) days thereof,
then AOL may suspend or terminate ICP's premier status in whole or in
part or invoke any other available remedy under this Agreement. On the
Restricted Screens, AOL shall not feature Permanent links to any Stars
Aggregation Area or any portion thereof other than a Stars Aggregation
Page, except as specifically provided for below in this Section. In
addition, AOL shall not provide a Permanent link from the Restricted
Screens to a web site of a ICP Stars Competitor, provided that AOL may
link to any ICP Stars Competitor content if such ICP Stars Competitor
removes its Stars Aggregated Areas, and, in the case of Rivals.com
only, both its Stars Aggregated Area and Teams Aggregated Areas so
that AOL Members cannot directly access or link to such content. AOL
shall not specifically target the Stars Aggregation Page with ICP
Stars Competitor's banner placements, but this in no way restricts any
run of service, run of channel or any other non-targeted advertising
or random advertisements. With respect to ICQ, AOL's obligation will
be limited to six months after the Effective Date, unless ICP provides
AOL with at least [*] which are not already contemplated by this
Agreement and which are reasonably satisfactory to AOL during such six
month period and every subsequent six month period [*]. Beginning six
(6) months after the Effective Date, AOL may at any time give notice
to ICP that it desires a specific international athlete or class of
international athletes (e.g., non-U.S. citizens) on ICQ, in which case
if ICP cannot provide such athletes or classes of athletes within 60
days, AOL may obtain such athlete content for ICQ from any third party
and feature Permanent links to such athlete content (including a Stars
Aggregation Page featuring such content) on any ICQ area, including
the Customized Site. Notwithstanding the foregoing, AOL shall in no
way be precluded from providing Permanent links to a Stars Aggregation
Page for athlete content of professional sports leagues, player
associations and/or college associations. Any navigational links
labeled "stars" controlled by AOL on a page that is solely branded
under the brand of a Covered Property within the Sports Channel of
such Covered Property shall link to the Stars Aggregation Page or
Stars Pages. AOL will not act in bad faith to circumvent ICP's premier
status under this paragraph by selling promotions or links within the
Restricted Screens that provide substantially Permanent promotion for
a particular Stars Aggregation Area. AOL shall not be deemed in
violation of this Section 1.10 as a result of any placements,
advertisements or promotions as to which AOL has not received written
notice from ICP so long as AOL removes such placements, advertisements
or promotions within a reasonable time after receiving notice thereof,
unless such violation is repeated (i.e., for the same ICP Competitor)
or intentional (i.e., with the specific intent of violating the
applicable provision).
1.11 Quality Standard for Continued Premier Status. AOL shall have the
right to suspend or terminate ICP's premier status, in whole or in
part, set forth in Section 1.9 if ICP is not one of the top three
providers of Team Aggregated Areas and Team Pages. Even if ICP
otherwise complies with the preceding sentence, ICP must still use [*]
to produce Content commensurate with such Content produced by the
other top two providers. AOL shall also have the right to suspend or
terminate ICP's premier status, in whole or in part, set forth in
Section 1.10, if ICP is not one of the top two (2) providers of
Content dedicated to individual star athletes. Even if ICP otherwise
complies with the preceding sentence, ICP must still use [*] to
produce Content commensurate with such Content produced by the other
top provider. In addition to having the foregoing market positions,
the quality of the Licensed Content must also be commensurate with
such market positions, as determined by evaluating the Customized Site
and the Customized Programming, as a whole, based on all of the
following relevant criteria: (a) an evaluation by a cross-section of
third-party reviewers, as reasonably determined by AOL, who are
recognized authorities in such market and can opine on material
quality averages or standards in such industry and (b) user traffic,
as measured by page views, and audience reach, as measured by share or
percentage of Internet online users as reported by Media Metrix or
similar organization reasonably determined by AOL. In addition to the
foregoing, beginning 180 days after the Effective Date, AOL shall also
have the right to suspend or terminate ICP's premier status, in whole
or in part, set forth in Section 1.10 for any particular
5
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
sport(s) if ICP is not one of the top two (2) providers of Content
dedicated to individual star athletes in a particular sport(s). If AOL
exercises its rights in the preceding sentence with respect to a
particular sport(s) and AOL receives cash or barter payment for
permanent carriage of a third party Stars Aggregation Area within the
Restricted Screens, ICP shall be entitled to a reduction in Carriage
Fee on a going forward basis equal to [*] (divided equally between
cash and ICP In-Kind Commitments) for each sport that AOL removes
ICP's Premier Status. The reduction in Carriage Fee in the preceding
sentence only applies when AOL removes ICP's Premier Status with
respect to a particular sport(s) and not if AOL removes ICP's Premier
Status for the entire category. After receiving written notice from
AOL regarding non-compliance with the requirements in this Section
1.11, ICP shall have a [*] cure period to satisfy the foregoing
Quality Standards. If ICP cannot remedy the non-compliance set forth
herein, AOL may suspend, or terminate ICP's Premier Status in whole or
in part. In the event that AOL has suspended or terminated ICP's
Premier Status under this Section 1.11, AOL must restore ICP's Premier
Status within ninety (90) days of (i) AOL receiving written notice
from ICP regarding its coming back into compliance and (ii) AOL making
a reasonable determination that ICP has come back into compliance with
this Section 1.11. ICP's renewal of Premier Status pursuant to the
preceding sentence shall be subject to any other third party
agreements that AOL has entered into for Content during ICP's Premier
Status termination or suspension.
1.12 Permissible AOL Activities. Notwithstanding anything to the contrary
in Sections 1.9 and 1.10 above (and without limiting any actions which
may be taken by AOL without violation of ICP's rights hereunder), no
provision of this Agreement will limit AOL's ability (on or off the
AOL Network) to:
(i) Undertake activities or perform duties pursuant to arrangements
with third parties, including without limitation any
relationships with ICP Competitors, existing as of the Effective
Date. To the best of AOL's actual knowledge, AOL is not a party
to any material agreement that would require AOL to provide a
third party with Promotions that would materially violate AOL's
obligations under Sections 1.9 and 1.10. In the event that AOL
is in breach of the foregoing representation because there is a
material violation of ICP's premier status rights in Section 1.9
and/or 1.10, ICP's sole remedy shall be to provide AOL with
written notice of any such breach and if such breach is not
cured within ninety (90) days from AOL's receipt thereof, ICP
may terminate this Agreement;
(ii) Sell non-permanent advertising (e.g., banners, buttons, links,
sponsorships), within any Covered Property. AOL will not act in
bad faith to circumvent ICP's premier status under this
paragraph by selling promotions or links within the Restricted
Screens that provide substantially Permanent promotion for a
particular Team Aggregation Area or Stars Aggregation Area;
(iii) Enter into an arrangement with any third party for the primary
purpose of acquiring AOL Users whereby such third party is
allowed to promote or market its products or services to only
those AOL Users that are acquired as a result of such
arrangement; or
(iv) create non-permanent editorial or news commentary or
programming, and contextual links within such areas, relating to
any third party so long as such party does not pay AOL for such
links or commentary.
1.13 Reach on Restricted Screens. If the Restricted Screens are not
receiving [*] of the [*] within the AOL Service Sports Channel as
reported by Media Metrix or another third party reasonably determined
by AOL, ICP may provide written notice to AOL regarding the level of
reach on such screens. After receiving written notice thereof, AOL
shall enter into good faith negotiations with ICP to modify the
"Restricted Screens" category so that such screens will receive [*] of
the [*] within the AOL Service Sports Channel.
6
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
2. CROSS-PROMOTION
---------------
2.1 Cooperation. Each Party shall cooperate with and reasonably assist
the other Party in supplying material for marketing and promotional
activities.
2.2 Interactive Site. Within the Primary Site, ICP shall include a
prominent actionable promotional button (at least 90 x 30 pixels or 70
x 70 pixels in size) appearing on the first screen of the Primary Site
(the "AOL Promo"), to promote such AOL products or services as AOL may
designate (for example, the America Online brand service, the
CompuServe brand service, the AOL.com site, the Digital City services,
the ICQ service, MovieFone services, When.com calendaring services or
the AOL Instant Messenger service). AOL will provide the creative
content to be used in the AOL Promo. ICP shall post (or update, as the
case may be) the creative content supplied by AOL within the spaces
for the AOL Promo within five days of its receipt of such content from
AOL. Without limiting any other reporting obligations of the Parties
contained herein, ICP shall provide AOL with monthly written reports
specifying the number of impressions to the pages containing the AOL
Promo during the prior month. In the event that AOL elects to serve
the AOL Promo to the Primary Site from an ad server controlled by AOL
or its agent, ICP shall take all reasonable operational steps
necessary to facilitate such ad serving arrangement, including,
without limitation, inserting HTML code designated by AOL on the pages
of the Primary Site on which the AOL Promo will appear. In addition,
within the Primary Site, ICP shall provide prominent promotion, [*],
for the keywords associated with the Customized Programming and links
from the Primary Site to the relevant topic areas on AOL's AOL.com
site. To the extent that ICP promotes any instant messaging technology
or functionality, ICP shall promote the AOL Instant Messaging
functionality on its Primary Site.
2.3 Other Media. In addition to the ICP In-Kind Commitments, in ICP's
television, radio, print and "out of home" (e.g., buses and
billboards, point of purchase and other "place-based" promotions)
advertisements and in any publications, programs, features or other
forms of media over which ICP exercises at least partial editorial
control, ICP will include specific references or mentions (orally
where possible) of the availability of the Customized Site through the
AOL Network. At least [*] of such references or mentions shall be at
least as prominent as the ICP's listing of a URL for any ICP
Interactive Site. The remaining [*] of such references must be at
least visible, audible or legible as the case may be in any ICP
advertisement in print, radio, or television. To the extent that the
foregoing mentions or references satisfy AOL's standard barter
requirements and the conditions of Section 1.4.2, these references or
mentions shall count towards ICP's In-Kind Commitment obligation in
Section 1.4.2. All such references or mentions of AOL, and the use of
AOL's trademarks, trade names and service marks in connection
therewith, shall be in accordance with Section II of Exhibit C and
shall conform to the samples shown on Exhibit H.
2.4 Preferred Access Provider. When promoting AOL, ICP shall promote AOL
as the preferred access provider through which a user can access the
Customized Programming and/or the Primary Site and ICP shall use
commercially reasonable efforts to promote AOL as prominently as any
other Interactive Service as part of ICP's promotion of the Licensed
Content
3. REPORTING; PAYMENT.
-------------------
3.1 AOL Usage Reporting. AOL shall make available to ICP a monthly report
specifying for the prior month aggregate usage and Impressions with
respect to ICP's presence on the AOL Network, which are similar in
substance and form to the reports provided by AOL to other content
partners similar to ICP.
7
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
3.2 Customized Programming Reporting. ICP will supply AOL with monthly
reports which reflect total impressions by AOL Members to the
Customized Programming during the prior month, the number of and
dollar value associated with the transactions involving AOL Members
and any registration information obtained from AOL Members at the
Customized Programming during the period in question. ICP represents
that all URLs related to the Customized Programming are listed on
Exhibit B (Primary Site definition) and ICP shall provide AOL with an
update of such list promptly upon any change thereto.
3.3 Promotional Commitments. ICP shall provide to AOL a monthly report
documenting its compliance with any promotional commitments
(including, without limitation, any in-kind commitments set forth in
Section 1.4.2) it has undertaken pursuant to this Agreement in the
form attached as Exhibit E hereto, and ICP shall provide AOL with
impressions data with respect to the promotions specified in Section
2.
3.4 Advertising. ICP shall provide monthly detailed information to AOL
regarding (i) AOL Advertisements (as defined below) sold by ICP or its
agents and (ii) any advertising or promotional activity through the
Customized Programming, Customized Site or any Linked ICP Interactive
Sites.
3.5 Wired Payments. All payments by ICP hereunder shall be paid in
immediately available, non-refundable U.S. funds wired to the "America
Online" account, [*] at the Chase Manhattan Bank, 1 Chase Manhattan
Plaza, New York, New York 10081 [*], or such other account of which
AOL shall give ICP written notice.
4. ADVERTISING AND MERCHANDISING
-----------------------------
4.1 AOL Network Advertising Inventory. AOL owns all right, title and
interest in and to the advertising and promotional spaces within the
AOL Network including, without limitation, the AOL Frames and shall
have the right to all revenues therefrom. The specific advertising
inventory within any AOL forms or pages, including such AOL Frames,
shall be as reasonably determined by AOL. AOL shall have the exclusive
right to sell AOL Advertisements on the Team Aggregation Page and the
Stars Aggregation Page. ICP must cooperate and facilitate AOL's
serving of advertisements sold by AOL. ICP must provide the necessary
technical support for AOL to serve such advertisements.
Notwithstanding the foregoing, AOL agrees not to place advertising
within any [*] that is activated by entering solely a Customized Site
or Customized Programming. AOL reserves the right to place advertising
within any [*] provided that any such advertising appearing on a frame
or [*] around the Customized Sites shall not be targeted specifically
toward the Customized Site. AOL hereby grants ICP the exclusive right
to license or sell AOL Advertisements on the other screens, subject to
AOL's approval for each AOL Advertisement, which approval shall not be
unreasonably withheld.
4.2 Advertising Policies. Any AOL Advertisements sold by ICP or its
agents shall be subject to AOL's then-standard advertising policies
which shall be made available, exclusivity commitments, and other
preferential contractual commitments to third parties which are
applicable to AOL and those exclusivities that AOL grants to itself
for its own business(es) subject to Section 5.2(b).
4.3 Advertising Revenues. AOL shall be entitled to [*] of Advertising
Revenues generated by the license or sale of AOL Advertisements on the
Team Aggregation Page and Stars Aggregation Page. ICP shall be
entitled to [*] of Advertising Revenues generated by the license or
sale of AOL Advertisements on the Other Pages.
4.4 Interactive Commerce. ICP is permitted to sell Product through the
commerce area on its Customized Site and/or Customized Programming.
ICP may sell "Licensed Sporting Goods," but
8
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
ICP is prohibited from "promoting" Licensed Sporting Goods anywhere on
the AOL Network; provided, however, that ICP shall be permitted sell
and promote Licensed Sporting Goods on the Customized Site and
Customized Programming. Any merchandising permitted hereunder shall be
subject to (i) the then-current requirements of AOL's merchant
certification program, (ii) AOL's standard terms and conditions
applicable to its interactive marketing partners, and (iii) receive
prior approval from AOL for all Product to be offered through the
Customized Site and/or Customized Programming, except for those pre-
approved Products listed in Exhibit H. ICP will take all reasonable
steps necessary to conform its promotion and sale of Products through
the Customized Site and Customized Programming to the then-existing
technologies identified by AOL which are optimized for the AOL Service
including, without limitation, any "quick checkout" tool which AOL may
implement to facilitate purchase of Products by AOL Members through
the Customized Site and Customized Programming. "Licensed Sporting
Goods" shall [*]. Memorabilia and collectibles are specifically
excluded from Licensed Sports Product.
5. CUSTOMIZED PROGRAMMING AND CUSTOMIZED SITE
------------------------------------------
5.1 Production; Performance. ICP shall optimize all Customized
Programming and the Customized Site for distribution hereunder
according to AOL specifications and guidelines (including, without
limitation, any HTML publishing guidelines) and the Operating
Standards set forth on Exhibit F attached hereto.
5.2 Customization. ICP shall customize all Customized Programming and the
Customized Site for AOL Members as follows:
(a) ICP shall customize and co-brand the Customized Site and
Customized Programming for distribution over the AOL Properties listed
in Exhibit A-1 by displaying on each page of the Customized Site
framing, branding for and links to the applicable AOL Property, and
other navigational and promotional spaces, each as described for each
such AOL Property on Exhibit A. In addition, on each page of the
Customized Site linked to from a permanent placement on a main
department screen of AOL.com or Netscape Netcenter, ICP shall display
a C-frame (i.e., side navigation/menu bars, headers and footers),
branding for and links to such AOL Property, and other navigational
and promotional spaces, each in accordance with AOL's standards for
such AOL Property. ICP shall make any changes to the customization
and/or co-branding of the Customized Site to conform to the standard
requirements of any AOL Property or otherwise requested by AOL during
the Term; provided that any such change shall not increase the portion
of the Customized Site that is covered by such framing by more than
10% over the portion covered by the framing shown on Exhibit A for
such AOL Property or the standard C-frame for such AOL Property as of
the Effective Date, as applicable.
(b) ICP shall ensure that AOL Members accessing the Customized Site
and/or Customized Programming or linking to any ICP Interactive Site
from the Customized Site or Customized Programming do not receive
advertisements, promotions or links (i) for any entity reasonably
construed to be in competition with AOL or the applicable AOL
Property, (ii) in a category in which AOL or the applicable AOL
Property has an exclusive or other preferential relationship (but this
limitation only applies to the Team Aggregation Page, Team Pages,
Stars
9
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
Aggregation Page, and Stars Page of the Customized Site and Customized
Programming), or (iii) otherwise in violation of the applicable AOL
Property's then-standard advertising policies. ICP shall ensure that
all Advertisements sold by ICP or its agents comply with all
applicable federal, state and local laws and regulations.
(c) Within the Customized Site, ICP shall use and/or feature solely
AOL's tools and technology for the following utilities and
functionality: instant messaging, chat, personalized news service,
calendaring (including "click-to-add event" functionality associated
therewith), web page community services, message boards, and
commerce/content aggregation services (e.g., Shop@AOL and local
content) ("AOL Tools"). If any such AOL Tool is not made available for
use on the Customized Site within a reasonable time upon ICP's
request, ICP shall be permitted to utilize on the Customized Site
similar tools and technology provided by a third party, provided that
such tools and technology are not branded by such third party and no
links or promotions for such third party appear on the Customized Site
and, provided, further that ICP will convert such tools and technology
over to the corresponding AOL Tool once such AOL Tool is made
available. In addition, the Customized Site shall not (x) provide or
promote any email service, or (y) use or feature the tools or
technology of any Interactive Service other than AOL.
(d) Within the AOL Service, ICP shall host the Team Aggregation Page
and Stars Aggregation Page of the Customized Programming under a
domain name co-branded with the applicable AOL Property as follows:
athletedirect.aol.com and all other pages within the Customized Site
will have domain names with applicable ICP Property extension such as
aol.athletedirect.com or yankees.aol.broadbandsports.com. Within all
other AOL Properties, ICP shall host the Team Aggregation Page, the
Team Page, the Stars Aggregation Page and the Stars Page under a
domain name co-branded with the applicable AOLProperty as follows:
athletedirect.netscape.com and all other pages within the Customized
Site may have domain names such as netscape.athletedirect.com. AOL
will use commercially reasonable efforts to have [*] for traffic on
the Team Pages within the AOL Service so long as such pages remain in
Rainman format. With respect to traffic on any other pages relating to
the Customized Site or Customized Programming which appear on an AOL
URL, AOL will use commercially reasonable efforts, including by
providing any necessary [*], to help ICP [*]. For pages appearing on
an ICP URL, AOL will use commercially reasonable efforts, including
[*], to help ICP receive [*].
5.3 Links on Customized Programming. The Parties will work together on
mutually acceptable links (including links back to AOL) within the
Customized Site and Customized Programming in order to create a robust
and engaging AOL member experience and the Customized Site and
Customized Programming shall not contain any pointers or links to any
other area on or outside the AOL Network without AOL's prior written
consent, other than (i) standard advertising that otherwise complies
with this Agreement and (ii) as expressly described on Exhibit A. ICP
may designate a "link" to the Customized Site and/or Customized
Programming as provided for herein. ICP shall take reasonable efforts
to ensure that AOL traffic is generally either kept within the
Customized Site or Customized Programming or channeled back into the
AOL Network and ICP shall ensure that the Customized Site or
Customized Programming contain no permanent or semi-permanent links
for third party Content, nor any rotational links for aggregated
Content within the same Content category or channel as ICP, except as
specifically set forth in the Programming Plan. To the extent that AOL
notifies ICP in writing that, in AOL's reasonable judgment, links from
the Customized Site or Customized Programming cause an excessive
amount of AOL traffic to be diverted outside of such Customized
Programming or Customized Site and the AOL Network in a manner that
has a detrimental effect on the traffic flow of the AOL
10
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
audience, then ICP shall immediately reduce the number of links out of
the Customized Programming and Customized Site. In the event that ICP
cannot or does not so limit diverted traffic from the Customized
Programming or Customized Site within thirty (30) days (or 10 days for
repeated violations) of receiving written notice from AOL regarding
such diverted traffic, AOL reserves the right to terminate such links
from the AOL Network to the Customized Programming Customized Site.
5.4 Review. ICP shall allow appropriate AOL personnel to have reasonable
access to all Customized Programming from time to time for the purpose
of reviewing such sites to determine compliance with the provisions of
this Section 5.
6. TERM, TERMINATION, PRESS RELEASES.
---------------------------------
6.1. Term. Unless earlier terminated as set forth herein, the initial term
of this Agreement shall commence on the Effective Date and expire
thirty-six (36) months from the Effective Date. AOL shall have the
right to extend this Agreement for two (2) successive one (1) year
periods (each, an "Extension Term") on the same terms and conditions
contained herein except that in lieu of the Carriage Fee in Section
1.4, ICP shall pay AOL at the Renewal Rate; provided that ICP has
generated Transaction Revenues and Advertising Revenues combined
totaling at least [*] during the initial term of this Agreement. In
the event that ICP has not generated such revenues during the initial
term of this Agreement, AOL may send ICP a notice of renewal and ICP
has the right to elect to pay either the Renewal Rate or the "Revenue
Share" payment option. The Revenue Share payment option shall mean
that ICP shall pay AOL fifty percent (50%) of Advertising Revenues and
a [*] percentage of Transaction Revenues which the Parties must
negotiate in good faith to [*] of net Transaction Revenues (i.e.,
gross revenues minus cost of goods sold [*] attributable to this
Agreement). The Impressions Target in a Extension Term shall equal
[*]. AOL shall exercise its option to extend this Agreement by
providing ICP with written notice of such election no later than [*]
prior to the expiration of the initial term or the then-current
Extension Term, as the case may be. Upon the expiration or earlier
termination of this Agreement, AOL may, at its discretion, continue to
promote one or more "pointers" or links from the AOL Network to an ICP
Interactive Site and continue to use ICP's trade names, trade marks
and service marks in connection therewith (collectively, a "Continued
Link").
6.2 Termination for Breach. Either Party may terminate this Agreement at
any time in the event of a material breach by the other Party which
remains uncured after thirty (30) days written notice thereof;
provided, however, that AOL will not be required to provide notice to
ICP in connection with ICP's failure to make any payment required
under Section 1.4, and the cure period with respect to any scheduled
payment shall be fifteen (15) days from the date such payment is due.
6.3 Termination for Bankruptcy/Insolvency or Changes in Business. Either
Party may terminate this Agreement immediately following written
notice to the other Party if the other Party (i) ceases to do business
in the normal course, (ii) becomes or is declared insolvent or
bankrupt, (iii) is the subject of any proceeding related to its
liquidation or insolvency (whether voluntary or involuntary) which is
not dismissed within ninety (90) calendar days or (iv) makes an
assignment for the benefit of creditors.
6.4 Press Releases. Each Party will submit to the other Party, for its
prior written approval, which will not be unreasonably withheld or
delayed, any press release or any other public statement ("Press
Release") regarding the transactions contemplated hereunder.
Notwithstanding the foregoing, either Party may issue Press Releases
and other disclosures as required by law, rule, regulation or court
order or as reasonably advised by legal counsel without the consent of
the other Party and in such event, the disclosing Party will provide
at least five (5) business days prior
11
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
written notice of such disclosure. The failure to obtain the prior
written approval of the other Party shall be deemed a material breach
of this Agreement. Because it would be difficult to precisely
ascertain the extent of the injury caused to the non-breaching Party,
in the event of such material breach, the non-breaching Party may
elect either to terminate this Agreement immediately upon notice to
the other Party. AOL hereby agrees that there will be a press release
announcing this Agreement pursuant to this provision and AOL shall
work with ICP in good faith to issue a timely release.
7. TERMS AND CONDITIONS. The terms and conditions set forth on the Exhibits
--------------------
attached hereto are hereby made a part of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the Effective Date.
AMERICA ONLINE, INC. BROAD BAND SPORTS, INC.
By: /s/ David M. Colburn By: /s/ Richard Nanula
--------------------------------- ------------------------------
Print Name: David M. Colburn Print Name: Richard Nanula
------------------------- ----------------------
Title: President - Business Affairs Title: Chairman & CEO
------------------------------ ----------------------------
Date: 3/15/00 Date: 3/15/00
------------------------------- -----------------------------
Tax ID/EIN#: 95-4673805
----------------------
12
<PAGE>
EXHIBIT A
---------
Exhibit A-1: Carriage Plan
<TABLE>
<CAPTION>
Brand/ Screen/Web Impressions Placements Permanent Branded (Y/N) Partner Content
Channel Center/Strip Guaranteed/
Trackable (Y/N)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
AOL
Service
Sports Main Y Integrated Placement Y Y Athlete Page
Aggregate
Sports Scoreboards - Y Editorial Link (3) Y Y Integrated Commerce
Main* link
Sports Scoreboards - Y Editorial Link (2) Y Y Integrated Commerce
Sub-Level* link
Sports Pro Football, Y Promotional Link Y Y Athlete Pages
College Football, managed by Athlete
Pro Basketball, Direct
College
Basketball, Pro
Hockey, Pro
Baseball, Soccer
Sports Pro Football,
College Football, Y Promotional Link Y Y Specific Individual
Pro Basketball, Team Pages
College
Basketball, Pro
Hockey, Pro
Baseball, Soccer,
Auto Racing,
Golf
Sports Extreme Sports - Y Content Block Y Y Extreme Seasonal
Main Sports - e.g. -
Snowboarding and
Skateboarding
Sports Scoreboards Y Advertising No - Y Commerce area of
Weekends Partner site
Only
Sports Run of Channel Y Advertising No Y Commerce area of
Partner site
====================================================================================================================================
AOL.com
====================================================================================================================================
Sports Main Y Content Block Y Y Promotional Content
- Main co-brand area
Sports Pro Football, Y Promotional Link Y Y Athlete Pages
College Football, managed by Athlete
Pro Basketball, College Direct
Basketball, Pro Hockey,
Pro Baseball,
Soccer
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sports Pro Football, College Y Promotional Link Y Y Specific Individual
Football, Pro Team Pages
Basketball, College
Basketball, Pro
Hockey, Pro Baseball,
Soccer, Auto Racing,
Golf
Sports Extreme Sports Y Department Pages Y Y Extreme Seasonal
Sports - e.g. -
Snowboarding and
Skateboarding
Sports Scoreboards* Y Editorial Links Y Y Integrated Commerce
Link
CompuServe
====================================================================================================================================
Sports Main Y Content Block Y Y Promotional Content
- Main co-brand area
Sports Pro Football, Y Promotional Link Y Y Athlete Pages
College Football, managed by Athlete
Pro Basketball, Direct
College Basketball,
Pro Hockey, Pro
Baseball, Soccer
Sports Pro Football, College Y Promotional Link Y Y Specific Individual
Football, Pro Team Pages
Basketball, College
Basketball, Pro
Hockey, Pro
Baseball, Soccer,
Auto Racing,
Golf
Sports Extreme Sports Y Department Pages Y Y Extreme Seasonal
Sports - e.g. -
Snowboarding and
Skateboarding
Sports Scoreboards* Y Editorial Links Y Y Integrated Commerce
Link
- ------------------------------------------------------------------------------------------------------------------------------------
AOL
Australia,
Brazil,
Canada,
UK
Sports Anywhere in N Text Link(s) Y Y Link to country
Channel specific area
developed by ICP
Netscape
====================================================================================================================================
Sports Main Y Content Block Y Y Promotional Content
- Main co-brand area
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Sports Pro Football, Y Department Pages Y Y Athlete Pages
College Football, managed by Athlete
Pro Basketball, Direct
College Basketball,
Pro Hockey, Pro
Baseball, Soccer
Sports Pro Football, Y Department Pages Y Y Specific Individual
College Football, Team Pages
Pro Basketball,
College Basketball,
Pro Hockey, Pro
Baseball, Soccer,
Auto Racing,
Golf
Sports Extreme Sports Y Department Pages Y Y Extreme Seasonal
Sports - e.g. -
Snowboarding and
Skateboarding
Sports Scoreboards* Y Editorial Links Y Y Integrated Commerce
Link
ICQ
====================================================================================================================================
Sports Main Y Text Promotion Permanent Y ICQ Sports Fan
Department
Sports Fans Y Feature Permanent Y Broadband Sports
Hosted Content
Sports Fans Y Secondary Feature Rotating Y Broadband Sports
Hosted Content
Sports Fans Y Top 5's Rotating Y Broadband Sports
Hosted Content
Sports Fans Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Baseball Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Basketball Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Tennis Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports US Football Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Football (Soccer) Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Other Sports Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Rugby Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Cricket Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Golf Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Hockey Y Text Promotion Permanent Y Broadband Sports
Hosted Content
Sports Extreme Y Text Promotion Rotating Y Broadband Sports
Hosted Content
Sports Scoreboards* Y Text Promotion Permanent Y Broadband Sports
Hosted Content
====================================================================================================================================
</TABLE>
15
<PAGE>
* Within the AOL Service, each Scoreboard Screen will contain a number of ICP
designated links equal to at least sixty (60) percent of the total Promotional
Links on the page; provided that, in no instance will the number of ICP
designated links on the main AOL Scoreboard Screen be less than three (3). At
least one (1) ICP designated link will be accompanied by a photo. A minimum of
one (1) ICP designated link will contain a graphical icon and two (2) lines of
text. A minimum of one (1) ICP designated link will be a text link. Each AOL
Service sub-Scoreboard Screen will contain a minimum of two (2) ICP designated
links.
AOL will provide similar relative level of promotion (but not necessarily number
of links) on the Scoreboards of other Covered Properties as reasonably
determined by AOL taking into account design and "look and feel" of such other
Scoreboards.
16
<PAGE>
[GRAPHIC OF AOL/SPORTS WEB SITE]
17
<PAGE>
EXHIBIT B -- DEFINITIONS
-------------------------
DEFINITIONS. The following definitions shall apply to this Agreement:
Advertisements. Promotions, advertisements, links, pointers and similar
services or rights.
Advertising Revenues. Aggregate amounts collected plus the fair market value of
any other compensation received (such as barter advertising) by ICP or ICP's
agents, as the case may be, arising from the license or sale of AOL
Advertisements, less applicable Advertising Sales Commissions; provided that, in
order to ensure that AOL receives fair value in connection with AOL
Advertisements, ICP shall be deemed to have received no less than the
Advertising Minimum in instances when ICP makes an AOL Advertisement available
to a third party at a cost below the Advertising Minimum.
Affiliate. Any agent, distributor or franchisee of AOL, or an entity that,
directly or indirectly, controls, is controlled by, or is under common control
with AOL, including any entity in which AOL holds, directly or indirectly, at
least a nineteen percent (19%) equity interest.
AOL Advertisements. Any promotion, advertisement, link pointer, sponsorship or
similar service or right on or through the Customized Site or Customized
Programming.
AOL.com. AOL's primary Internet-based Interactive Site marketed under the
"AOL.COM/sm/" brand, specifically excluding (a) the AOL Service, (b) any
international versions of such site, (c) CompuServe.com, Netscape Netcenter, any
other CompuServe or Netscape products or services or interactive sites, (d)
"ICQ/sm/," "AOL Search," "AOL Instant Messenger/sm/," "AOL NetMail/sm/" or any
similar independent product or service offered by or through such site or any
other AOL Interactive Site, (e) any programming or Content area offered by or
through such site over which AOL does not exercise complete operational control
(including, without limitation, Content areas controlled by other parties and
member-created Content areas), (f) any programming or Content area offered by or
through the U.S. version of the America Online brand service which was operated,
maintained or controlled by the former AOL Studios division, (g) any yellow
pages, white pages, classifieds or other search, directory or review services or
Content offered by or through such site or any other AOL Interactive Site, (h)
any property, feature, product or service which AOL or its affiliates may
acquire subsequent to the Effective Date and (i) any other version of an America
Online Interactive Site which is materially different from AOL's primary
Internet-based Interactive Site marketed under the "AOL.COM" brand, by virtue of
its branding, distribution, functionality, Content or services, including,
without limitation, any co-branded versions and any version distributed through
any broadband distribution platform or through any platform or device other than
a desktop personal computer.
AOL Service. The standard narrow-band U.S. version of the America Online brand
service, specifically excluding (a) AOL.com/sm/ and any other AOL Interactive
Site, (b) the international versions of an America Online service (e.g., AOL
Japan), (c) the CompuServe(R) brand service and any other CompuServe products or
services, (d) Netscape Netcenter(TM) and any other Netscape products or
services, (e) "ICQ/sm/," "AOL NetFind/sm/," "AOL Instant Messenger/sm/,"
"Digital City/sm/," "AOL NetMail/sm/," "Real Fans/sm/", "Love@AOL/sm/",
"Entertainment Asylum/sm/," "AOL Hometown/sm/" or any similar independent
product, service or property which may be offered by, through or with the U.S.
version of the America Online brand service, (f) any programming or content area
offered by or through the U.S. version of the America Online brand service over
which AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created Content
areas), (g) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through the U.S. version
of the America Online brand service, (h) any property, feature, product or
service which AOL or its affiliates may acquire subsequent to the Effective Date
and (i) any other version of an America Online service which is materially
different from the standard narrow-band U.S. version of the America Online brand
service, by virtue of its branding, distribution, functionality, Content or
services, including, without limitation, any co-branded version of the service
and any version distributed through any broadband distribution platform or
through any platform or device other than a desktop personal computer.
AOL Presence. Any AOL trademark or logo, headline, word or picture and/or any
other Content which describes or promotes AOL.
AOL Property. Any product, service or property owned, operated, marketed,
distributed, or authorized to be distributed by or through AOL or its
Affiliates, including, without limitation, the AOL Service, AOL.com, and AOL
Hometown.
AOL Look and Feel. The elements of graphics, design, organization,
presentation, layout, user interface, navigation, trade dress and stylistic
convention (including the digital implementations thereof) within the AOL
Network and the total appearance and impression substantially formed by the
combination, coordination and interaction of these elements.
AOL Member(s). Any user of the AOL Network, including authorized users
(including any sub-accounts under an authorized master account) of the AOL
Service and/or the CompuServe Service.
AOL Network. (i) The AOL Service, AOL.com, ICQ, and (ii) any other product,
service or property owned, operated, distributed or authorized to be distributed
by or through AOL or its Affiliates worldwide (and including those products,
services and properties that are excluded from the definitions of the AOL
Service, AOL.com or any other AOL Property). It is understood and agreed that
the rights of ICP relate solely to particular AOL Properties as expressly set
forth in this Agreement and not generally to the AOL Network.
AOL Purchaser. (i) Any person or entity who enters the Customized Site or the
Customized Programming from the AOL Network including, without limitation, from
any third party area therein (to the extent entry from such third party area is
traceable through both Parties' commercially reasonable efforts), and generates
Transaction Revenues (regardless of whether such person or entity provides an e-
mail address during registration or entrance to the Customized Site which
includes a domain other than an "AOL.com" domain); and (ii) any other person or
entity who, when purchasing a product, good or service through a Linked ICP
Interactive Site, provides an AOL.com domain name or a CompuServe.com domain
name as part of such person or entity's e-mail address and provided that any
person or entity who has previously satisfied the definition of AOL Purchaser
will remain an AOL Purchaser, and any subsequent purchases by such person or
entity (e.g., as a result of e-mail solicitations or any off-line means for
receiving orders requiring purchasers to reference a specific promotional
identifier or tracking code) will also give rise to Transaction Revenues
hereunder (and will not be conditioned on the person or entity's satisfaction of
clauses (i) or (ii) above).
Change of Control. (a) The consummation of a reorganization, merger or
consolidation or sale or other disposition of substantially all of the assets of
a party or (b) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than 50% of either (i) the then outstanding
shares of common stock of such party; or (ii) the combined voting power of the
then outstanding voting securities of such party entitled to vote generally in
the election of directors.
CompuServe Service. The standard HTML version of the narrow-band U.S. version
of the CompuServe brand service, specifically excluding (a) any international
versions of such service (e.g., NiftyServe), (b) any web-based service including
"compuserve.com", "cserve.com" and "cs.com", or any similar product or service
offered by or through the U.S. version of the CompuServe brand service, (c)
Content areas owned, maintained or controlled by CompuServe affiliates or any
similar "sub-service," (d) any programming or Content area offered by or through
the U.S. version of the CompuServe brand service over which CompuServe does not
exercise complete or substantially complete operational control (e.g., third-
party Content areas), (e) any yellow pages, white pages, classifieds or other
search, directory or review services or Content (f) any co-branded or private
label branded version of the U.S. version of the CompuServe brand service, (g)
any version of the U.S. version of the CompuServe brand service which offers
Content, distribution, services or functionality materially different from the
Content, distribution, services or functionality associated with the standard,
narrow-band U.S. version of the CompuServe brand service, including, without
limitation, any version of such service distributed through any platform or
device other than a desktop personal computer, (h) any property, feature,
product or service which CompuServe or its affiliates may acquire subsequent to
the Effective Date, (i) the America Online brand service and any independent
product or service which may be offered by, through or with the U.S. version of
the America Online brand service and (j) the HMI versions of the CompuServe
brand service.
18
<PAGE>
Confidential Information. Any information relating to or disclosed in the
course of this Agreement, which is, or should be reasonably understood to be,
confidential or proprietary to the disclosing Party, including, but not limited
to, the material terms of this Agreement, information about AOL Members,
technical processes and formulas, source codes, product designs, sales, cost and
other unpublished financial information, product and business plans, projections
and marketing data. "Confidential Information" shall not include information
(a) already lawfully known to or independently developed by the receiving Party,
(b) disclosed in published materials, (c) generally known to the public, or (d)
lawfully obtained from any third party.
Content. Text, images, video, audio (including, without limitation, music used
in time relation with text, images, or video), and other data, products,
services, advertisements, promotions, URLs, keywords and other navigational
elements, links, pointers, technology and software.
Covered Property. AOL Service, AOL.com, [*], ICQ.com, and CompuServe.
Customized Programming. Any (a) area within the AOL Network or outside the AOL
Network but exclusively available to AOL Members, which area is developed,
programmed, and/or managed by ICP, in whole or in part, pursuant to this
Agreement and all Content thereon (including, without limitation, message
boards, chat and other AOL Member-supplied content areas contained therein)
including, without limitation, Team Aggregation Page, Team Page, Stars
Aggregation Page, Stars Page and any co-branded page, but excluding the
Customized Site and (b) Content provided to AOL by ICP pursuant to this
Agreement for distribution on or through the AOL Network other than on the
Customized Site.
Customized Site. Collectively, each version of the Primary Site that is
customized for distribution through the AOL Network in accordance with this
Agreement.
Department Screens. The following eleven departmental main screens of the AOL
Covered Property Sports Channel: Pro Football, College Football, Pro Basketball,
College Basketball, Extreme Sports, Hockey, Baseball, Golf, Soccer, Auto Racing
and Tennis (or successor screens thereto).
Digital City. The standard, narrow-band U.S. version of Digital City's local
content offerings marketed under the Digital City brand name, specifically
excluding (a) the AOL Service, AOL.com or any other AOL Interactive Site, (b)
any international versions of such local content offerings, (c) the CompuServe
brand service and any other CompuServe products or services (d) "Driveway,"
"ICQ," "AOL Search," "AOL Instant Messenger," "Digital City," "AOL NetMail,"
"Electra", "Thrive", "Real Fans", "Love@AOL", "Entertainment Asylum," "AOL
Hometown," "My News" or any similar independent product, service or property
which may be offered by, through or with the standard narrow band version of
Digital City's local content offerings, (e) any programming or Content area
offered by or through such local content offerings over which AOL does not
exercise complete operational control (including, without limitation, Content
areas controlled by other parties and member-created Content areas), (f) any
yellow pages, white pages, classifieds or other search, directory or review
services or Content offered by or through such local content offerings, (g) any
property, feature, product or service which AOL or its affiliates may acquire
subsequent to the Effective Date, (h) any other version of a Digital City local
content offering which is materially different from the narrow-band U.S. version
of Digital City's local content offerings marketed under the Digital City brand
name, by virtue of its branding, distribution, functionality, Content or
services, including, without limitation, any co-branded version of the offerings
and any version distributed through any broadband distribution platform or
through any platform or device other than a desktop personal computer, and (i)
Digital City- branded offerings in any local area where such offerings are not
owned or operationally controlled by AOL, Inc. or DCI (e.g., Chicago, Orlando,
South Florida, and Hampton Roads).
Keyword/TM/ Search Terms. (a) The Keyword online search terms made available on
the AOL Service, combining AOL's Keyword online search modifier with a term or
phrase specifically related to ICP (and determined in accordance with the terms
of this Agreement) and (b) the Go Word online search terms made available on the
CompuServe Service, combining CompuServe's Go Word online search modifier with a
term or phrase specifically related to ICP (and determined in accordance with
the terms of this Agreement).
ICP Stars Competitors. Fan Link, Athlete Now, Rivals.com and Big Pros (and
their majority-owned subsidiaries provided that such subsidiaries would
otherwise qualify under this definition), provided that Fan Link, Athlete Now
and Big Pros shall no longer be considered ICP Stars Competitors if their page
views from their Stars Aggregation Areas [*] of their annual page views and
provided further that Rivals.com shall no longer be considered ICP Stars
Competitors if its page views from its Stars Aggregation Area and its Team
Aggregation Area combined [*] of its annual page views. In the event of an
acquisition of any of the foregoing entities, the annual gross revenues test
shall apply only to the above mentioned entities as stand-alone entities
provided they continue to operate as such brands (but the ICP Stars Competitor
definition shall never apply to a parent of the above entities unless the parent
entities revenues from Stars Aggregation Areas is [*] of its total revenues).
ICP shall have the right to add four additional ICP Stars Competitors upon
reasonable written notice to AOL if such entity generates [*] of their total
page views from Stars Aggregation Areas. Any prior existing relationships
between AOL and such a new ICP Stars Competitor shall be grandfathered and
excluded from any applicable restrictions.
ICP Interactive Site. Any interactive site or area (other than Customized
Programming), including any mirrored site or area, which is managed, maintained
or owned by ICP or its agents or to which ICP provides and/or licenses
information, content or other materials, including, by way of example and
without limitation, (i) an ICP site on the World Wide Web portion of the
Internet or (ii) a channel or area delivered through a "push" product such as
the Pointcast Network or interactive environment such as Microsoft's proposed
Active Desktop or interactive television service such as WebTV.
ICP Presence. Any (a) ICP trademark or logo, (b) headline or picture from ICP
Content, (c) teaser, icon, or link to the Customized Site or Customized
Programming and/or (d) other Content which originates from, describes or
promotes ICP or ICP's Content. This does not include AOL navigational links
(i.e., links to " teams", "stars" or the names of such teams or stars).
ICQ.com. ICQ's primary Internet-based English language Interactive Site
marketed under the "ICQ.com" brand, specifically excluding (a) the ICQ Service,
(b) any international / non-English language versions of such site, (c) "ICQ
It!" or any other independent product or service offered by or through such site
or any other ICQ Interactive Site, (d) any programming or Content area offered
by or through such site over which ICQ does not exercise complete operational
control (including, without limitation, Content areas controlled by other
parties and user-created Content areas), (e) any yellow pages, white pages,
classifieds or other search, directory or review services or Content offered by
or through such site or any other ICQ Interactive Site, (f) any property,
feature, product or service which ICQ or its affiliates may acquire subsequent
to the Effective Date and (g) any other version of an ICQ Interactive Site which
is materially different from ICQ's primary Internet-based English language
Interactive Site marketed under the "ICQ.com" brand, by virtue of its branding,
distribution, functionality, Content and services, including, without
limitation, any co-branded versions and any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer
Impression. User exposure to an ICP Presence, as such exposure may be
reasonably determined and measured by AOL in accordance with its standard
methodologies and protocols; provided that on scoreboards multiple Impressions
on a single page shall count as one Impression.
Interactive Service. An entity offering one or more of the following: (i)
online or Internet connectivity services (e.g., an Internet service provider);
(ii) an interactive site or service featuring a broad selection of aggregated
third party interactive content (or navigation thereto) (e.g., an online service
or search and directory service) and/or marketing a broad selection of products
and/or services across multiple interactive commerce categories; (iii) a
persistent desktop client; or (iv) communications software capable of serving as
the principal means through which a user creates, sends or receives electronic
mail or real time or "instant" online messages (whether by telephone, computer
or other means).
Linked Interactive Site. Any site or area outside of the AOL Network which is
linked to Customized Programming (through a "pointer" or similar link) subject
to approval by AOL in accordance with the terms and conditions of this
Agreement.
Linked ICP Interactive Site. Any ICP Interactive Site which is also a Linked
Interactive Site.
Licensed Sports Product. A sports-related Product which requires a license from
a sports league, team, governing body or individual athlete in order to sell
such Product.
19
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
Licensed Content. All Content offered through [*] pursuant to this Agreement or
otherwise provided by or on behalf of ICP or its agents in connection herewith
(e.g., offline promotional content or online Content for distribution through
the AOL Network), including without limitation all Customized Programming.
Main Screen. The primary or first screen of a particular area or channel.
Member Page. Any web page created by an AOL Member through AOL Hometown and
using the community tools available therein.
Memorabilia Products. Products consisting of (i) Authentically autographed
(e.g., autograph not provided by machine or facsimile) sports products deriving
a portion of their value from the autograph, and (ii) commemorative, unique or
limited sports products related to a sport, sporting event, league, team,
players association or athlete.
Netscape Netcenter. Netscape Communications Corporation's primary Internet-
based Interactive Site marketed under the "Netscape Netcenter/sm/" brand,
specifically excluding (a) the AOL Service and the CompuServe Service, (b)
AOL.com and CompuServe.com, (c) any international versions of such site, (d)
"ICQ," "AOLSearch," "AOL Instant Messenger," "AOL NetMail," "AOL Hometown," "My
News," "Digital City," or any similar independent product or service offered by
or through such site or any other AOL Interactive Site, (e) any programming or
Content area offered by or through such site over which AOL does not exercise
complete operational control (including, without limitation, Content areas
controlled by other parties and member-created Content areas), (f) any
programming or Content area offered by or through the U.S. version of the
America Online brand service which was operated, maintained or controlled by the
former AOL Studios division (e.g., Electra), (g) any yellow pages, white pages,
classifieds or other search, directory or review services or Content offered by
or through such site or any other AOL Interactive Site, (h) any property,
feature, product or service which AOL or its affiliates may acquire subsequent
to the Effective Date and (i) any other version of an AOL or Netscape
Communications Corporation Interactive Site which is materially different from
Netscape Communications Corporation's primary Internet-based Interactive Site
marketed under the "Netscape Netcenter" brand, by virtue of its branding,
distribution, functionality, Content or services, including, without limitation,
any co-branded versions and any version distributed through any broadband
distribution platform or through any platform or device other than a desktop
personal computer (e.g. Custom NetCenters built specifically for third parties).
Other Pages. All pages directly linked to from a Team Aggregation Page or Stars
Aggregation Page.
Permanent. Shall mean a placement within a screen on the AOL Network that is
continuously visible 24 hours per day, 7 days a week, 52 weeks a year.
Premium Information Products. Specialized electronic sports information
Products offered, licensed or sold for an amount charged by ICP to AOL
Purchasers in addition to the base membership fee charged by AOL to AOL Members.
Premium Information Products may include, but shall not be limited to,
electronically distributed informational items such as special event products
(e.g., special Super Bowl reports), special fantasy reports, team fan clubs,
seasonal specials, which Products shall be created and marketed to specialized
audiences subject to the restrictions, terms and conditions contained in the
Agreement. ICP shall be solely responsible for the Content of the Premium
Information Products.
Primary Site. The Internet site and Content currently located at
www.athletedirect.com, www.psx.com, www.csx.com , www.rotonews.com and all
derivative URLs which are (i) managed, maintained or owned by ICP or its agents
or (ii) to which ICP licenses information, content or other materials.
Product. Any product, good or service which ICP (or others acting on its behalf
or as distributors) offers, sells, provides, distributes or licenses to AOL
Purchaser directly or indirectly through (i) the Customized Site (including
through any Interactive Site linked thereto) or Customized Programming
(including any Linked Interactive Site), (ii) any other electronic means
directed at AOL Purchaser (e.g., e-mail offers), or (iii) an "offline" means
(e.g., toll-free number) for receiving orders related to specific offers within
the Customized Site or Customized Programming requiring purchasers to reference
a specific promotional identifier or tracking code, including, without
limitation, products sold through surcharged downloads (to the extent expressly
permitted hereunder).
Promotional Links. Any link except for banner ads, editorial, navigational or
other similar links.
Renewal Rate. Equals $12,500,000.00 per Extension Term to be paid as follows:
(1) a total cash payment of $5,000,000.00 to be paid quarterly with two quarters
being paid up front on or before the first day of the Extension Term and under
the same terms and conditions as set forth in Section 1.4 and (2) $7,500,00.00
in ICP In-Kind Commitments to be distributed evenly during the Extension Term
and otherwise subject to Section 1.4.2.
Restricted Screens. Shall mean the Customized Site, Team Aggregation Page, Team
Page, Stars Aggregation Page, Stars Page and Department Screens; the Scoreboard
Screens and Sub-Scoreboard Screens; the Main Screens of the Sports Channels of
each of the AOL Service, AOL.com, the CompuServe Service, Netscape Netcenter,
ICQ.com; all screens that are under AOL's complete operational control within
each of the Grandstand Area and Fantasy Area of the AOL Service Sports Channel;
and all screens that are under AOL's complete operational control within the
Sports News Areas of the Sports Channels of each of the AOL Service, AOL.com,
the CompuServe Service, Netscape Netcenter, orICQ.com. AOL hereby represents
that the Grandstand Area, Fantasy Area and the Sports News Area of the Sports
Channel all within the AOL Service are under AOL's complete operational control
as of the signing of this Agreement. AOL does not represent or warrant that
such areas will remain under its complete operational control after the signing
of this Agreement.
Scoreboards Screen. Shall mean the main scoreboard screen corresponding to each
Department Screen.
Sub-Scoreboard Screen. The screen(s) one or more click under the Scoreboard
screen which contains the same characteristics of the Scoreboard Screen.
Sports Entertainment Products. Audio-based and or video-based sports-related
content offerings, (i.e., chats, broadcasts, interviews or shows) which feature
athletes, sports writers or other sports personalities.
Stars Page. The Page devoted to content relating to an individual athlete as
set forth in Exhibit A and directly linked to from the Stars Aggregation Page.
Stars Aggregation Area. An athlete area which is produced by a company that
produces athlete programming for at least 8 athletes. Athlete Programming shall
mean interactive content (including athlete websites) produced by or under
license from an athlete in which an athlete has material financial interest
excluding, without limitation, any content produced for distribution through any
other medium, any content created independent of the athlete or any other
content created around athlete endorsement, promotional, league, team or similar
relationships.
Stars Aggregation Page. The area in the AOL Network linked directly from an
AOL-based permanent promotion and/or used as a navigational page that is
designed as the premier interactive and online home for mutually and reasonable
agreed-upon nationally (in some cases internationally) recognized major
professional athletes in the following sports categories: NFL, NBA, NHL, MLB,
auto racing ("Nascar") and soccer ("MLS") and other mutually agreed upon sports
categories.
Term. The period beginning on the Effective Date and ending upon the expiration
or earlier termination of this Agreement.
Team Aggregated Area. An area containing aggregated content or links to
aggregated content from all or substantially all NFL, NHL, NBA, MLB, MLS,NASCAR,
NCAA Football, or NCAA Basketball teams.
Team Aggregation Page. The AOL page that contains all of the team listings for
all categories of professional, college or any other category including teams
and that is linked directly from an AOL-based permanent promotion and/or used as
a navigational page to team listings.
Team Page. The page devoted to content relating to a specific team as set forth
in Exhibit A and directly linked to from the Team Aggregation Page.
Transaction Revenues. Aggregate amounts paid by AOL Purchasers in connection
with the sale, licensing, distribution or provision of any Products, including,
in each case, handling, shipping, service charges, and excluding, in each case,
(a) amounts collected for sales or use taxes or duties and (b) credits and
chargebacks for returned or canceled goods or services, but not excluding cost
of goods sold or any similar cost.
20
[*] Portions have been omitted pursuant to a conflicting treatment request.
<PAGE>
EXHIBIT C -- STANDARD LEGAL TERMS AND CONDITIONS
------------------------------------------------
I. AOL NETWORK
Content. ICP represents and warrants that all Content contained within the
Customized Site and Customized Programming and all Licensed Content (i) does and
will conform to AOL's applicable Terms of Service, the terms of this Agreement
and any other standard, written policy of AOL and any applicable AOL Property
(including without limitation AOL's kids policies to the extent applicable),
(ii) does not and will not infringe on or violate any copyright, trademark, U.S.
patent, rights of publicity, moral rights or any other third party right,
including without limitation, any music performance or other music related
rights, and (iii) does not and will not contain any Content which violates any
applicable law or regulation ((i), (ii) and (iii) collectively, the "Rules").
In the event that AOL notifies ICP in writing that any such Content, as
reasonably determined by AOL, does not comply or adhere to the Rules, then ICP
shall use its best efforts to block access by AOL Members to such Content. In
the event that ICP cannot, through its best efforts, block access by AOL Members
to such Content in question, then ICP shall provide AOL prompt written notice of
such fact. AOL may then, at its option, either (i) restrict access from the AOL
Network to the Content in question using technology available to AOL or (ii) in
the event access cannot be restricted, direct ICP to remove any such Content.
ICP will cooperate with AOL's reasonable requests to the extent AOL elects to
implement any such access restrictions.
AOL Network Distribution. The distribution, placements and/or promotions
described in this Agreement or otherwise provided to ICP by AOL shall be used by
ICP solely for its own benefit, will link to and promote solely the Licensed
Content within the Customized Site or Customized Programming expressly described
on Exhibit A and will not be resold, traded, exchanged, bartered, brokered or
otherwise offered or transferred to any third party or contain any branding
other than ICP's branding. Further, the Content of all such distribution,
placements and promotions shall be subject to AOL's policies relating to
advertising and promotion, including those relating to AOL's exclusivity
commitments and other contractual preferences to third parties as set forth in
Section 4.and Section 5.
Changes to AOL Properties. AOL reserves the right to redesign or modify the
organization, structure, "look and feel," navigation and other elements of the
AOLNetwork at any time, including without limitation, by adding or deleting
channels, subchannels and/or screens and/or by outsourcing to a third party the
programming responsibility for any channel, subchannel, screen or portion
thereof. If such redesign or modification substantially modifies the nature of
the distribution provided under this Agreement in a material adverse fashion, or
if AOL is otherwise unable to deliver any particular Promotion, AOL will work
with ICP in good faith to provide ICP, as its sole remedy, with comparable
distribution [*].
Member Page. AOL will have no obligation with respect to the Content and
services available on or through any Member Page including, but not limited to,
any duty to review or monitor any such Content and services. AOL expressly
disclaims any liability to ICP for the Content and services contained in any
Member Page or any expense, claim, demand, costs, loss or damage arising out of
any use of the ICP-provided Content available from, without limitation, a
Community Center or the Customized Site. ICP agrees to release AOL and its
affiliates, including partners, directors, officers, employees and agents from
any and all claims, rights and recourses for such loss or damage.
Contests. ICP shall ensure that any contest, sweepstakes or similar promotion
conducted or promoted through the Customized Site and/or Customized Programming
(a "Contest") complies with all applicable laws and regulations. ICP shall
provide AOL with (i) at least thirty (30) days prior written notice of any
Contest and (ii) upon AOL's request, an opinion from ICP's counsel confirming
that the Contest complies with all applicable federal, state and local laws and
regulations.
Disclaimers. ICP agrees to include within the Customized Site and Customized
Programming a disclaimer (the specific form and substance to be mutually agreed
upon by the Parties) indicating that all Content (including any products and
services) is provided solely by ICP and not AOL, and any transactions are solely
between ICP and AOL Members using or purchasing such Content and AOL is not
responsible for any loss, expense or damage arising out of the Licensed Content
or services provided through the Customized Site or Customized Programming
(e.g., "In no event shall AOL nor any of its agents, employees, representatives
or affiliates be in any respect legally liable to you or any third party in
connection with any information or services contained herein and AOL makes no
warranty or guaranty as to the accuracy, completeness, correctness, timeliness,
or usefulness of any of the information contained herein"). ICP shall not in any
manner state or imply that AOL recommends or endorses ICP or its Content.
Insurance. At all times during the Term, ICP shall maintain an insurance policy
or policies adequate in amount to insure ICP against potential liability
associated with the Licensed Content. ICP shall include AOL as a named insured
party on such policy or policies. ICP shall provide AOL with a copy of such
policy or policies within thirty (30) days after the Effective Date, failing
which, in addition to all other available remedies, AOL shall be entitled to
delay the launch of the Licensed Content on the AOL Network (and reduce AOL's
promotional and Impressions obligations proportionately). ICP shall promptly
notify AOL of any material change in such policy or policies.
Rewards Programs. ICP shall not offer, provide, implement or otherwise make
available on the Customized Site or Customized Programming any third party
promotional programs or plans that are intended to provide customers with
rewards or benefits in exchange for, or on account of, their past or continued
loyalty to, or patronage or purchase of, the products or services of ICP or any
third party (e.g., a promotional program similar to a "frequent flier" program),
unless such promotional program or plan is provided exclusively through AOL's
"AOL Rewards" program, accessible on the AOL Service at Keyword: "AOL Rewards."
[*].
Navigation. In cases where an AOL Member performs a search for ICP through any
search or navigational tool or mechanism that is accessible or available through
the AOL Network (e.g., promotions, Keyword Search Terms, navigation bars or any
other promotions or navigational tools), AOL shall have the right to direct such
AOL Member to the Customized Site, or any other Linked ICP Interactive Site
determined by AOL in its reasonable discretion. ICP shall ensure that
navigation back to the AOL Network from the Customized Site (and from any other
Linked ICP Interactive Site linked to from the AOL Network), whether through a
particular pointer or link, the "back" button on an Internet browser, the
closing of an active window, or any other return mechanism, shall not be
interrupted by ICP through the use of any intermediate screen or other device
not specifically requested by the user, including without limitation through the
use of any html pop-up window or any other similar device.
AOL Look and Feel. ICP acknowledges and agrees that AOL shall own all right,
title and interest in and to the AOL Look and Feel. In addition, AOL shall
retain editorial control over the portions of the AOL pages and forms which
frame the Customized Site or Customized Programming (the "AOL Frames"). AOL
may, at its discretion, incorporate navigational icons, links and pointers or
other Content into such AOL Frames subject to Section 4.1.
Operations. AOL shall be entitled to require reasonable changes to the
Customized Site and Customized Programming to the extent such site will, in
AOL's good faith judgment, adversely affect technical operations of the AOL
Network.
Classifieds and Auctions. ICP shall not implement or promote any classifieds
listing features through Customized Programming or Customized Site without AOL's
prior written approval not to be unreasonably withheld. Such approval may be
conditioned upon, among other things, ICP's conformance with any then-applicable
service-wide technical or other standards related to online classifieds. ICP
shall not conduct any merchandising through the Customized Site or Customized
Programming through auctions or any method other than a direct sales format
without AOL's prior written consent with the exception of auctions from eBay.
Message Boards; Chat Rooms and Comparable Vehicles. Any Content submitted by
ICP or its agents within the AOL Network message boards, chat rooms or any
comparable vehicles will be subject to the license grant relating to submissions
to "public areas" set forth in the AOL Terms of Service. ICP acknowledges that
it has no rights or interest in AOL Member submissions to message boards, chat
rooms or any other vehicles through which AOL Members may make submissions
within the AOL Network. ICP will refrain from editing, deleting or altering,
without AOL's prior approval, any opinion expressed or submission made by an AOL
Member within the Customized Programming except in cases where ICP has a good
faith belief that the Content in question violates an applicable law,
regulation, third party right or the applicable AOL Property's Terms of Service.
Duty to Inform. ICP shall promptly inform AOL of any information related to the
Customized Site, Customized Programming or the Licensed Content which could
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reasonably lead to a claim, demand or liability of or against AOL and/or its
Affiliates by any third party.
Response to Questions/Comments; Customer Service. ICP shall respond promptly
and professionally to questions, comments, complaints and other reasonable
requests regarding the Customized Site, Customized Programming or the Licensed
Content by AOL Members or on request by AOL, and shall cooperate and assist AOL
in promptly answering the same. ICP shall have sole responsibility for customer
service (including, without limitation, order processing, billing, shipping,
etc.) and AOL shall have no responsibility with respect thereto. ICP shall
comply with all applicable requirements of any federal, state or local consumer
protection or disclosure law.
Statements through AOL Network. ICP shall not make, publish, or otherwise
communicate through the AOL Network any deleterious remarks concerning AOL or
its Affiliates, directors, officers, employees, or agents (including, without
limitation, AOL's business projects, business capabilities, performance of
duties and services, or financial position) which remarks are based on the
relationship established by this Agreement or information exchanged hereunder.
This section is not intended to limit good faith editorial statements made by
ICP based upon publicly available information, or information developed by ICP
independent of its relationship with AOL and its employees and agents.
Production Work. In the event that ICP requests any AOL production assistance,
ICP shall work with AOL to develop detailed production plans for the requested
production assistance (the "Production Plan"). Following receipt of the final
Production Plan, AOL shall notify ICP of (i) AOL's availability to perform the
requested production work, (ii) the proposed fee or fee structure for the
requested production work and (iii) the estimated development schedule for such
work. To the extent the Parties reach agreement regarding implementation of
agreed-upon Production Plan, such agreement shall be reflected in a separate
work order signed by the Parties. All fees to be paid to AOL for any such
production work shall be paid in advance. To the extent ICP elects to retain a
third party provider to perform any such production work, work produced by such
third party provider must generally conform to AOL's production standards
available at Keyword "Styleguide." The specific production resources which AOL
allocates to any production work to be performed on behalf of ICP shall be as
determined by AOL in its sole discretion. With respect to any routine
production, maintenance or related services which AOL reasonably determines are
necessary for AOL to perform in order to support the proper functioning and
integration of the Promotions, Customized Programming and the Customized Site
("Routine Services"), ICP will pay the then-standard fees charged by AOL for
such Routine Services.
Production Tools. AOL shall determine in its sole discretion, which of its
proprietary publishing tools (each a "Tool") shall be made available to ICP in
order to develop and implement the Licensed Content during the Term. ICP shall
be granted a nonexclusive license during the Term to use any such Tool, which
license shall be subject to: (i) ICP's compliance with all rules and regulations
relating to use of the Tools, as published from time to time by AOL, (ii) AOL's
right to withdraw or modify such license at any time, and (iii) ICP's express
recognition that AOL provides all Tools on an "as is" basis, without warranties
of any kind.
Training and Support. AOL shall make available to ICP standard AOL training and
support programs necessary to produce any AOL areas hereunder. ICP can select
its training and support program from the options then offered by AOL. ICP
shall be responsible to pay the fees associated with its chosen training and
support package. In addition, ICP will pay travel and lodging costs associated
with its participation in any AOL training programs (including AOL's travel and
lodging costs when training is conducted at ICP's offices).
Keywords. Any Keyword Search Terms to be directed to the Customized Site shall
be (i) subject to availability for use by ICP and (ii) limited to the
combination of the Keyword search modifier combined with a registered trademark
of ICP. AOL reserves the right to revoke at any time ICP's use of any Keyword
Search Terms which do not incorporate registered trademarks of ICP. ICP
acknowledges that its utilization of a Keyword Search Term will not create in
it, nor will it represent it has, any right, title or interest in or to such
Keyword Search Term, other than the right, title and interest ICP holds in ICP's
registered trademark independent of the Keyword Search Term. Without limiting
the generality of the foregoing, ICP will not: (a) attempt to register or
otherwise obtain trademark or copyright protection in the Keyword Search Term;
or (b) use the Keyword Search Term, except for the purposes expressly required
or permitted under this Agreement. This Section shall survive the completion,
expiration, termination or cancellation of this Agreement.
Accounts. ICP shall be granted [*] per athlete, plus twenty (20) additional
accounts for production purposes, for the exclusive purpose of enabling ICP and
its agents to perform ICP's duties hereunder. The accounts shall be of the type
determined by AOL to be necessary for ICP to perform its duties hereunder. The
twenty (20) accounts granted for production purposes shall be free of charge,
but the [*] per athlete shall be subject to such monthly subscription charges as
AOL shall determine shall be applied to similarly-situated interactive service
providers (not to exceed monthly subscription charges generally available to the
public for a similar type of account). In any event, ICP shall be responsible
for the actions taken under or through its accounts, which actions are subject
to AOL's then-standard Terms of Service, and for any surcharges, including,
without limitation, all premium charges, transaction charges and any applicable
communication charges incurred by any such account. Upon the termination of this
Agreement, all accounts, related screen names and any associated usage credits
or similar rights shall automatically terminate. AOL shall have no liability for
loss of any data or content related to the proper termination of any account.
II. TRADEMARKS
Trademark License. In designing and implementing any marketing, advertising, or
other promotional materials (expressly excluding Press Releases) related to this
Agreement and/or referencing the other Party and/or its trade names, trademarks
and service marks (the "Promotional Materials") and subject to the other
provisions contained herein, ICP shall be entitled to use the following trade
names, trademarks and service marks of AOL: the "America Online" brand service,
"AOL" service/software and AOL's triangle logo and, in connection therewith, ICP
shall comply with the AOL styleguide available at keyword: "style guide"; and
AOL and its Affiliates shall be entitled to use the trade names, trademarks and
service marks of ICP (collectively, together with the AOL marks listed above,
the "Marks"); provided that each Party: (i) does not create a unitary composite
mark involving a Mark of the other Party without the prior written approval of
such other Party and (ii) displays symbols and notices clearly and sufficiently
indicating the trademark status and ownership of the other Party's Marks in
accordance with applicable trademark law and practice. This Section shall
survive the completion, expiration, termination or cancellation of this
Agreement.
Rights. Each Party acknowledges that its utilization of the other Party's Marks
will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.
Quality Standards. Each Party agrees that the nature and quality of its
products and services supplied in connection with the other Party's Marks shall
conform to quality standards communicated in writing by the other Party for use
of its trademarks. Each Party agrees to supply the other Party, upon request,
with a reasonable number of samples of any Materials publicly disseminated by
such Party which utilize the other Party's Marks. Each Party shall comply with
all applicable laws, regulations and customs and obtain any required government
approvals pertaining to use of the other Party's Marks.
Promotional Materials. Each Party will submit to the other Party, for its prior
written approval, which shall not be unreasonably withheld or delayed, any
Promotional Materials; provided, however, that after initial public announcement
of the business relationship between the Parties in accordance with the approval
and other requirements contained herein, either Party's subsequent factual
reference in Promotional Materials to the existence of a business relationship
between AOL and ICP, including, without limitation, the availability of the
Licensed Content through the AOL Network, or use of screen shots relating to the
distribution under this Agreement (so long as the AOL Network is clearly
identified as the source of such screen shots) for promotional purposes shall
not require the approval of the other Party. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the distribution of the Licensed Content through the AOL Network and reused for
such purpose until such approval is withdrawn with reasonable prior notice. In
the event such approval is withdrawn, existing inventories of Promotional
Materials may be depleted.
Infringement Proceedings. Each Party agrees to promptly notify the other Party
of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
III. REPRESENTATIONS AND WARRANTIES
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Each Party represents and warrants to the other Party that: (i) such Party has
the full corporate right, power and authority to enter into this Agreement, to
grant the licenses granted hereunder and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not violate any agreement to which such Party is a party or by which it is
otherwise bound; (iii) when executed and delivered by such Party, this Agreement
will constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms; (iv) such Party's
Promotional Materials will neither infringe on any copyright, U.S. patent or any
other third party right nor violate any applicable law or regulation and (v)
such Party acknowledges that the other Party makes no representations,
warranties or agreements related to the subject matter hereof which are not
expressly provided for in this Agreement.
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement. Each Party agrees that it will
take reasonable steps, at least substantially equivalent to the steps it takes
to protect its own proprietary information, during the term of this Agreement,
and for a period of three years following expiration or termination of this
Agreement, to prevent the disclosure of Confidential Information of the other
Party, other than to its employees, or to its other agents who must have access
to such Confidential Information for such Party to perform its obligations
hereunder, who will each agree to comply with this section. Notwithstanding the
foregoing, either Party may issue a press release or other disclosure containing
Confidential Information without the consent of the other Party, to the extent
such disclosure is required by law, rule, regulation or government or court
order or as reasonably advised by legal counsel. In such event, the disclosing
Party will provide at least five (5) business days prior written notice of such
proposed disclosure to the other Party. Further, in the event such disclosure
is required of either Party under the laws, rules or regulations of the
Securities and Exchange Commission or any other applicable governing body, such
Party will (i) redact mutually agreed-upon portions of this Agreement to the
fullest extent permitted under applicable laws, rules and regulations and (ii)
submit a request to such governing body that such portions and other provisions
of this Agreement receive confidential treatment under the laws, rules and
regulations of the Securities and Exchange Commission or otherwise be held in
the strictest confidence to the fullest extent permitted under the laws, rules
or regulations of any other applicable governing body.
V. RELATIONSHIP WITH AOL MEMBERS
Solicitation of Subscribers. (a) During the term of this Agreement and for a
two year period thereafter, ICP will not use the AOL Network (including, without
limitation, the e-mail network contained therein) to solicit AOL Members on
behalf of another Interactive Service. More generally, ICP will not send
unsolicited, commercial e-mail (i.e., "spam") or other online communications
through or into AOL's products or services, absent a Prior Business
Relationship. For purposes of this Agreement, a "Prior Business Relationship"
will mean that the AOL Member to whom commercial e-mail or other online
communication is being sent has voluntarily either (i) engaged in a transaction
with ICP or (ii) provided information to ICP through a contest, registration, or
other communication, which included clear notice to the AOL Member that the
information provided could result in commercial e-mail or other online
communications being sent to that AOL Member by ICP or its agents. Any
commercial e-mail or other online communications to AOL Members which are
otherwise permitted hereunder will (x) include a prominent and easy means to
"opt-out" of receiving any future commercial e-mail communications from ICP and
(y) shall also be subject to AOL's then-standard restrictions on distribution of
bulk e-mail (e.g., related to the time and manner in which such e-mail can be
distributed through or into the AOL product or service in question).
(b) ICP shall ensure that its collection, use and disclosure of information
obtained from AOL Members under this Agreement ("Member Information") complies
with (i) all applicable laws and regulations and (ii) AOL's standard privacy
policies, available on the AOL Service at the keyword term "Privacy" (or, in the
case of the Customized Site, ICP's standard privacy policies so long as such
policies are prominently published on the site and provide adequate notice,
disclosure and choice to users regarding ICP's collection, use and disclosure of
user information). ICP will not disclose Member Information collected hereunder
to any third party in a manner that identifies AOL Members as end users of an
AOL product or service or use Member Information collected under this Agreement
to market another Interactive Service.
Email Newsletters. Any email newsletters sent to AOL Members by ICP or its
agents shall (i) be subject to AOL's policies on use of the email functionality,
including but not limited to AOL's policy on unsolicited bulk email, (ii) be
sent only to AOL Members requesting to receive such newsletters, (iii) not
contain Content which violates AOL's Terms of Service, and (iv) not contain any
advertisements, marketing or promotion for any other Interactive Service.
AOL Member Communications. To the extent ICP is otherwise permitted to send
communications to AOL Members (in accordance with the other requirements
contained herein): in any such communications to AOL Members on or off the
Customized Site (including, without limitation, e-mail solicitations), ICP will
limit the subject matter of such communications to those categories of products,
services and/or content that are specifically contemplated by this Agreement and
will not encourage AOL Members to take any action inconsistent with the scope
and purpose of this Agreement, including without limitation, the following
actions: (i) using an Interactive Site other than the Customized Site for the
purchase of Products, (ii) using Content other than the Licensed Content; (iii)
bookmarking of Interactive Sites; or (iv) changing the default home page on the
AOL browser. Additionally, with respect to such AOL Member communications, in
the event that ICP encourages an AOL Purchaser to purchase products through such
communications, ICP shall ensure that (a) the AOL Network is expressly promoted
as the primary means through which the AOL Purchaser can access the Customized
Site (including without limitation by stating the applicable Keyword Search Term
and including direct links to specific offers within the Customized Site) and
(b) any link to the Customized Site will link to a page which indicates to the
AOL Purchaser that such user is in a site which is affiliated with the AOL
Network.
VI. TREATMENT OF CLAIMS
Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES),
ARISING FROM BREACH OF THIS AGREEMENT, THE USE OF OR INABILITY TO USE THE AOL
NETWORK OR ANY OTHER PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO,
LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS (COLLECTIVELY,
"DISCLAIMED DAMAGES"); PROVIDED THAT EACH PARTY SHALL REMAIN LIABLE TO THE OTHER
PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE CLAIMED BY A THIRD PARTY AND ARE
SUBJECT TO INDEMNIFICATION BELOW. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY"
SECTION, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR MORE THAN THE
AGGREGATE AMOUNTS PAYABLE HEREUNDER IN THE YEAR IN WHICH THE EVENT GIVING RISE
TO SUCH LIABILITY OCCURRED; PROVIDED THAT EACH PARTY SHALL REMAIN LIABLE FOR THE
AGGREGATE AMOUNT OF ANY PAYMENT OBLIGATIONS OWED TO THE OTHER PARTY UNDER THE
PROVISIONS OF THIS AGREEMENT.
No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL NETWORK,
THE AOL TOOLS, OR ANY AOL PUBLISHING TOOLS, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING
THE PROFITABILITY OF AOL NETWORK OR THE CUSTOMIZED SITE.
Indemnity. Each Party will defend, indemnify, save and hold harmless the other
Party and the officers, directors, agents, affiliates, distributors, franchisees
and employees of the other Party from any and all third party claims, demands,
liabilities, costs or expenses, including reasonable attorneys' fees
("Liabilities"), resulting from the indemnifying Party's material breach or
alleged breach of any duty, representation, or warranty of this Agreement. In
addition, ICP will defend, indemnify, save and hold harmless AOL and AOL's
officers, directors, agents, affiliates, distributors, franchisees and employees
from any and all Liabilities arising out of or in any way related to the
Licensed Content.
If a Party entitled to indemnification hereunder (the "Indemnified Party")
becomes aware of any matter it believes is indemnifiable hereunder involving any
claim, action, suit, investigation, arbitration or other proceeding against the
Indemnified Party by any third party (each an "Action"), the Indemnified Party
shall give the other Party (the "Indemnifying Party") prompt written notice of
such Action. Such notice shall (i) provide the basis on which indemnification
is being asserted and (ii) be accompanied by copies of all relevant pleadings,
demands, and other papers related to the Action and in the possession of the
Indemnified Party. The
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Indemnifying Party shall have a period of ten (10) days after delivery of such
notice to respond. If the Indemnifying Party elects to defend the Action or does
not respond within the requisite ten (10) day period, the Indemnifying Party
shall be obligated to defend the Action, at its own expense, and by counsel
reasonably satisfactory to the Indemnified Party. The Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, with the Indemnifying Party
and its counsel in the defense and the Indemnified Party shall have the right to
participate fully, at its own expense, in the defense of such Action. If the
Indemnifying Party responds within the required ten (10) day period and elects
not to defend such Action, the Indemnified Party shall be free, without
prejudice to any of the Indemnified Party's rights hereunder, to compromise or
defend (and control the defense of) such Action. In such case, the Indemnifying
Party shall cooperate, at its own expense, with the Indemnified Party and its
counsel in the defense against such Action and the Indemnifying Party shall have
the right to participate fully, at its own expense, in the defense of such
Action. Any compromise or settlement of an Action shall require the prior
written consent of both Parties hereunder, such consent not to be unreasonably
withheld or delayed.
Acknowledgment. AOL AND ICP EACH ACKNOWLEDGES THAT THE PROVISIONS OF THIS
AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED, VOLUNTARY ALLOCATION BETWEEN
THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN) ASSOCIATED WITH THE TRANSACTIONS
CONTEMPLATED HEREUNDER. THE LIMITATIONS AND DISCLAIMERS RELATED TO WARRANTIES
AND LIABILITY CONTAINED IN THIS AGREEMENT ARE INTENDED TO LIMIT THE
CIRCUMSTANCES AND EXTENT OF LIABILITY. THE PROVISIONS OF THIS SECTION VI SHALL
BE ENFORCEABLE INDEPENDENT OF AND SEVERABLE FROM ANY OTHER ENFORCEABLE OR
UNENFORCEABLE PROVISION OF THIS AGREEMENT.
VII. ARBITRATION
(a) The Parties shall act in good faith and use commercially reasonable efforts
to promptly resolve any claim, dispute, claim, controversy or disagreement (each
a "Dispute") between the Parties or any of their respective subsidiaries,
affiliates, successors and assigns under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby. If the Parties cannot resolve the Dispute within such
timeframe, the Dispute shall be submitted to the Management Committee for
resolution. For ten (10) days after the Dispute was submitted to the Management
Committee, the Management Committee shall have the exclusive right to resolve
such Dispute; provided further that the Management Committee shall have the
final and exclusive right to resolve Disputes arising from any provision of this
Agreement which expressly or implicitly provides for the Parties to reach mutual
agreement as to certain terms. If the Management Committee is unable to
amicably resolve the Dispute during the ten (10) day period, then the Management
Committee will consider in good faith the possibility of retaining a third party
mediator to facilitate resolution of the Dispute. In the event the Management
Committee elects not to retain a mediator, the Dispute will be subject to the
resolution mechanisms described below. "Management Committee" shall mean a
committee made up of a senior executive from each of the Parties for the purpose
of resolving Disputes under this Section and generally overseeing the
relationship between the Parties contemplated by this Agreement. Neither Party
shall seek, nor shall be entitled to seek, binding outside resolution of the
Dispute unless and until the Parties have been unable to amicably resolve the
dispute as set forth in this paragraph (a) and then, only in compliance with the
procedures set forth in this Section.
(b) Except for Disputes relating to issues of (i) proprietary rights, including
but not limited to intellectual property and confidentiality, and (ii) any
provision of this Agreement which expressly or implicitly provides for the
Parties to reach mutual agreement as to certain terms (which shall be resolved
by the Parties solely and exclusively through amicable resolution as set forth
in paragraph (a)), any Dispute not resolved by amicable resolution as set forth
in paragraph (a) shall be governed exclusively and finally by arbitration. Such
arbitration shall be conducted by the American Arbitration Association ("AAA")
in Washington, D.C. and shall be initiated and conducted in accordance with the
Commercial Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures shall
not apply in order to promote the efficient arbitration of Disputes where the
nature of the Dispute, including without limitation the amount in controversy,
does not justify the application of such procedures.
(c) The arbitration panel shall consist of three arbitrators. Each Party shall
name an arbitrator within ten (10) days after the delivery of the Demand. The
two arbitrators named by the Parties may have prior relationships with the
naming Party, which in a judicial setting would be considered a conflict of
interest. The third arbitrator, selected by the first two, shall be a neutral
participant, with no prior working relationship with either Party. If the two
arbitrators are unable to select a third arbitrator within ten (10) days, a
third neutral arbitrator will be appointed by the AAA from the panel of
commercial arbitrators of any of the AAA Large and Complex Resolution Programs.
If a vacancy in the arbitration panel occurs after the hearings have commenced,
the remaining arbitrator or arbitrators may not continue with the hearing and
determination of the controversy, unless the Parties agree otherwise.
(d) The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and not state law, shall
govern the arbitrability of all Disputes. The arbitrators shall allow such
discovery as is appropriate to the purposes of arbitration in accomplishing a
fair, speedy and cost-effective resolution of the Disputes. The arbitrators
shall reference the Federal Rules of Civil Procedure then in effect in setting
the scope and timing of discovery. The Federal Rules of Evidence shall apply in
toto. The arbitrators may enter a default decision against any Party who fails
to participate in the arbitration proceedings.
(e) The arbitrators shall have the authority to award compensatory damages
only. Any award by the arbitrators shall be accompanied by a written opinion
setting forth the findings of fact and conclusions of law relied upon in
reaching the decision. The award rendered by the arbitrators shall be final,
binding and non-appealable, and judgment upon such award may be entered by any
court of competent jurisdiction. The Parties agree that the existence, conduct
and content of any arbitration shall be kept confidential and no Party shall
disclose to any person any information about such arbitration, except as may be
required by law or by any governmental authority or for financial reporting
purposes in each Party's financial statements.
(f) Each Party shall pay the fees of its own attorneys, expenses of witnesses
and all other expenses and costs in connection with the presentation of such
Party's case (collectively, "Attorneys' Fees"). The remaining costs of the
arbitration, including without limitation, fees of the arbitrators, costs of
records or transcripts and administrative fees (collectively, "Arbitration
Costs") shall be born equally by the parties. Notwithstanding the foregoing,
the arbitrators may modify the allocation of Arbitration Costs and award
Attorneys' Fees in those cases where fairness dictates a different allocation of
Arbitration Costs between the Parties and an award of Attorneys' Fees to the
prevailing Party as determined by the arbitrators.
(g) Any Dispute that is not subject to final resolution by the Management
Committee or to arbitration under this Section or law (collectively, "Non-
Arbitration Claims") shall be brought in a court of competent jurisdiction in
the Commonwealth of Virginia. Each Party irrevocably consents to the exclusive
jurisdiction of the courts of the Commonwealth of Virginia and the federal
courts situated in the Commonwealth of Virginia, over any and all Non-
Arbitration Claims and any and all actions to enforce such claims or to recover
damages or other relief in connection with such claims or to enforce a judgment
rendered in an arbitration proceeding.
VIII. MISCELLANEOUS
Auditing Rights. Each Party shall maintain complete, clear and accurate records
of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, AOL shall have the right, at its expense, to
conduct a reasonable and necessary copying and inspection of portions of the
Records of ICP that are directly related to amounts payable to AOL pursuant to
this Agreement, which right may, at AOL's option, be exercised by [*] an
independent certified public accounting firm to conduct such inspection. For the
sole purpose of ensuring compliance with this Agreement, ICP shall have the
right, at its expense, to direct an independent certified public accounting firm
subject to strict confidentiality restrictions to conduct a reasonable and
necessary copying and inspection of portions of the Records of AOL that are
directly related to amounts payable to ICP pursuant to this Agreement. Any such
audit may be conducted after twenty (20) business days prior written notice,
subject to the following. Such audits shall not be made more frequently than
once every twelve months. No such audit of AOL shall occur during the period
beginning on June 1 and ending October 1. In lieu of providing access to its
Records as described above, AOL shall be entitled to provide ICP with a report
from an independent certified public accounting firm confirming the information
to be derived from such Records.
Excuse. Neither Party shall be liable for, or be considered in breach of or
default under this Agreement on account of, any delay or failure to perform as
required by
24
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
this Agreement as a result of any causes or conditions which are beyond such
Party's reasonable control and which such Party is unable to overcome by the
exercise of reasonable diligence.
Independent Contractors. The Parties to this Agreement are independent
contractors. Neither Party is an agent, representative or partner of the other
Party. Neither Party shall have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement shall not be interpreted or
construed to create an association, agency, joint venture or partnership between
the Parties or to impose any liability attributable to such a relationship upon
either Party.
Notice. Any notice, approval, request, authorization, direction or other
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname
"[email protected]" in the case of AOL) or by confirmed facsimile; (ii) on the
delivery date if delivered personally to the Party to whom the same is directed;
(iii) one business day after deposit with a commercial overnight carrier, with
written verification of receipt; or (iv) five business days after the mailing
date, whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no. 703-
265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of ICP, except as otherwise specified herein, the notice address shall be the
address for ICP set forth in the first paragraph of this Agreement, with the
other relevant notice information, including the recipient for notice and, as
applicable, such recipient's fax number or AOL e-mail address, to be as
reasonably identified by AOL.
No Waiver. The failure of either Party to insist upon or enforce strict
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
Return of Information. Upon the expiration or termination of this Agreement,
each Party shall, upon the written request of the other Party, return or destroy
(at the option of the Party receiving the request) all confidential information,
documents, manuals and other materials specified by the other Party.
Survival. Sections IV, V, VI, VII and VIII of this Exhibit C, shall survive the
completion, expiration, termination or cancellation of this Agreement. In
addition, all payment terms of this Agreement and any provision that expressly
states that it shall survive or which, by its nature, must survive the
completion, expiration, termination or cancellation of this Agreement, shall
survive the completion, expiration, termination or cancellation of this
Agreement.
Entire Agreement. This Agreement sets forth the entire agreement and supersedes
any and all prior agreements of the Parties with respect to the transactions set
forth herein. Neither Party shall be bound by, and each Party specifically
objects to, any term, condition or other provision which is different from or in
addition to the provisions of this Agreement (whether or not it would materially
alter this Agreement) and which is proffered by the other Party in any
correspondence or other document, unless the Party to be bound thereby
specifically agrees to such provision in writing.
Amendment. No change, amendment or modification of any provision of this
Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
Further Assurances. Each Party shall take such action (including, but not
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by the other Party for the implementation or continuing
performance of this Agreement.
Assignment. ICP shall not assign this Agreement or any right, interest or
benefit under this Agreement without the prior written consent of AOL.
Assumption of this Agreement by any successor to ICP (including, without
limitation, by way of merger, consolidation or sale of all or substantially all
of ICP's stock or assets) shall be subject to AOL's prior written approval.
Notwithstanding the foregoing, if AOL's prior written approval for an assumption
is not obtained by ICP in connection with [*], AOL shall have, [*], the right to
terminate this Agreement. Further, in the event of any Change of Control of ICP
or other transaction resulting in control of ICP by an Interactive Service or an
entity that controls, is controlled by or is under common control with an
Interactive Service, AOL shall have, [*], the right to terminate this Agreement
upon written notice to ICP. Subject to the foregoing, this Agreement shall be
fully binding upon, inure to the benefit of and be enforceable by the Parties
hereto and their respective successors and assigns. [*] shall mean a merger,
consolidation, or sale of all or substantially all of the [*], of ICP provided
that (a) the entity assuming this Agreement has adequate capacity (including
financial capacity) to fully perform hereunder, and (b) such assumption shall
not be deemed to release ICP from liability hereunder.
Subcontractors. To the extent ICP desires to utilize consultants or
subcontractors to perform a material portion of its obligations under this
Agreement, utilization of such consultants and/or subcontractors shall be
subject to AOL's prior written approval and ICP shall provide AOL with direct
contact information for the employees of such consultants and/or subcontractors
who are responsible for performing such obligations, which employees shall be
available during business hours for consultation with AOL. ICP shall be
responsible for ensuring that all consultants and subcontractors comply with
this Agreement and ICP shall be liable for any breaches of this Agreement caused
by any consultant or subcontractor.
Construction; Severability. In the event that any provision of this Agreement
conflicts with the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over the Parties to
this Agreement, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
Remedies. Except where otherwise specified, the rights and remedies granted to
a Party under this Agreement are cumulative and in addition to, and not in lieu
of, any other rights or remedies which the Party may possess at law or in
equity.
Applicable Law. This Agreement shall be interpreted, construed and enforced in
all respects in accordance with the laws of the Commonwealth of Virginia except
for its conflicts of laws principles.
Export Controls. Both parties shall adhere to all applicable laws, regulations
and rules relating to the export of technical data and shall not export or re-
export any technical data, any products received from the other Party or the
direct product of such technical data to any proscribed country listed in such
applicable laws, regulations and rules unless properly authorized.
Headings. The captions and headings used in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document. Signatures sent by facsimile shall be deemed original
signatures.
25
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<PAGE>
EXHIBIT D
---------
Detailed Schedule and Bona-Fide Value of ICP In-Kind Commitments to be mutually
agreed upon by the Parties as set forth in Section 1.4.2
26
<PAGE>
EXHIBIT E
---------
CERTIFICATION OF COMPLIANCE WITH COMMITMENTS
REGARDING PROMOTIONS
Pursuant to Section 2.3 of the Interactive Services Agreement between
______________ ("ICP") and America Online, Inc. ("AOL"), dated as of
_________________, 2000 (the "Agreement"), the following report is delivered to
AOL for the period beginning _____________ and ending __________ (the "Period"):
I. Promotional Commitments
ICP hereby certifies to AOL that ICP completed the following promotional
commitments during the Period:
Type of Date(s) of Duration/Circulation of Relevant Contract
Promotion Promotion Promotion Section
- --------------------------------------------------------------------------------
1.
- --------------------------------------------------------------------------------
2.
- --------------------------------------------------------------------------------
3.
IN WITNESS WHEREOF, this Certificate has been executed this ___ day of
___________, 199_.
__________________________________
By: ______________________________
Print Name: _____________________
Title: ___________________________
Date: ____________________________
27
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EXHIBIT F
---------
TECHNICAL OPERATING STANDARDS
-----------------------------
1. Customized Site Infrastructure. ICP will be responsible for all
communications, hosting and connectivity costs and expenses associated with
the Customized Site. ICP will provide all hardware, software,
telecommunications lines and other infrastructure necessary to meet traffic
demands on the Customized Site from the AOL Network. ICP will design and
implement the network between the AOL Service and Customized Site such that
(i) no single component failure will have a materially adverse impact on
AOL Members seeking to reach the Customized Site from the AOL Network and
(ii) no single line under material control by ICP will run at more than 70%
average utilization for a 5-minute peak in a daily period. In this regard,
ICP will provide AOL, upon request, with a detailed network diagram
regarding the architecture and network infrastructure supporting the
Customized Site. In the event that ICP elects to create a custom version of
the Customized Site in order to comply with the terms of this Agreement,
ICP will bear responsibility for all aspects of the implementation,
management and cost of such customized site.
2. Optimization; Speed. ICP will use commercially reasonable efforts to
ensure that: (a) the functionality and features within the Customized Site
are optimized for the client software then in use by AOL Members; and (b)
the Customized Site is designed and populated in a manner that minimizes
delays when AOL Members attempt to access such site. At a minimum, ICP will
ensure that the Customized Site's data transfers initiate within fewer than
fifteen (15) seconds on average. Prior to commercial launch of any material
promotions described herein, ICP will permit AOL to conduct performance and
load testing of the Customized Site (in person or through remote
communications), with such commercial launch not to commence until such
time as AOL is reasonably satisfied with the results of any such testing.
3. User Interface. ICP will maintain a graphical user interface within the
Customized Site that is competitive in all material respects with
interfaces of other similar sites based on similar form technology. AOL
reserves the right to review and approve the user interface and site design
prior to launch of the Promotions and to conduct focus group testing to
assess compliance with respect to such consultation and with respect to
ICP's compliance with the preceding sentence.
4. Technical Problems. ICP agrees to use commercially reasonable efforts to
address material technical problems (over which ICP exercises control)
affecting use by AOL Members of the Customized Site (an "ICP Technical
Problem") promptly following notice thereof. In the event that ICP is
unable to promptly resolve an ICP Technical Problem following notice
thereof from AOL (including, without limitation, infrastructure
deficiencies producing user delays), AOL will have the right to regulate
the promotions it provides to ICP hereunder until such time as ICP corrects
the ICP Technical Problem at issue.
5. Monitoring. ICP will ensure that the performance and availability of the
Customized Site is monitored on a continuous (24 X 7) basis. ICP will
provide AOL with contact information (including e-mail, phone, pager and
fax information, as applicable, for both during and after business hours)
for ICP's principal business and technical representatives, for use in
cases when issues or problems arise with respect to the Customized Site.
6. Telecommunications. Where applicable the ICP will utilize encryption
methodology to secure data communications between the Parties' data
centers. The network between the Parties will be configured such that no
single component failure will significantly impact AOL Users. The network
will be sized such that no single line over which the ICP has material
control runs at more than 70% average utilization for a 5-minute peak in a
daily period.
7. Security. ICP will utilize Internet standard encryption technologies
(e.g., Secure Socket Layer - SSL) to provide a secure environment for
conducting transactions and/or transferring private member information
(e.g. credit card numbers, banking/financial information, and member
address information) to and from the Customized Site. ICP will facilitate
periodic reviews of the Customized Site by AOL in order to evaluate the
security risks of such site. ICP will promptly remedy any security risks or
breaches of security as may be identified by AOL's Operations Security
team.
8. Technical Performance.
i. ICP will design the Customized Site to support the AOL-Client
embedded versions of the Microsoft Internet Explorer 3.XX and 4.XX
browsers (Windows and Macintosh), the Netscape Browser 4.XX and make
commercially reasonable efforts to support all other AOL browsers
listed at: "http://webmaster.info.aol.com."
ii. To the extent ICP creates customized pages on the Customized Site for
AOL Members, ICP develop and employ a methodology to detect AOL
Members (e.g., examine the HTTP User-Agent field in order to identify
the "AOL Member-Agents" listed at: http://webmaster. info.aol.com and
referenced under the heading "Browser Detection."
iii. ICP will periodically review the technical information made available
by AOL at http://webmaster.info.aol.com.
iv. ICP will design its site to support HTTP 1.0 or later protocol as
defined in RFC 1945 and to adhere to AOL's parameters for refreshing
or preventing the caching of information in AOL's proxy system as
outlined in the document provided at the following URL:
http://webmaster.info.aol.com. ICP is responsible for the
manipulation of these parameters in web based objects so as allow
them to be cached or not cached as outlined in RFC 1945.
v. Prior to releasing material, new functionality or features through
the Customized Site ("New Functionality"), ICP will use commercially
reasonable efforts to either (i) test the New Functionality to
confirm its compatibility with AOL Service client software and (ii)
provide AOL with written notice of the New Functionality so that AOL
can perform tests of the New Functionality to confirm its
compatibility with the AOL Service client software. Should any new
material, new functionality or features through the Customized Site
be released
28
<PAGE>
without notification to AOL, AOL will not be responsible for any
adverse member experience until such time that compatibility tests
can be performed and the new material, functionality or features
qualified for the AOL Service.
9. AOL Internet Services Partner Support. AOL will provide ICP with access to
the standard online resources, standards and guidelines documentation,
technical phone support, monitoring and after-hours assistance that AOL
makes generally available to similarly situated web-based partners. AOL
support will not, in any case, be involved with content creation on behalf
of ICP or support for any technologies, databases, software or other
applications which are not supported by AOL or are related to any ICP area
other than the Customized Site. Support to be provided by AOL is contingent
on ICP providing to AOL demo account information (where applicable), a
detailed description of the Customized Site's software, hardware and
network architecture and access to the Customized Site for purposes of such
performance and the coordination load testing as AOL elects to conduct.
10. Customized Programming. The terms and conditions of this Exhibit
applicable to the Customized Site shall apply equally to any Customized
Programming that is (a) programmed in HTML or (b) web-based.
29
<PAGE>
EXHIBIT G
---------
KEYWORD GUIDELINES
------------------
GRAPHIC: PRINT/TV/"OUT OF HOME"
. Required treatment: (AOL Triangle appears) America Online Keyword:
Athletes Direct
or
America Online Keyword: Athletes Direct
. "America Online" must be spelled out
. Capitalization - listing shall appear in initial caps only
Note: K of Keyword must always be capitalized
. Font, Font style and Size must all be consistent
. Listing size must be of equal prominence to that of any/all other URLs
featured but shall, in any event, be at least10 point font and comprise at
least five percent (5%) of the live area of any print or out of home
promotion and at least 75 scan lines in any television advertisement
AUDIO: TV/RADIO
. "America Online Keyword" must be announced entirely
Example voiceover would read:
"For more information, please visit America Online Keyword: Athletes Direct"
Logo Usage Guidelines
Not Allowed
> No color gradients
> No "filled" icons (must be solid)
> No different colors for triangle and the copy (must be all the same color)
> No words/copy on top of the logo or triangle
> No script writing of "America Online" used alone without triangle
> No adaptations of the icon or logo (i.e., don't turn it into a mountain or
Xmas tree)
> No America Online or AOL in all lower case letters (either use initial caps.
or all caps.)
> No turning logo on its side, upside down, etc.
> No changing the proportion of the logo
> No "deforming" the logo (stretching it out or making it "skinny")
> No giving the logo structural dimension or "blurring" the logo
> No reconfiguring the elements logo (i.e., don't put "America" on the left of
the triangle & "Online" on the right)
Registration marks
> Must have small registration marks ((R)) at the right-hand tip of the
triangle and at the tip of the "e" in "Online"
Approved Colors:
- ----------------
> black
> (reversed-out) white
> PMS 534 blue (NOTE: this is AOL's corporate color)
> PMS 286 blue
> Reflex blue
> PMS 123 yellow
30
<PAGE>
> PMS 2617 purple
NOTE: the entire logo (triangle and type) must always be 100% of the same
color
31
<PAGE>
EXHIBIT H
AOL Approval
- ------------
AOL-Approved Product Categories*
AOL hereby approves ICP's offer or sale of the following categories of
sports-related Products in or through the Online Area:
[*] :Mass-produced, generally available team or league branded
headgear, footwear, swimwear, and apparel (i.e. sweaters, sweatshirts, jackets,
shirts, shorts, pants, sweatpants, and undergarments).
* Notwithstanding AOL's approval of the above categories of Products, the
Placements and any Content or Links on the AOL Network (including the Welcome
Mats and the hybrid browsers) shall not advertise or promote music or books,
without AOL's prior approval.
32
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
EXHIBIT 10.19
Execution Copy
CONFIDENTIAL
CUSTOMIZED PROGRAMMING AGREEMENT
--------------------------------
This Customized Programming Agreement (this "Agreement"), effective as of
June 15, 2000 (the "Effective Date"), is made and entered into by and between
America Online, Inc. ("AOL"), a Delaware corporation, with its principal offices
at 22000 AOL Way, Dulles, Virginia 20166, and Athlete Direct, Inc. and Pro
Sports Xchange, Inc. (hereinafter collectively referred to as "Interactive
Content Provider" or "ICP"), both Delaware corporations, both with their
principal offices at 2120 Colorado Avenue, Suite 200, Santa Monica, California
90404 (each a "Party" and collectively the "Parties").
INTRODUCTION
------------
AOL and ICP each desires that ICP provide AOL with Content for distribution
through the AOL Network, subject to the terms and conditions set forth in this
Agreement. Capitalized terms used but not otherwise defined in this Agreement
shall be as defined on Exhibit B attached hereto.
TERMS
-----
1. PROGRAMMING
-----------
1.1 Content. The Customized Site and Customized Programming shall consist
of the Content described on the programming plan attached as Exhibit A
(the "Programming Plan"). ICP shall inform AOL of relevant search
terms and terminology associated with popular areas and functionality
within the Customized Site and Customized Programming for AOL's
promotional and Content integration purposes. The inclusion of any
additional Content within the Customized Site and/or Customized
Programming (including, without limitation, any features,
functionality or technology) not expressly described on Exhibit A
shall be subject to AOL's prior written approval.
1.2 License. ICP hereby grants AOL a nonexclusive, non-transferable
(except to AOL Affiliates) worldwide license to use, market, license,
store, distribute, reproduce, display, adapt, communicate, perform,
translate, transmit, and promote the Customized Site, Customized
Programming and the Licensed Content (or any portion thereof) through
the AOL Network as set forth in Exhibit A and/or as AOL may determine
in its sole discretion by integrating Content from the Customized Site
and/or Customized Programming by linking to specific areas of the
Customized Site and/or Customized Programming, provided that the link
to any such Content on the AOL Network shall conform to the
specifications of an ICP Presence. Any Linked ICP Interactive Site
shall be subject to the foregoing license. Subject to the right and
License contained herein, ICP retains all right, title and interest in
and to the Licensed Content. AOL's use of the License Content shall be
subject to the express requirements of this Agreement.
1.3 Promotion of Athletes. ICP shall secure the promotional rights set
forth in Exhibit A with respect to each athlete and columnist
described in Exhibit A.
1.4 Management. ICP shall design, create, edit, manage, review, update
(on a daily basis or as otherwise specified herein), and maintain the
Customized Site, Customized Programming and the Licensed Content in a
timely and professional manner and in accordance with the terms of
this Agreement and shall keep the Licensed Content current, accurate
and well-organized at all times. ICP shall ensure that the Licensed
Content within the Customized Site and Customized Programming in
aggregate is equal to or better than any non-surcharge Content (i.e.,
Content for which no third party pays ICP) dedicated to athlete and/or
team Content distributed by ICP through any other ICP Interactive Site
in all material respects, including without limitation, quality,
breadth, depth, timeliness, functionality, features, prices of
products and services and terms and conditions, provided that any
changes to the Customized Programming or the Licensed Content
necessary to comply with this sentence shall be subject to AOL's
review and approval and the terms of this Agreement. ICP shall not be
in breach of the preceding sentence (i) where ICP has material
technical limitations in implementing the foregoing with respect to a
specific AOL Property or (ii) where ICP has included a specific
athlete on another Interactive Site but not on the Customized Site or
Customized Programming, provided that ICP is otherwise in compliance
with the athlete requirements set forth in Exhibit A. ICP shall
provide the necessary technical support in order to optimize ICQ tools
and functionality in a
1
<PAGE>
Execution Copy
manner that AOL requests. Except as specifically provided for herein,
AOL shall have no obligations of any kind with respect to the
Customized Site or Customized Programming. ICP shall be responsible
for any hosting or communication costs associated with the Customized
Site and Customized Programming (including any Linked Interactive
Sites), including, without limitation, the costs associated with (i)
any agreed-upon direct connections between the AOL Network and the
ICP. AOL Members shall not be subject to a registration process (or
any similar process) in order to access and use the Customized Site,
Customized Programming (including any Linked ICP Interactive Site) or
the Licensed Content; provided, however, that the Parties agree and
acknowledge that some features or areas of the Linked ICP Interactive
Site may require a registration process for all users generally (e.g.,
a premium service) and that such registration process for AOL Members
shall be no more burdensome than for any other user and shall be upon
terms and conditions no less favorable than for any other user. During
the Term and for the two (2) year period after the expiration or
termination thereof, ICP shall allow AOL Members to access and use
non-Premium Information Products on any Linked ICP Interactive Site on
terms and conditions no less favorable than the terms and conditions
available to other users of such ICP Interactive Site. In the event
ICP fails to comply with any material term of this Agreement, subject
to Section 6.2 below, including without limitation ICP's obligations
under this Section 1.4 or its promotional obligations under Section 2,
AOL will have the right (in addition to any other remedies available
to AOL hereunder) to decrease the promotion it provides to ICP
hereunder and/or to decrease or cease any other contractual obligation
of AOL hereunder until such time as ICP corrects its non-compliance,
in which event AOL will be relieved of the proportionate amount of any
promotional commitment made to ICP by AOL hereunder corresponding to
such decrease in promotion. In the event that AOL fails to comply with
the payment terms in Section 1.5 below, subject to Section 6.2 below,
ICP will have the right (in addition to any other remedies available
hereunder) to decrease or cease any contractual obligation hereunder
until AOL corrects its non-compliance.
1.5 Programming Fee. AOL shall pay ICP $15,000,000.00 as follows:
Cash Payment. AOL shall pay ICP $15,000,000.00 as follows:
$1,250,000.00 quarterly beginning three (3) months after the
Effective Date.
1.6 Site and Programming Preparation. Provided that ICP has achieved Site
and Programming Preparation for the carriage it will receive on the
main screen and scoreboards of the Sports Channel within the AOL
Service within five (5) days of the Effective Date, AOL will provide
carriage within the AOL Service for such Customized Programming [*]
from the Effective Date. Provided that ICP has achieved Site and
Programming Preparation by a mutually agreed upon date, AOL shall
substantially provide Promotions on all Covered Properties, except for
[*] (until available based upon the end of another exclusive
agreement), [*] from the Effective Date." Site and Programming
Preparation" shall mean that ICP shall have completed all necessary
production work (including completion of all necessary training for
AOL's proprietary "Rainman" publishing tool) for the Customized
Programming and any other related areas or screens (including
programming all Content thereon); customized and configured the
Customized Programming in accordance with this Agreement; and
completed all other necessary work (including, without limitation,
undergone all AOL site testing set forth on Exhibit E) to prepare the
Customized Programming and any other related areas or screens to
launch on the AOL Network as contemplated hereunder.
1.7 Member Benefits. ICP will generally promote through the Customized
Site and Customized Programming any special or promotional offers made
available by or on behalf of ICP through any ICP Interactive Site or
any other distribution channel. In addition, ICP shall promote through
the Customized Site or Customized Programming on a regular and
consistent basis special offers exclusively available to AOL Members
("AOL Exclusive Offers"). ICP shall, at all times, feature at least
one AOL Exclusive Offer for AOL Members (except as otherwise mutually
agreed upon by the Parties). The AOL Exclusive Offer made available by
ICP shall provide a substantial member benefit to AOL Members, either
by virtue of a meaningful price discount, product enhancement, unique
service benefit or other special feature. Specific AOL Exclusive
Offers to be made available by ICP shall include the following:
specially-priced sports memorabilia. ICP will provide AOL with
reasonable prior notice of AOL Exclusive Offers and other special
offers so that AOL can, in its editorial discretion, market the
availability of such offers. Inadvertent omissions of such offers
shall not be deemed a breach of this Agreement.
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2. CROSS-PROMOTION
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2.1 Cooperation. Each Party shall cooperate with and reasonably assist
the other Party in supplying material for marketing and promotional
activities.
2.2 Interactive Site. Within the Primary Site, ICP shall include a
prominent actionable promotional button (at least 90 x 30 pixels or 70
x 70 pixels in size) appearing on the first screen of the Primary Site
(the "AOL Promo"), to promote such AOL products or services as AOL may
designate (for example, the America Online brand service, the
CompuServe brand service, the AOL.com site, the Digital City services,
the ICQ service, MovieFone services, When.com calendaring services or
the AOL Instant Messenger service). AOL will provide the creative
content to be used in the AOL Promo. ICP shall post (or update, as
the case may be) the creative content supplied by AOL within the
spaces for the AOL Promo within five days of its receipt of such
content from AOL. Without limiting any other reporting obligations of
the Parties contained herein, ICP shall provide AOL with monthly
written reports specifying the number of impressions to the pages
containing the AOL Promo during the prior month. In the event that
AOL elects to serve the AOL Promo to the Primary Site from an ad
server controlled by AOL or its agent, ICP shall take all reasonable
operational steps necessary to facilitate such ad serving arrangement,
including, without limitation, inserting HTML code designated by AOL
on the pages of the Primary Site on which the AOL Promo will appear.
In addition, within the Primary Site, ICP shall provide prominent
promotion, where commercially practicable, for the keywords associated
with the Customized Programming and links from the Primary Site to the
relevant topic areas on AOL's AOL.com site. To the extent that ICP
promotes any instant messaging technology or functionality, ICP shall
promote the AOL Instant Messaging functionality on its Primary Site.
2.3 Other Media. In ICP's television, radio, print and "out of home"
(e.g., buses and billboards, point of purchase and other "place-based"
promotions) advertisements and in any publications, programs, features
or other forms of media over which ICP exercises at least partial
editorial control, ICP will include specific references or mentions
(orally where possible) of the availability of the Customized Site
through the AOL Network. At least [*] of such references or mentions
shall be (a) at least as prominent as the ICP's listing of a URL for
any ICP Interactive Site. The remaining [*] of such references must be
at least clearly visible, audible or legible as the case may be in any
ICP advertisement in print, radio, or television. All such references
or mentions of AOL, and the use of AOL's trademarks, trade names and
service marks in connection therewith, shall be in accordance with
Section II of Exhibit C and shall conform to the samples shown on
Exhibit G.
2.4 Preferred Access Provider. When promoting AOL, ICP shall promote AOL
as the preferred access provider through which a user can access the
Customized Programming and/or the Primary Site and ICP shall use
commercially reasonable efforts to promote AOL as prominently as any
other Interactive Service as part of ICP's promotion of the Licensed
Content
3. REPORTING.
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3.1 Customized Programming Reporting. ICP will supply AOL with monthly
reports which reflect total impressions by AOL Members to the
Customized Programming during the prior month, the number of and
dollar value associated with the transactions involving AOL Members
and any registration information obtained from AOL Members at the
Customized Programming during the period in question. ICP represents
that all URLs related to the Customized Programming are listed on
Exhibit A and ICP shall provide AOL with an update of such list
promptly upon any change thereto.
3.2 Advertising. ICP shall provide monthly detailed information to AOL
regarding (i) AOL Advertisements (as defined below) sold by ICP or its
agents and (ii) any advertising or promotional activity through the
Customized Programming and any Linked ICP Interactive Sites.
4. ADVERTISING AND MERCHANDISING
-----------------------------
4.1 AOL Network Advertising Inventory. AOL owns all right, title and
interest in and to the advertising and promotional spaces within the
AOL Network including, without limitation, the AOL Frames and shall
have the right
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to all revenues therefrom. The specific advertising inventory within
any AOL forms or pages, including such AOL Frames, shall be as
reasonably determined by AOL. AOL shall have the exclusive right to
sell AOL Advertisements on the Main Teams Page, Main Stars Page, Team
Aggregate Screens, Stars Aggregate Screens and Extreme Main Page. ICP
must cooperate and facilitate AOL's serving of advertisements sold by
AOL. ICP must provide the necessary technical support for AOL to serve
such advertisements. Notwithstanding the foregoing, AOL agrees not to
place advertising within any hybrid browser frame or header or footer
frame that is activated by entering solely a Customized Site or
Customized Programming. AOL reserves the right to place advertising
within any client-based frame or any frame or hybrid browser provided
that any such advertising appearing on a frame or hybrid browser
around the Customized Sites shall not be targeted specifically toward
the Customized Site. AOL hereby grants ICP the exclusive right to
license or sell AOL Advertisements on the other pages, subject to
AOL's approval for each AOL Advertisement, which approval shall not be
unreasonably withheld.
4.2 Advertising Revenues. AOL shall be entitled to [*] of Advertising
Revenues generated by the license or sale of AOL Advertisements on the
Main Teams Page, Main Stars Page, Team Aggregate Screens, Stars
Aggregate Screens and Extreme Main Page. ICP shall be entitled to [*]
of Advertising Revenues generated by the license or sale of AOL
Advertisements on the other pages on the Customized Site and
Customized Programming
4.3 Advertising Policies. Any AOL Advertisements sold by ICP or its
agents shall be subject to AOL's then-standard advertising policies
which shall be made available, exclusivity commitments, and other
preferential contractual commitments to third parties which are
applicable to AOL and those exclusivities that AOL grants to itself
for its own business(es) subject to Section 5.2.
4.4 Interactive Commerce. ICP is permitted to sell Product through the
commerce area on its Customized Internet Site and/or Customized
Programming. ICP may sell "Licensed Sporting Goods," but ICP is
prohibited from "promoting" Licensed Sporting Goods anywhere on the
AOL Network; provided, however, that ICP is otherwise permitted to
sell and promote Licensed Sporting Goods on the Customized Site and
Customized Programming. Any merchandising permitted hereunder shall
be subject to (i) the then-current requirements of AOL's merchant
certification program, (ii) AOL's standard terms and conditions
applicable to its interactive marketing partners, and (iii) prior
approval by AOL of all Product to be offered through the Customized
Site or Customized Programming except for the pre-approved Products
listed in Exhibit A-5. ICP will take all reasonable steps necessary
to conform its promotion and sale of Products through the Customized
Site and Customized Programming to the then-existing technologies
identified by AOL which are optimized for the AOL Service including,
without limitation, any "quick checkout" tool which AOL may implement
to facilitate purchase of Products by AOL Members through the
Customized Site, and Customized Programming. "Licensed Sporting Goods"
shall mean the following products [*]. Memorabilia and collectibles
are specifically excluded from Licensed Sports Product.
5. CUSTOMIZED PROGRAMMING AND CUSTOMIZED SITE
------------------------------------------
5.1 Production; Performance. ICP shall optimize the Customized Site and
Customized Programming for distribution hereunder according to AOL
specifications and guidelines (including, without limitation, any HTML
publishing guidelines) and the Operating Standards set forth on
Exhibit E attached hereto.
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5.2 Customization. ICP shall customize the Customized Site and Customized
Programming for AOL Members as follows:
(a) ICP shall customize and co-brand the Customized Site and
Customized Programming for distribution over the AOL Properties
listed in Exhibit A-1 using AOL's design guideline templates and
co-branding requirements, including by (x) displaying on each
page of the Customized Site framing (e.g., C-frame, side
navigation/menu bars, headers and footers) of size and type
determined by AOL and which contain branding for the applicable
AOL Property and ICP as determined by AOL and, as determined by
AOL, links to the applicable AOL Property, a search box and/or
promotional spaces to be programmed by AOL, and (y) matching the
look and feel of the applicable AOL Property on the Customized
Site. In addition, ICP shall comply with any customization and
co-branding requirements set forth on Exhibit A. ICP shall make
any changes to the customization and/or co-branding of the
Customized Site to conform to the standard requirements of any
AOL Property or otherwise reasonably requested by AOL during the
Term.
(b) ICP shall ensure that AOL Members accessing the Customized
Site and/or Customized Programming or linking to any ICP
Interactive Site from the Customized Site or Customized
Programming do not receive advertisements, promotions or links
(i) for any entity reasonably construed to be in competition with
AOL or the applicable AOL Property, (ii) in a category in which
AOL or the applicable AOL Property has an exclusive or other
preferential relationship (but this limitation only applies to
the Team Pages, Stars Pages, and the Extreme Main Page), or (iii)
otherwise in violation of the applicable AOL Property's then-
standard advertising policies. ICP shall ensure that all
Advertisements sold by ICP or its agents comply with all
applicable federal, state and local laws and regulations.
(c) Within the Customized Site, ICP shall use and/or feature
solely AOL's tools and technology for the following utilities and
functionality: instant messaging, chat, personalized news
service, calendaring (including "click-to-add event"
functionality associated therewith), web page community services,
message boards, and commerce/content aggregation services (e.g.,
Shop@AOL and local content) ("AOL Tools"). If any such AOL Tool
is not made available for use on the Customized Site within a
reasonable time upon ICP's request, ICP shall be permitted to
utilize on the Customized Site similar tools and technology
provided [*], provided that such tools and technology are not
[*] and no links or promotions for such third party appear on the
Customized Site and, provided, further that ICP will convert such
tools and technology over to the corresponding AOL Tool once such
AOL Tool is made available. In addition, the Customized Site
shall not (x) provide or promote any email service, or (y) use or
feature the tools or technology of any Interactive Service other
than AOL.
(d) Within the AOL Service, ICP shall host the Main Teams Page,
Team Aggregate Screens, Main Stars Page, Stars Aggregate Screens
and the Extreme Main Page of the Customized Programming and
Customized Site under a domain name co-branded with the
applicable AOL Property as follows: athletedirect.aol.com and all
other pages within the Customized Site will have domain names
with applicable ICP Property extension such as
aol.athletedirect.com or yankees.aol.broadbandsports.com. Within
all other AOL Properties, ICP shall host the Team Pages, Stars
Pages and Extreme Online Area of the Customized Programming and
Customized Site under a domain name co-branded with the
applicable AOL Property as follows: athletedirect.netscape.com
and all other pages within the Customized Site may have domain
names such as netscape.athletedirect.com. AOL will use
commercially reasonable efforts to have [*] for traffic on the
Team Pages within the AOL Service so long as such pages remain in
Rainman format. With respect to traffic on any other pages
relating to the Customized Site or Customized Programming which
appear on an AOL URL, AOL will use commercially reasonable
efforts, including by providing any necessary [*], to help [*].
For pages appearing on an ICP URL, then AOL will use commercially
reasonable efforts, including by providing any necessary [*], to
help ICP [*] and ICP shall used [*].
5.3 Links on Customized Programming. The Parties will work together on
mutually acceptable links (including links back to AOL) within the
Customized Site and Customized Programming in order to create a robust
and engaging
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AOL member experience and the Customized Site and Customized
Programming shall not contain any pointers or links to any other area
on or outside the AOL Network without AOL's prior written consent,
other than (i) standard advertising that otherwise complies with this
Agreement and (ii) as expressly described on Exhibit A. ICP may
designate a "link" to the Customized Site and/or Customized
Programming as provided for herein. ICP shall take reasonable efforts
to ensure that AOL traffic is generally either kept within the
Customized Site or Customized Programming or channeled back into the
AOL Network and ICP shall ensure that the Customized Site or
Customized Programming contain no permanent or semi-permanent links
for third party Content, nor any rotational links for aggregated
Content within the same Content category or channel as ICP, except as
specifically set forth in the Programming Plan. To the extent that AOL
notifies ICP in writing that, in AOL's reasonable judgment, links from
the Customized Site or Customized Programming cause an excessive
amount of AOL traffic to be diverted outside of such Customized
Programming or Customized Site and the AOL Network in a manner that
has a detrimental effect on the traffic flow of the AOL audience, then
ICP shall immediately reduce the number of links out of the Customized
Programming and Customized Site. In the event that ICP cannot or does
not so limit diverted traffic from the Customized Programming or
Customized Site within thirty (30) days of receiving notice from AOL,
AOL reserves the right to terminate such links from the AOL Network to
the Customized Programming Customized Site.
5.4 Review. ICP shall allow appropriate AOL personnel to have reasonable
access to all Customized Programming from time to time for the
purpose of reviewing such sites to determine compliance with the
provisions of this Section 5.
6. TERM, TERMINATION, PRESS RELEASES.
---------------------------------
6.1 Term. Unless earlier terminated as set forth herein, the initial term
of this Agreement shall commence on the Effective Date and expire
thirty-six (36) months from the Effective Date. AOL shall have the
right to extend this Agreement for two (2) successive one (1) year
periods (each, an "Extension Term"). Each such Extension Term shall be
on the same terms and conditions contained herein. AOL shall make
payments during the Extension Term in the same manner as it made
payments during the initial term. AOL shall exercise its option to
extend this Agreement by providing ICP with written notice of such
election no later than [*] days prior to the expiration of the initial
term or the then-current Extension Term, as the case may be. Upon the
expiration or earlier termination of this Agreement, AOL may, at its
discretion, continue to promote one or more "pointers" or links from
the AOL Network to an ICP Interactive Site and continue to use ICP's
trade names, trade marks and service marks in connection therewith
(collectively, a "Continued Link").
6.2 Termination for Breach. Either Party may terminate this Agreement at
any time in the event of a material breach by the other Party which
remains uncured after thirty (30) days written notice thereof. If ICP
or any of its subsidiaries or affiliates is behind (i.e., 45 days late
in paying) any material payment obligation in excess of [*] to any
party (including AOL), AOL may, at its option (i) reduce its payment
of the Programming Fee in Section 1.5 in an equal amount of such late
payment and/or (ii) terminate this Agreement immediately.
6.3 Termination for Bankruptcy/Insolvency or Changes in Business. Either
Party may terminate this Agreement immediately following written
notice to the other Party if the other Party (i) ceases to do business
in the normal course, (ii) becomes or is declared insolvent or
bankrupt, (iii) is the subject of any proceeding related to its
liquidation or insolvency (whether voluntary or involuntary) which is
not dismissed within ninety (90) calendar days or (iv) makes an
assignment for the benefit of creditors.
6.4 Termination of Existing Agreement. The Parties previously entered
into an Interactive Services Agreement that became effective January
1, 1999 ("Existing Agreement"). The Parties hereby terminate the
Existing Agreement effective June 15, 2000.
6.5 Press Releases. Each Party will submit to the other Party, for its
prior written approval, which will not be unreasonably withheld or
delayed, any press release or any other public statement ("Press
Release") regarding the transactions contemplated hereunder.
Notwithstanding the foregoing, either Party may issue Press Releases
and
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other disclosures as required by law, rule, regulation or court order
or as reasonably advised by legal counsel without the consent of the
other Party and in such event, the disclosing Party will provide at
least five (5) business days prior written notice of such disclosure.
The failure to obtain the prior written approval of the other Party
shall be deemed a material breach of this Agreement. Because it would
be difficult to precisely ascertain the extent of the injury caused to
the non-breaching Party, in the event of such material breach, the
non-breaching Party may elect to terminate this Agreement immediately
upon notice to the other Party. AOL hereby agrees that there will be a
press release announcing this Agreement pursuant to this provision and
AOL shall work with ICP in good faith to issue a timely release.
7. TERMS AND CONDITIONS. The terms and conditions set forth on the Exhibits
--------------------
attached hereto are hereby made a part of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the Effective Date.
AMERICA ONLINE, INC. ATHLETES DIRECT, INC.
By: /s/ David M. Colburn By: /s/ Ross Schafelberger
---------------------------------- -------------------------------
Print Name: David M. Colburn Print Name: Ross Schafelberger
------------------------- ----------------------
Title: President - Business Affairs Title: President
------------------------------ ---------------------------
Date: 3/15/00 Date: 3/15/00
------------------------------- ----------------------------
Tax ID/EIN#: 95-4673807
---------------------
PRO SPORTS XCHANGE, INC.
By: /s/ Tyler Goldman
------------------------------
Print Name: Tyler Goldman
----------------------
Title: President
---------------------------
Date: 3/15/00
----------------------------
Tax ID/EIN#: 95-4673807
---------------------
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EXHIBIT A-1
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A.1 -- Description of the Online Area/Licensed Content. ICP shall provide the
following to AOL:
A.1.1 Customized Programming and Customized Site. AOL shall provide ICP
with editorial guidelines ("Guidelines") for the Customized Programming and
Customized Site to appear on the AOL Service, AOL.com, CompuServe, Netscape
(subject to availability) and ICQ (the "Covered Properties") within seventy-five
(75) days after the Effective Date. A sample of such Guidelines is attached to
the Agreement as Exhibit A-2, which shall govern to the extent no additional
Guidelines are provided. For a period of thirty (30) days after the date AOL
provides the Guidelines to ICP, AOL will discuss in good faith any modifications
to such Guidelines proposed by ICP. In providing the Customized Programming,
Customized Site and the Licensed Content, ICP shall comply with the Guidelines,
as may be modified by AOL after discussions with ICP. The Customized Programming
and Customized Site shall consist of the following online areas on the Covered
Properties:
A.1.1.1 Team Online Area. ICP shall program and produce the only
team online area, which is solely an AOL Property-branded
area, on the Covered Properties ("Team Online Area") where
AOL Members can access information relating to all
professional and collegiate sports teams ("collectively,
"Teams" and singularly "Team") on a team-by-team basis in
each of the following sports categories (collectively,
"Sports Categories" and singularly "Sports Category"):
National Football League ("NFL"), Major League Baseball
("MLB"), National Basketball Association ("NBA"), National
Hockey League ("NHL"), NCAA Football (only teams set forth in
Exhibit A-4) and NCAA Basketball (only teams set forth in
Exhibit A-4). The Team Online Area shall consist of the
following:
(A) Team Pages. For each Covered Property, ICP shall
program and produce the AOL pages and screens consistent
with the following general descriptions ("Team Pages"):
(i) an AOL Property-branded main page for the Team
Online Area linked directly from an AOL Property-based
permanent promotion and/or used as a navigational
page("Main Teams Page"), (ii) for each Sports Category
and for each conference/division in a Sports Category
(each, a "Conference"), an AOL Property-branded
aggregate screen for all teams in the Sports Category
and/or Conference (e.g., NFL Football Teams Page,
Atlantic Conference Football Page) linked directly from
an AOL Property-based permanent promotion and/or used as
a navigational page("Teams Aggregate Screens"), and
(iii) an AOL Property-branded main page for each team
("Team Main Page") (e.g., New York Yankees Main Page).
The Team Pages shall (a) contain the links specified in
Exhibit A.1.1.3 and feature regularly updated "teaser"
Content from the Team Deeper Content and the Feeds (as
defined below).
(B) Team Deeper Content. For each Covered Property, the
Team Deeper Content shall generally consist of the
following Content: (a) the complete Feeds related to
each Sports Category and each Team, (b) other AOL-
approved Team Content, (c) other AOL-approved dynamic
Content such as weekly chats, updated player information
and multimedia elements, and (d) additional Team
features. The Parties acknowledge that, subject to the
terms of this Agreement, including without limitation,
Section5 of this Agreement, ICP intends to advertise,
offer, sell or license Products through the Team Deeper
Content.
(C) Updates. Unless otherwise requested by AOL, ICP shall
update the Team Pages to keep them dynamic and robust as
set forth on the schedule set forth in Exhibit A-6.
A.1.1.2 Stars Online Area. ICP shall program and produce the Stars
Online area, which is solely AOL Property-branded, ("Stars
Online Area") on the Covered Properties where AOL Members can
access information
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relating to individual star athletes. The Stars Online Area
shall be designed as the premier interactive and online home
for mutually and reasonably agreed-upon nationally recognized
major professional athletes ("Athletes") in the following
Sports Categories: NFL, MLB, NBA, NHL, NASCAR and soccer
("MLS") and other mutually agreed upon Sports Categories. The
Stars Online Area shall consist of the following:
(A) Star Pages. For each Covered Property, ICP shall
program and produce the following pages and screens on
each AOL Property consistent with the following general
descriptions ("Stars Pages"): (i) an AOL Property-
branded main page for the Stars Online Area linked
directly from an AOL Property-based permanent promotion
and/or used as a navigational page ("Main Stars Page"),
(ii) an AOL Property-branded aggregate screen for all
Athletes in each Sports Category linked directly from an
AOL Property-based permanent promotion and/or used as a
navigational page ("Stars Aggregate Screens"), and (iii)
an AOL Property-branded main page for each Athlete
Online Area (as described below) ("Athlete Main Page").
The Stars Pages shall contain the links specified in
Exhibit A.1.1.3 and shall feature regularly updated
"teaser" Content from Deeper Stars Content and the
Feeds.
(B) Deeper Stars Content. For each Covered Property, he
Deeper Stars Content shall generally consist of (a)
individual athlete online areas ("Athlete Online Areas")
produced and maintained by ICP, (b) other ICP star
Content and additional star features, and (c) other
dynamic Content such as weekly chats, updated player
information and multimedia elements.
(C) Athlete Online Areas. For each Covered Property, ICP
shall provide at least at least sixty (60) Athlete
Online Areas upon the Effective Date, and at least five
(5) additional athletes each year. In addition, for ICQ,
ICP shall provide twenty (20) additional international
athletes per year. Beginning on the Effective Date, at
least five (5) of the Athlete Online Areas shall be for
Star Athletes (as defined in Exhibit B) in five of the
NBA, NHL, NFL, MLB, NASCAR and MLS Sports Categories,
for a total of twenty-five Star Athletes, and ICP shall
add an additional five (5) international Star Athletes
per year. Within six (6) months of the Effective Date,
at least five (5) of the international athletes provided
to ICQ shall be Star Athletes, and ICP shall provide an
additional five (5) international Star Athletes to ICQ
per year. ICP shall provide to AOL a list of all
Athletes to be included in the Stars Online Area, which
list shall be subject to AOL's approval pursuant to the
terms set forth herein and in Exhibit A-1. ICP
recognizes and acknowledges the importance to AOL of
certainty and consistency with respect to the Athlete
Online Areas, and AOL recognizes and acknowledges that
ICP may need to modify the list from time to time. As
such, ICP shall have the right to modify the list from
time to time to delete injured athletes or athletes no
longer under contract with ICP, or to add new athletes
under contract with ICP, or to address other ICP
business requirements; provided that, (a) ICP shall
replace Athletes deleted from the list with Athletes of
equal prominence, and (b) ICP shall provide AOL seventy-
five (75) days prior written notice of such
modifications.
(D) Programming. In addition to the above, the programming
of the Star Online Area, including without limitation,
the Athlete Online Areas, shall include, at a minimum,
those features and areas set forth in Exhibit A-3
hereto.
A.1.1.3 Look and Feel/Links. The look and feel of the Team Pages,
Stars Pages and Extreme Pages (collectively, the "AOL Pages"
and singularly, the "AOL Page") and the Team Deeper Content
and Extreme Deeper Content shall be as determined by AOL
after consultation with ICP. AOL will determine, at its sole
discretion, and ICP will implement (a) the design and
navigation of each AOL Page; (b) the links from each AOL Page
to news, schedules, scores and statistics packages provided
by AOL's other partners, and (c) any other links from an AOL
Page. Each AOL Page shall (i) contain AOL-approved ICP-
designated links to the relevant Deeper Content (i.e., Team
Pages to Team Deeper Content and Star Pages to Star Deeper
Content) or commerce in accordance with the provisions of
this Agreement, including without limitation, Section5, and
(ii) feature the greater of (a) twenty percent (20%) of total
links or (b) twelve (12) links, all of which links are to be
prominent, to AOL-designated Content or commerce
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(including, without limitation, other AOL content and/or
commerce partners and ICP Content and/or commerce at AOL's
sole discretion). AOL's approval for the ICP-designated links
to Team, Extreme or Star Deeper Content or commerce (other
than the links which are approved pursuant to Section 5 of
this Agreement) shall not be unreasonably withheld; provided
that, (i) such links are to ICP Content on Linked ICP
Interactive Sites which are not co-branded and such linked
Content is editorially relevant to and enhances the Content
contained in the Online Area from which it is linked, and
(ii) such links would not otherwise violate the terms of this
Agreement, any other AOL policy or impair or impede any AOL
business plan or project. To the extent ICP is permitted to
sell Products through the Online Area in conformance with
Section 4.4 of this Agreement, the AOL Pages shall not
feature promotions for Memorabilia Products or Premium
Information Products of any third party as long as ICP is
permitted to offer, license or sell such Products through the
Online Area pursuant to Section 4.4and does, in fact, offer,
license or sell substantially similar Memorabilia Products or
Premium Information Products through the Online Area.
A.1.1.4 Fantasy Content. At ICP's expense, including the expense
associated with integrating the following Content into the
Covered Properties' Sports Channel fantasy area ("Fantasy
Center"), ICP shall provide to AOL, the following Content:
(A) Headline Notes. ICP shall provide to AOL Headline Notes
for inclusion in the Fantasy Center news area as
follows: (a) for baseball and football as of the
Effective Date, and (b) for hockey and basketball as of
the next hockey and basketball season (including,
without limitation, the shortened 1999 NBA basketball
season), respectively, after the Effective Date. During
the baseball and football Seasons, ICP shall provide at
least five daily Headline Notes for each of these
sports. During the hockey and basketball Seasons and the
football and baseball Off-Seasons, ICP shall provide
Headline Notes for each of these sports on an as-needed
basis, but no less often than once per week or as
mutually agreed upon by the Parties.
(B) Fantasy Articles. Fantasy articles ("Fantasy Articles")
written by Bob Nightingale or Tracy Ringolsby or by a
writer of similar caliber approved by AOL for baseball,
football, hockey and basketball for inclusion in the
Fantasy Center analysis area as follows: (a) during the
baseball and football Seasons, ICP shall provide at
least one (1) Fantasy Article for each of these sports
per day, (b) during the hockey and basketball Seasons
and the football and baseball Off-Seasons, ICP shall
provide Fantasy Articles for each of these sports on an
as-needed basis, but no less often than once per week or
as mutually agreed upon by the Parties.
A.1.1.5 Kids Programming and Content. ICP shall program an area on
the AOL Service Kids Only Channel ("ICP Kids Area")
consisting of the Content set forth in Exhibit A-3, Paragraph
(b) "Kids Channel." The ICP Kids Area shall be a part of the
Online Area. ICP shall comply with AOL's policies regarding
Content targeted to children under twelve years of age ("AOL
Kids Policies").
A.1.1.6 Extreme Online Area. ICP shall program and produce 50% (as
reasonably determined by AOL) of the main department screen
only AOL-branded online area on the AOL Service where AOL
Members can access information relating to extreme (i.e.
skateboarding, snowboarding, surfing, windsurfing and similar
sports) ("Extreme Main Page"). The ICP-programmed area of the
Extreme Main Page shall link to Extreme Athlete Pages and
Extreme Deeper Content (collectively referred to as the
"Extreme Online Area") AOL shall designate the look and feel
of the area, and shall designate, at its sole discretion,
which portion of the Extreme Online Area shall be programmed
by ICP and which portions shall be programmed by AOL or any
3rd party. The programming on the Extreme Online Area to be
provided by ICP shall consist of the following:
(A) Extreme Athlete Pages. ICP shall program and produce
Customized Programming featuring top extreme sports
athletes as set forth in Exhibit A-3.
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(B) Extreme Deeper Content. ICP shall provide detailed
content around events, sports, stars and other relevant
aspects of extreme sports and the extreme sports
culture.
(C) Updates. Unless otherwise requested by AOL, ICP shall
update the Team Pages to keep them dynamic and robust as
set forth on the schedule set forth in Exhibit A-6.
A.1.1.7 Talent and Athletes. ICP shall provide at least twenty-five
(25) athletes, including without limitation ten (10) Star
Athletes per year, and other talent for regular chats and
live events in the AOL Sports Live Online Area, based upon a
mutually agreed upon schedule. ICP agrees to work with AOL to
create appropriate promotional plans with respect to such
chat and live events. ICP agrees to use best efforts to give
AOL at least twenty-four (24) hours notice to cancel any
scheduled athlete appearance on the AOL Service.
A.1.1.8 Feeds. ICP shall provide within the Customized Programming
and/or Customized Site: (i) Pro Sports Xchange Feed ("PSX
Feed"), and (ii) College Sports Xchange Feed ("CSX Feed").
Subject to all terms of this Agreement, including without
limitation Sections 1.3.1 and 2, ICP shall be entitled to
promote and market Premium Information Products through the
inclusion of a promotional link. Other than such promotion,
the Feeds shall contain no advertising, promotion or
merchandising. The Feeds shall consist of in-depth, team-by-
team information in a quality and delivered on a schedule
similar to the Feeds currently being delivered and displayed
on the applicable AOL Property. The Feeds shall comply with
the Operating Standards set forth in Exhibit E to the extent
that the Feeds are delivered via FTP. The Content of the
Feeds shall be as currently being provided as generally set
forth in Exhibit A-4 hereto. The Feeds as described in
Exhibit A-4 shall be the best quality feeds for that specific
Content that ICP offers or provides to any third party (e.g.,
the PSX NFL Football Team Reports shall be the best such
Content offered or provided by ICP to any third party).
A.1.1.9 AOL International Online Area: For each of AOL Australia,
AOL Brazil, AOL Canada and AOL UK, ICP shall create a unique
online area ("International Online Areas") dedicated to star
athletes. Such International Online Areas will feature at
least three (3) local athletes per country, of which at least
one (1) shall be a Star Athlete. The presentation of the
International Online Areas will generally be equal in quality
to the presentation of the Stars Online Area.
A.1.1.10 Supplemental Reports. ICP shall use commercially reasonable
efforts to make the PSX writer network available to AOL for
additional columns and features on a per-assignment basis
(the "Supplemental Reports"), the content and nature of which
would be determined at AOL's sole discretion. The cost of the
Supplemental Reports shall be no higher than the lowest
commercially reasonable cost offered to any other third party
for substantially similar columns and features.
A.3 -- Rights and Licenses in and related to Athlete Online Areas and Columns.
ICP represents and warrants that it shall have all necessary licenses to
distribute each individual Athlete Online Area and the Columns (as defined
herein) and to grant AOL and AOL's successors, Affiliates, licensees, and
assigns the licenses set forth in Section 1.2 of the Agreement with respect to
each Athlete Online Area and the Columns.
In addition to, and without limiting the other rights in this Agreement, ICP
represents and warrants that it shall have all necessary licenses to grant to
AOL and AOL's successors, Affiliates, licensees, and assigns, for the Term, the
right to use the name, likeness, image, biography, and voice of the Athletes
through the AOL Network in and in connection with the Customized Programming,
Customized Site and/or Licensed Content and in advertising and promotion of one
or more Athlete Online Areas in any and all forms of media now known or
hereafter devised, including but not limited to the Internet, broadcast, non-
broadcast, pay, cable and network television, satellite and closed circuit
transmission, in-flight video, home entertainment (including home video, CD-ROM
in current and future formats, and online services, both commercial and non-
commercial) linear, digital and interactive formats and printed transcripts as
AOL deems appropriate in its sole discretion. Such rights shall include the
right to create, reproduce, distribute, and promote marketing materials
(including but not limited to print, radio, and television advertisements, and
software kits,) for one or more Athlete Online Area; provided, however, unless
otherwise agreed by the Parties: (i) all uses of offline material regarding any
Athlete are subject to the pre-approval right of the Athlete and ICP, (ii) all
such uses shall immediately terminate upon the expiration
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of the Term (except for those pieces which were produced during the Term and are
in the process of distribution thereafter), and (iii) any such use shall be for
the primary purpose of promoting the Stars Online Area.
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EXHIBIT A-2
-----------
Sample Editorial Guidelines
---------------------------
The following is for purposes of general agreement & discussion only and shall
be used as the basis for creating definitive "Editorial Guidelines" as called
for in the Agreement between AOL and ICP. Notwithstanding the forgoing, the
definitive "Editorial Guidelines" shall in no way be limited to the following.
AOL SPORTS PROGRAMMING GUIDELINES: OUTLINE OF KEY COMPONENTS FOR AOL/ICP
INTEGRATED EDITORIAL RELATIONSHIP
Sports coverage must stress immediacy, depth, and interactivity. That is,
screens must be regularly updated to reflect game and news coverage; appropriate
links must be added to provide background and context to the stories; and
opportunities for interactivity must be linked to the stories.
1. Maintenance of Areas and Frequency of Programming
-------------------------------------------------
The Team Pages and Star Pages need to be changed as often as determined by AOL.
In general, this means for In-Season coverage of the major sports (Pro and
College Football, Pro and College Basketball, Baseball, Hockey), all promo slots
will be fresh each day by 7 a.m. and the top promo slots will change throughout
the day as mutually agreed by both parties. The top promo slots also will be
updated throughout the daytime as events or news warrant. During the off-season,
all sport-by-sport screens will change at least once daily.
The Team Pages, Star Pages and Extreme Online Area should be checked by copy
editors to make sure that everything is accurate and that the links are working
properly. The sports screens need to be perfect when it comes to details such as
scores, names of teams, players and events, dates, spelling, grammar, and links
to content and photos. When a mistake is identified, it must be corrected
immediately, regardless of the time of day.
All screens must be checked constantly to make sure that the information is
timely and accurate. Changes must be made before something becomes outdated.
2. Promotions/Style and Guidelines
-------------------------------
The text, headlines and captions should be written in a direct newspaper style
that is consistent with what is currently on the AOL Sports site. The writing
will reflect a consistent editorial attitude determined by AOL. It is important
that the AP editorial style guide be followed. There should never be more than
two hyperlinks within a story text field. The hyperlinks need to be written in a
clear manner and go directly to what is being promoted. Blind hyperlinks are not
acceptable; the member must always have a good idea of where the link will take
him before he clicks on it.
Links to commerce opportunities will not be inserted ad hoc. Instead, they will
be used in contextually appropriate areas as identified by AOL and ICP.
3. Escalation Procedures and Disputes
----------------------------------
AOL Sports has final say on all editorial decisions.
4. Linking
--------
ICP will receive the wingdings on the Team Pages and Star Pages that have been
agreed to in the Agreement. ICP cannot hyperlink or link to other ICP content or
commerce within a story without the approval of AOL Sports.
5. Editorial Calls
---------------
There will be consistent, daily communication regarding editorial direction.
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6. Timelines of Changes
--------------------
Any changes to links should be made immediately by ICP.
7. Right to Modify Links
---------------------
ICP does not have the right to modify the copy for AOL Sports or AOL Sports News
links. ICP does not have the right to update the links AOL Sports owns (unless
requested by AOL Sports). AOL Sports can modify the language on ICP links when
needed to conform to the AOL Sports style as indicated above.
8. Minimum Standards
-----------------
At a minimum, the Programming Guidelines will provide that ICP shall not
include, without AOL's prior approval, any Content that (i) is sexually
explicit, (ii) contains profanity, (iii) is slanderous or libelous, (iv)
denigrates a particular group based on gender, race, creed, religion, sexual
preference or handicap, (v) violates AOL's terms of Service, or (vi) does not
comply with any provision of this Agreement.
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EXHIBIT A-3
------------
Star Online Area Content
------------------------
(A) Athlete Online Areas. Each Athlete Online Area shall contain the following
at a minimum:
. Athlete Journals: Regular journals for each Athlete (during the Season and
the Post-Season), posted on a regular and timely basis. Journal content
shall be fresh, entertaining, and innovative, giving the athlete's
perspective on sports DIRECTLY to the fan. Whenever possible, certain fans
(AOL Members) will be highlighted to heighten the interactivity of the
Journals.
. Bulletin Boards and Chat Rooms: ICP shall produce, manage, and maintain
Athlete bulletin boards and Athlete Chat Rooms in which fans can communicate
to each other and in which Athletes (via ICP) will respond to member
questions within their own folders or chat room.
. Athlete "Themed Nights" and Regular Athlete Programming: Athletes will be
participants in regularly scheduled online programming as set forth in this
Agreement. These programs may involve live chats, question and answer
sessions, and unique content material submitted by the Athletes, such as
analyzing highlights from the past week's games while the footage is shown
on AOL. All "themed nights" and Athlete programming must be pre-approved by
AOL, which approval shall not be unreasonably withheld or delayed.
. Content Links to other AOL sports sites: Links with other AOL sports sites.
Such links shall first be approved by both parties hereto, which approval
shall not be unreasonably withheld or delayed.
. Athlete Direct Fan Club: Online membership clubs, which may include but not
be limited to offering discounted Memorabilia Products, ticket discounts to
special events only accessible by the members, special one-on-one chats,
etc... to members based on usage and contest promotions.
. Athlete Buddy Lists: ICP shall use commercially reasonable efforts to
encourage each Athlete to log into the America Online brand service under a
published screenname (available by Buddy List), during which time the
Athlete can attend a chat room or auditorium chat event with AOL members.
(B) Other Programming. In addition, the Stars Online Area shall include
programming geared toward crossover usage with other AOL Channels. ICP and
AOL (to the extent its participation is required) shall use commercially
reasonable efforts to cause the Stars Online Area to include content which
will be suitable for links to and from the following channels:
. Kids Channel -- ICP shall produce and manage kids programming and
content, subject to the terms and conditions of the Kids Channel.
Subject to this condition, ICP shall provide to the AOL Kids Channel the
following features, at a minimum: an Aggregated Min Screen, updated
weekly; twelve (12) Athlete Journals, updated weekly; The Favre Files
(or similar slideshow-oriented fun series), updated weekly; the Sports
Station for Kids (scores, headlines, etc.), updated daily; Message
Boards for all Athlete Journals, screened daily; a Sports Stars section
which will contain a permanent link or links to Athlete Direct Athlete
Areas and programming designed for kids. ICP acknowledges that all such
Content is content targeted towards children aged 12 and under and ICP
agrees that such Content, including any advertising, commerce and
promotions, shall fully comply with AOL's Kids Policies. In addition,
there shall be public relations support for the Kids Only Channel from
the Athletes featured therein.
ICP agrees to use commercially reasonable efforts to create content and
programming which is suitable for other AOL channels upon the request of
AOL, subject to appropriate links from these channels to the Online
Area.
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(C) Updates. ICP shall update the Stars Online Area in a commercially
reasonable manner so that the site is continually fresh on a daily basis as
agreed to by AOL.
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EXHIBIT A-4
-----------
Content of Feeds
A. PSX Feed. ICP shall provide the PSX Feed in general conformity with
the following description:
(I) PSX Team Reports. The following reports ("PSX Team Reports") shall be
approximately 1000 words per team in length. Each of the PSX Team Reports
will be provided two times each week during the Season and once each week
during the Off-Season. Each PSX Report shall include a Season preview for
each team (the "Season Preview"), a Post-Season review for each team (the
"Post Season Review") and a Draft Special for NFL football in April and for
NBA Basketball in June (the "Draft Specials").
(A) PSX NFL Football Team Reports. Team-by-team reports for each
team in the NFL ("PSX NFL Football Team Reports") sorted as
follows:
(i) National Football Conference
(ii) American Football Conference
(B) PSX MLB Baseball Team Reports. Team-by-team reports for each
team in MLB ("PSX MLB Baseball Team Reports") sorted as follows:
(i) National League
(ii) American League
(C) PSX NBA Basketball Team Reports. Team-by-team reports for each
team in the NBA ("PSX NBA Basketball Team Reports") sorted as
follows:
(i) Eastern Conference
(ii) Western Conference
(D) PSX NHL Hockey Team Reports. PSX reports focusing on NHL inside
information, including insights into strategy and personnel in
the NHL ("PSX NHL Hockey Team Reports") during the NHL Season.
The PSX NHL Hockey Team Reports will be delivered in six weekly
conference files sorted as follows:
(i) Eastern Conference-Northeast
(ii) Eastern Conference-Atlantic
(iii) Eastern Conference-Southeast
(iv) Western Conference-Central
(v) Western Conference-Pacific.
(vi) Western Conference-Northwest
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The PSX NHL Hockey Team Reports will not be as extensive as the
team-by team information found in PSX standard Reports, but will
provide analysis on all NHL teams on a weekly basis by PSX's
conference writers.
(II) PSX Editorial Package. Through its special feature columnists, ICP
shall provide to AOL, via the Feeds, seven (7) mutually agreed-upon
editorial columns ("Columns") per week from mutually agreed-upon respected
sports columnists ("Columnists"), including without limitation, Bob
Nightengale, Ira Miller, Tracy Ringolsby, and shall also include specials
from nationally known insiders ("PSX Editorial Package"). The Columns shall
cover various mutually agreed-upon topics/issues in professional sports.
Certain of these Columns will be devoted to a mutually agreed-upon
consistent subject matter (such as fantasy) each week during the course of
the year, and others will highlight the key topics of that week, with an
emphasis on the sports then In-Season. ICP will cover breaking stories and
submit these if, in its editorial judgment, they are newsworthy. The PSX
Editorial Package shall generally include, but not be limited to, the
following additional coverage for each professional sport, in a form
substantially similar to that which ICP and/or Pro Sports Xchange, Inc. has
previously produced for AOL:mid-season reports by sport, all star game
Notebooks by sport, playoff and championship coverage by sport, Season
review by sport, draft coverage by sport, and additional breaking stories.
B. CSX Feed. ICP shall provide the CSX Feed in general conformity with
the following description ("CSX Team Reports"):
(I) NCAA Football Reports. The following reports which shall be
approximately 1000 words per team in length:
(A) NCAA Football Team Reports. Team-by-team reports for each team
in the following conferences ("NCAA Football Team Reports"),
which NCAA Football Team Reports shall be provided twice per each
week during the Season and once each week during the Off-Season:
(i) ACC
(ii) Big East
(iii) Big Twelve
(iv) Big Ten
(v) Pac Ten
(vi) SEC
(vii) WAC
(viii) Conference USA conferences
(ix) Independent teams (e.g.,Notre Dame)
(B) College Football Conference Reports. Reports provided on a
weekly basis during the NCAA college football regular season
covering the six remaining NCAA Division I-A independent schools
and the Mid-American and Big West conferences on a conference-by-
conference basis ("College Football Conference Report").
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(C) Ivy Reports. Reports provided weekly covering the Ivy League on
a team-by-team basis during the Ivy League regular season ("Ivy
Reports").
(II) CSX Football Editorial Package. CSX shall provide, on a
regularly scheduled basis, an editorial package ("CSX Football
Editorial Package"), which shall include from time to time:
(A) National Columns. National Columns focusing on current events
and topics in NCAA football. The columns shall be provided a
minimum of four (4) times per week during the NCAA college
football regular season ("NCAA Football Season"). When events
warrant (i.e., Bowl Games, recruiting results, etc.), ICCP will
supplement its Special Events Coverage (defined below) with
additional National Columns. National Columns will run twice a
week in the Off-Season.
(B) Game Previews. Game Previews analyzing the major upcoming
Division I-A college football games during each week of the NCAA
Football Season.
(C) Game Day Feature. During the NCAA Football Season, a CSX column
highlighting a game(s) from that week.
(D) Top 112. Every week during the NCAA Football Season, ICP shall
create a Top 112 Column, ranking every Division 1-A team in the
country.
(E) Special Reports. ICP will provide seven special reports that
focus on key events in NCAA football formatted on a team-by-team
or conference-by-conference basis. These Special Reports shall
include:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Name Coverage Date
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Season Previews Preview of all 11 conferences and Late August
independents (122 teams)
- --------------------------------------------------------------------------------------------
Season Reviews A review of all 122 teams Early January
- --------------------------------------------------------------------------------------------
Recruiting Preview Update on recruit's short lists Late January
- --------------------------------------------------------------------------------------------
Recruiting Review Rating team and conference recruits Mid February
- --------------------------------------------------------------------------------------------
Spring Football Preview Each team's primary focus Early April*
- --------------------------------------------------------------------------------------------
Spring Football Review Spring practice review February
- --------------------------------------------------------------------------------------------
Recruiting Features Focus on individual recruits April
- --------------------------------------------------------------------------------------------
</TABLE>
* The actual dates for Spring Practice have not yet been determined by the
teams. These reports will begin in April and run until all conferences have
been reviewed.
(F) Special Events Coverage. ICP shall cover the NCAA Division 1-A
Bowl Games, including team-by team reports on bowl teams on a
weekly basis until
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their bowl game is concluded. ICP shall also provide in-depth
analysis of the Kick-Off Classic, Pigskin Classic, Blue-Gray
Game, East-West Shrine, Senior Bowl and Hula Bowl.
(G) Regional Recruiting News. In addition to the recruiting previews
and reviews, ICP shall provide a weekly column on Regional
Recruiting News once a week May through July.
(III) NCAA Basketball Reports. The following reports which shall be
approximately 1000 words per team in length:
(A) NCAA Basketball Teams Reports. Team-by-team reports for each team
in the following conferences ("NCAA Basketball Team Reports"),
(i) ACC
(ii) Big East
(iii) Big Twelve
(iv) Big Ten
(v) Pac Ten
(vi) SEC
(vii) Atlantic 10
(viii) Conference USA
(ix) Ivy League
(x) Big West
(xi) Colonial
(xii) Missouri Valley
(xiii) WAC
(xiv) MAC
Under the current schedule, which is subject to PSX modification with AOL's
reasonable approval, the NCAA Basketball Team Reports for teams (i) through
(viii) above shall be provided each Monday throughout the Season, with each
team covered until it is eliminated from post-season and weekly during the
Post-Season. The NCAA Basketball Team Reports shall be provided on Tuesday
throughout the Season, which each team covered until it is eliminated from
Post-Season and weekly during the Post-Season.
(B) Conference Reports. Team-by-Team reports for the remaining
sixteen (16) conferences and 156 Division I teams on a once-per-
week basis ("Basketball Conference Reports"). While following the
same editorial approach as the NCAA Basketball Team Reports,
these Conference Reports will not cover each team as extensively.
However, teams in this group that qualify for the NCAA and/or NIT
tournaments will be covered as extensively as the
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NCAA Basketball Team Reports with twice weekly coverage during
the period from qualification until elimination in the above
tournaments. The Conference Reports shall be provided for each
team in the following conferences:
(i) Sun Belt
(ii) Midwest Collegiate
(iii) West Coast
(iv) Metro Atlantic
(v) Big Sky
(vi) America East
(vii) Ohio Valley
(viii) Southern
(ix) Big South
(x) TAAC
(xi) Northeast
(xii) SWAC
(xiii) Southland
(xiv) Mid-continent
(xv) Patriot
(xvi) MEAC
(IV) CSX Basketball Editorial Package. ICP shall provide CSX
perspectives by college basketball writers seven days per week
during the Season ("CSX Basketball Editorial Package"), including
the following:
(A) National Columns. CSX's National Columns focus on current events
and topical issues in college basketball. The National Columns
will appear throughout the week (a minimum of four files per week
during the Season). The National Columns will be bylined by
college basketball writers from across the country. Additional
regional columns will be delivered during the NCAA tournament and
periods of increased news activity (see NCAA/NIT Tournament
Coverage). National Columns will be delivered weekly during the
Off-Season.
(B) Game Previews. CSX Game Previews will provide a profile of major
games during the season. Top weekday games will be previewed in
capsules delivered on Mondays. Top weekend games will be profiled
in capsules delivered on Thursdays.
(C) Top 100. Each Sunday, ICP will deliver the CSX Top 100 Column,
ranking the top Division I teams in the country, with appropriate
comments.
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(D) Special Team Reports. Five Special Team Reports during the year
that focus on key events in college basketball, particularly in
the off-season, on a team-by-team basis. These Special Team
Reports include:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Name Coverage Date
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Season Preview A preview of all teams covered by Mid-November
NCAA Basketball Team Reports and CSX
Basketball Conference Reports
("Basketball Teams")
- ----------------------------------------------------------------------------------------------
Season Review A look back on the season for all April
Basketball Teams
- ----------------------------------------------------------------------------------------------
Recruiting Review Analysis of every team and conference May
- ----------------------------------------------------------------------------------------------
Off-Season Spotlight Up close focus on an interesting May-October
coach, player or recruit from major
teams
- ----------------------------------------------------------------------------------------------
Summer Update Report on progress of team and July, August
players during the Off-Season; look
ahead to Season
- ----------------------------------------------------------------------------------------------
</TABLE>
(E) NCAA/NIT Tournament Coverage. ICP will provide CSX analysis and
perspective on all teams remaining in both the NCAA and NIT
Tournament, with weekly coverage. Tournament coverage will
include the following elements:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Name Coverage
- ------------------------------------------------------------------------------------------
<S> <C>
Team Reports Weekly Team Reports for all teams in each tournament
- ------------------------------------------------------------------------------------------
Live Notebooks Notebooks from writers at NCAA tournament sites
- ------------------------------------------------------------------------------------------
Special Columns Added columns for duration of tournaments
- ------------------------------------------------------------------------------------------
Match-Up Analysis Evaluation of personnel and strategies that will decide
each game
- ------------------------------------------------------------------------------------------
Historical Perspective Anthology of records, statistics and highlights from
previous NCAA tournaments
- ------------------------------------------------------------------------------------------
</TABLE>
(F) November and December Tournaments. CSX analysis of the regular
season tournaments, including Notebooks, from key tournaments
such as the Maui Invitational, Great Eight and Preseason NIT.
(G) Conference Tournaments. CSX Team Reports and Conference Reports
will analyze the conference tournaments on a team by team basis
for all teams playing in the 28 conference tournaments.
Additional coverage will include regional columns and on-site
Notebooks analyzing the major conference tournaments.
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(H) Recruiting Coverage. CSX Basketball Recruiting Updates will be
included in the weekly Team Reports and analyzed in Special Team
Reports after the late-signing period in May. During the Off-
Season, the CSX Off-Season Spotlight will focus on notable
recruits, delving into their lives on and off the court as well
as their significance to their respective college programs.
Throughout the year, ICP shall provide a bi-monthly National
Column covering regional recruiting news, including reports from
major high school all-star games and camps.
(I) Breaking Stories. Utilizing the exclusive CSX writer network,
updates of breaking NCAA basketball stories.
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EXHIBIT A-5
AOL Approval
- ------------
AOL-Approved Product Categories*
AOL hereby approves ICP's offer or sale of the following categories of
sports-related Products in or through the Online Area:
[*] Mass-produced, generally available team or league branded
headgear, footwear, swimwear, and apparel (i.e. sweaters, sweatshirts, jackets,
shirts, shorts, pants, sweatpants, and undergarments).
* Notwithstanding AOL's approval of the above categories of Products, the
Placements and any Content or Links on the AOL Network (including the Welcome
Mats and the hybrid browsers) shall not advertise or promote music or books,
without AOL's prior approval.
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Exhibit A-6
AOL Team Pages Update Schedule
------------------------------
I. All Teams in Three Major Professional Sports plus Key (up to 10) Hockey
Teams
In-Season: Editorial: Daily, plus day-part programming for breaking
stories of major import as reasonably determined by AOL with
consultation of E-Sport.
Photos: Daily, plus in conjunction with breaking stories
above.
Links: Daily
Off-season: Editorial: Three times per week, plus breaking stories of
major import as reasonably determined by AOL with
consultation of E-Sport
Photos: Three times per week, plus in conjunction with
breaking stories above.
Links: Daily sweep
II. Major College Pages - One combined page per major college team - (Up to 60)
August 1 - April 7: Editorial: Daily, plus day-part programming for
breaking stories of major import as reasonably
determined by AOL with consultation of E-Sport
Photos: Daily, plus in conjunction with breaking
stories above.
Links: Daily
April 7 - August 1: Editorial: Twice per week, plus breaking stories of
major import as reasonably determined by AOL with
consultation of E-Sport
Photos: twice per week, plus in conjunction with
breaking stories above.
Links: Four times per week
III. Minor College Pages -- One combined page per minor college team - remaining
Division I football and selected Division I basketball (Up to 60)
August 1 - April 7: Editorial: Three times per week, plus breaking stories
of major import as reasonably determined by AOL with
consultation of E-Sport
Photos: Three times per week, plus in conjunction with
breaking stories above.
Links: Four times per week
*non major hockey teams will use this schedule in-
season
April 7 - August 1: Editorial: Once per week, plus breaking stories of
major import as reasonably determined by AOL with
consultation of E-Sport
Photos: Once per week, plus in conjunction with
breaking stories above.
Links: Three times per week
*non major hockey teams will use this schedule off-
season
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EXHIBIT B -- DEFINITIONS
-------------------------
DEFINITIONS. The following definitions shall apply to this Agreement:
Advertisements. Promotions, advertisements, links, pointers and similar
services or rights.
Advertising Revenues. Aggregate amounts collected plus the fair market value of
any other compensation received (such as barter advertising) by ICP or ICP's
agents, as the case may be, arising from the license or sale of AOL
Advertisements, less applicable Advertising Sales Commissions; provided that, in
order to ensure that AOL receives fair value in connection with AOL
Advertisements, ICP shall be deemed to have received no less than the
Advertising Minimum in instances when ICP makes an AOL Advertisement available
to a third party at a cost below the Advertising Minimum.
Affiliate. Any agent, distributor or franchisee of AOL, or an entity that,
directly or indirectly, controls, is controlled by, or is under common control
with AOL, including any entity in which AOL holds, directly or indirectly, at
least a nineteen percent (19%) equity interest.
AOL Advertisements. Any promotion, advertisement, link pointer, sponsorship or
similar service or right on or through the Customized Site or Customized
Programming.
AOL Service. The standard narrow-band U.S. version of the America Online brand
service, specifically excluding (a) AOL.com/sm/ and any other AOL Interactive
Site, (b) the international versions of an America Online service (e.g., AOL
Japan), (c) the CompuServe(R) brand service and any other CompuServe products or
services, (d) Netscape Netcenter(TM) and any other Netscape products or
services, (e) "ICQ/sm/," "AOL NetFind/sm/," "AOL Instant Messenger/sm/,"
"Digital City/sm/," "AOL NetMail/sm/," "Real Fans/sm/", "Love@AOL/sm/",
"Entertainment Asylum/sm/," "AOL Hometown/sm/" or any similar independent
product, service or property which may be offered by, through or with the U.S.
version of the America Online brand service, (f) any programming or content area
offered by or through the U.S. version of the America Online brand service over
which AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created Content
areas), (g) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through the U.S. version
of the America Online brand service, (h) any property, feature, product or
service which AOL or its affiliates may acquire subsequent to the Effective Date
and (i) any other version of an America Online service which is materially
different from the standard narrow-band U.S. version of the America Online brand
service, by virtue of its branding, distribution, functionality, Content or
services, including, without limitation, any co-branded version of the service
and any version distributed through any broadband distribution platform or
through any platform or device other than a desktop personal computer.
AOL Presence. Any AOL trademark or logo, headline, word or picture and/or any
other Content which describes or promotes AOL.
AOL Property. Any product, service or property owned, operated, marketed,
distributed, or authorized to be distributed by or through AOL or its
Affiliates, including, without limitation, the AOL Service, AOL.com, and AOL
Hometown.
AOL Look and Feel. The elements of graphics, design, organization,
presentation, layout, user interface, navigation, trade dress and stylistic
convention (including the digital implementations thereof) within the AOL
Network and the total appearance and impression substantially formed by the
combination, coordination and interaction of these elements.
AOL Member(s). Any user of the AOL Network, including authorized users
(including any sub-accounts under an authorized master account) of the AOL
Service and/or the CompuServe Service.
AOL Network. (i) The AOL Service, AOL.com, ICQ, and (ii) any other product,
service or property owned, operated, distributed or authorized to be distributed
by or through AOL or its Affiliates worldwide (and including those products,
services and properties that are excluded from the definitions of the AOL
Service, AOL.com or any other AOL Property). It is understood and agreed that
the rights of ICP relate solely to particular AOL Properties as expressly set
forth in this Agreement and not generally to the AOL Network.
AOL Purchaser. (i) Any person or entity who enters the Customized Site or the
Customized Programming from the AOL Network including, without limitation, from
any third party area therein (to the extent entry from such third party area is
traceable through both Parties' commercially reasonable efforts), and generates
Transaction Revenues (regardless of whether such person or entity provides an e-
mail address during registration or entrance to the Customized Site which
includes a domain other than an "AOL.com" domain); and (ii) any other person or
entity who, when purchasing a product, good or service through a Linked ICP
Interactive Site, provides an AOL.com domain name or a CompuServe.com domain
name as part of such person or entity's e-mail address and provided that any
person or entity who has previously satisfied the definition of AOL Purchaser
will remain an AOL Purchaser, and any subsequent purchases by such person or
entity (e.g., as a result of e-mail solicitations or any off-line means for
receiving orders requiring purchasers to reference a specific promotional
identifier or tracking code) will also give rise to Transaction Revenues
hereunder (and will not be conditioned on the person or entity's satisfaction of
clauses (i) or (ii) above).
Change of Control. (a) The consummation of a reorganization, merger or
consolidation or sale or other disposition of substantially all of the assets of
a party or (b) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than 50% of either (i) the then outstanding
shares of common stock of such party; or (ii) the combined voting power of the
then outstanding voting securities of such party entitled to vote generally in
the election of directors.
Confidential Information. Any information relating to or disclosed in the
course of this Agreement, which is, or should be reasonably understood to be,
confidential or proprietary to the disclosing Party, including, but not limited
to, the material terms of this Agreement, information about AOL Members,
technical processes and formulas, source codes, product designs, sales, cost and
other unpublished financial information, product and business plans, projections
and marketing data. "Confidential Information" shall not include information
(a) already lawfully known to or independently developed by the receiving Party,
(b) disclosed in published materials, (c) generally known to the public, or (d)
lawfully obtained from any third party.
Content. Text, images, video, audio (including, without limitation, music used
in time relation with text, images, or video), and other data, products,
services, advertisements, promotions, URLs, keywords and other navigational
elements, links, pointers, technology and software.
Customized Programming. Any (a) area within the AOL Network or outside the AOL
Network but exclusively available to AOL Members, which area is developed,
programmed, and/or managed by ICP, in whole or in part, pursuant to this
Agreement and all Content thereon (including, without limitation, message
boards, chat and other AOL Member-supplied content areas contained therein)
including, without limitation, Team Pages, Stars Pages, Extreme Online Area and
any other co-branded site or page, but excluding the Customized Site and (b)
Content provided to AOL by ICP pursuant to this Agreement for distribution on or
through the AOL Network other than on the Customized Site.
Customized Site. Collectively, each version of the Primary Site that is
customized for distribution through the AOL Network in accordance with this
Agreement.
ICP Interactive Site. Any interactive site or area (other than Customized
Programming), including any mirrored site or area, which is managed, maintained
or owned by ICP or its agents or to which ICP provides and/or licenses
information, content or other materials, including, by way of example and
without limitation, (i) an ICP site on the World Wide Web portion of the
Internet or (ii) a channel or area delivered through a "push" product such as
the Pointcast Network or interactive environment such as Microsoft's proposed
Active Desktop or interactive television service such as WebTV.
ICP Presence. Any (a) ICP trademark or logo, (b) headline or picture from ICP
Content, (c) teaser, icon, or link to the Customized Site or Customized
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Programming and/or (d) other Content which originates from, describes or
promotes ICP or ICP's Content. This does not include AOL navigational links
(i.e., links to " teams", "stars" or the names of such teams or stars).
Impression. User exposure to an ICP Presence, as such exposure may be
reasonably determined and measured by AOL in accordance with its standard
methodologies and protocols.
Interactive Service. An entity offering one or more of the following: (i)
online or Internet connectivity services (e.g., an Internet service provider);
(ii) an interactive site or service featuring a broad selection of aggregated
third party interactive content (or navigation thereto) (e.g., an online service
or search and directory service) and/or marketing a broad selection of products
and/or services across multiple interactive commerce categories; (iii) a
persistent desktop client; or (iv) communications software capable of serving as
the principal means through which a user creates, sends or receives electronic
mail or real time or "instant" online messages (whether by telephone, computer
or other means).
Keyword Search Terms. (a) The Keyword online search terms made available on the
AOL Service, combining AOL's Keyword online search modifier with a term or
phrase specifically related to ICP (and determined in accordance with the terms
of this Agreement) and (b) the Go Word online search terms made available on the
CompuServe Service, combining CompuServe's Go Word online search modifier with a
term or phrase specifically related to ICP (and determined in accordance with
the terms of this Agreement).
Linked Interactive Site. Any site or area outside of the AOL Network which is
linked to Customized Programming (through a "pointer" or similar link) in
accordance with the terms and conditions of this Agreement.
Linked ICP Interactive Site. Any ICP Interactive Site which is also a Linked
Interactive Site.
Licensed Sports Product. A sports-related Product which requires a license from
a sports league, team, governing body or player in order to sell such Product.
Licensed Content. All Content offered through [*] pursuant to this Agreement or
otherwise provided by or on behalf of ICP or its agents in connection herewith
(e.g., offline promotional content or online Content for distribution through
the AOL Network), including without limitation all Customized Programming.
Main Screen. The primary or first screen of a particular area or channel.
Memorabilia Products. Products consisting of (i) Authentically autographed
(e.g., autograph not provided by machine or facsimile) sports products deriving
a portion of their value from the autograph, and (ii) commemorative, unique or
limited sports products related to a sport, sporting event, league, team,
players association or athlete.
Premium Information Products. Specialized electronic sports information
Products offered, licensed or sold for an amount charged by ICP to AOL
Purchasers in addition to the base membership fee charged by AOL to AOL Members.
Premium Information Products may include, but shall not be limited to,
electronically distributed informational items such as special event products
(e.g., special Super Bowl reports), special fantasy reports, team fan clubs,
seasonal specials, which Products shall be created and marketed to specialized
audiences subject to the restrictions, terms and conditions contained in the
Agreement. ICP shall be solely responsible for the Content of the Premium
Information Products.
Primary Site. Each Internet site and Content currently located at
www.athletedirect.com, www.psx.com, www.csx.com, and www.rotonews.com and all
derivative URLs which are (i) managed, maintained or owned by ICP or its agents
or (ii) to which ICP licenses information, content or other materials.
Product. Any product, good or service which ICP (or others acting on its behalf
or as distributors) offers, sells, provides, distributes or licenses to AOL
Purchasers directly or indirectly through (i) the Customized Site (including
through any Interactive Site linked thereto) or Customized Programming
(including any Linked Interactive Site), (ii) any other electronic means
directed at AOL Purchasers (e.g., e-mail offers), or (iii) an "offline" means
(e.g., toll-free number) for receiving orders related to specific offers within
the Customized Site or Customized Programming requiring purchasers to reference
a specific promotional identifier or tracking code, including, without
limitation, products sold through surcharged downloads (to the extent expressly
permitted hereunder).
Sports Entertainment Products. Audio-based and or video-based sports-related
content offerings, (i.e., chats, broadcasts, interviews or shows) which feature
athletes, sports writers or other sports personalities.
Term. The period beginning on the Effective Date and ending upon the expiration
or earlier termination of this Agreement.
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EXHIBIT C -- STANDARD LEGAL TERMS AND CONDITIONS
------------------------------------------------
I. AOL NETWORK
Content. ICP represents and warrants that all Content contained within the
Customized Site and Customized Programming and all Licensed Content (i) does and
will conform to AOL's applicable Terms of Service, the terms of this Agreement
and any other standard, written policy of AOL and any applicable AOL Property
(including without limitation AOL's kids policies to the extent applicable),
(ii) does not and will not infringe on or violate any copyright, trademark, U.S.
patent, rights of publicity, moral rights or any other third party right,
including without limitation, any music performance or other music related
rights, and (iii) does not and will not contain any Content which violates any
applicable law or regulation ((i), (ii) and (iii) collectively, the "Rules"). In
the event that AOL notifies ICP in writing that any such Content, as reasonably
determined by AOL, does not comply or adhere to the Rules, then ICP shall use
its best efforts to block access by AOL Members to such Content. In the event
that ICP cannot, through its commercially reasonable efforts, block access by
AOL Members to such Content in question, then ICP shall provide AOL prompt
written notice of such fact. AOL may then, at its option, either (i) restrict
access from the AOL Network to the Content in question using technology
available to AOL or (ii) in the event access cannot be restricted, direct ICP to
remove any such Content. ICP will cooperate with AOL's reasonable requests to
the extent AOL elects to implement any such access restrictions.
AOL Network Distribution. The distribution, placements and/or promotions
described in this Agreement or otherwise provided to ICP by AOL shall be used by
ICP solely for its own benefit, will link to and promote solely the Licensed
Content within the Customized Site or Customized Programming expressly described
on Exhibit A and will not be resold, traded, exchanged, bartered, brokered or
otherwise offered or transferred to any third party or contain any branding
other than ICP's branding. Further, the Content of all such distribution,
placements and promotions shall be subject to AOL's policies relating to
advertising and promotion, including those relating to AOL's exclusivity
commitments and other contractual preferences to third parties as set forth in
Section 4 and Section 5.
Changes to AOL Properties. AOL reserves the right to redesign or modify the
organization, structure, "look and feel," navigation and other elements of the
AOLNetwork at any time, including without limitation, by adding or deleting
channels, subchannels and/or screens and/or by outsourcing to a third party the
programming responsibility for any channel, subchannel, screen or portion
thereof. If such redesign or modification substantially modifies the nature of
the distribution provided under this Agreement in a material adverse fashion, or
if AOL is otherwise unable to deliver any particular Promotion, AOL will work
with ICP in good faith to provide ICP, as its sole remedy, with comparable
distribution [*].
Member Page. AOL will have no obligation with respect to the Content and
services available on or through any Member Page including, but not limited to,
any duty to review or monitor any such Content and services. AOL expressly
disclaims any liability to ICP for the Content and services contained in any
Member Page or any expense, claim, demand, costs, loss or damage arising out of
any use of the ICP-provided Content available from, without limitation, a
Community Center or the Customized Site. ICP agrees to release AOL and its
affiliates, including partners, directors, officers, employees and agents from
any and all claims, rights and recourses for such loss or damage.
Contests. ICP shall ensure that any contest, sweepstakes or similar promotion
conducted or promoted through the Customized Site and/or Customized Programming
(a "Contest") complies with all applicable laws and regulations. ICP shall
provide AOL with (i) at least thirty (30) days prior written notice of any
Contest and (ii) upon AOL's request, an opinion from ICP's counsel confirming
that the Contest complies with all applicable federal, state and local laws and
regulations.
Disclaimers. ICP agrees to include within the ICP Internet and Customized
Programming a disclaimer (the specific form and substance to be mutually agreed
upon by the Parties) indicating that all Content (including any products and
services) is provided solely by ICP and not AOL, and any transactions are solely
between ICP and AOL Members using or purchasing such Content and AOL is not
responsible for any loss, expense or damage arising out of the Licensed Content
or services provided through the Customized Site or Customized Programming
(e.g., "In no event shall AOL nor any of its agents, employees, representatives
or affiliates be in any respect legally liable to you or any third party in
connection with any information or services contained herein and AOL makes no
warranty or guaranty as to the accuracy, completeness, correctness, timeliness,
or usefulness of any of the information contained herein"). ICP shall not in any
manner state or imply that AOL recommends or endorses ICP or its Content.
Insurance. At all times during the Term, ICP shall maintain an insurance policy
or policies reasonably satisfactory to AOL and adequate in amount to insure ICP
against all liability associated with the Licensed Content. ICP shall include
AOL as a named insured party on such policy or policies. ICP shall provide AOL
with a copy of such policy or policies within thirty (30) days after the
Effective Date, failing which, in addition to all other available remedies, AOL
shall be entitled to delay the launch of the Licensed Content on the AOL Network
(and reduce AOL's promotional and Impressions obligations proportionately). ICP
shall promptly notify AOL of any material change in such policy or policies.
Rewards Programs. ICP shall not offer, provide, implement or otherwise make
available on the Customized Site or Customized Programming any promotional
programs or plans that are intended to provide customers with third party
rewards or benefits in exchange for, or on account of, their past or continued
loyalty to, or patronage or purchase of, the products or services of ICP or any
third party (e.g., a promotional program similar to a "frequent flier" program),
unless such promotional program or plan is provided exclusively through AOL's
"AOL Rewards" program, accessible on the AOL Service at Keyword: "AOL Rewards"
or provided by ICP directly.
Navigation. In cases where an AOL Member performs a search for ICP through any
search or navigational tool or mechanism that is accessible or available through
the AOL Network (e.g., promotions, Keyword Search Terms, navigation bars or any
other promotions or navigational tools), AOL shall have the right to direct such
AOL Member to the Customized Site, or any other Linked ICP Interactive Site
determined by AOL in its reasonable discretion. ICP shall ensure that
navigation back to the AOL Network from the Customized Site (and from any other
Linked ICP Interactive Site linked to from the AOL Network), whether through a
particular pointer or link, the "back" button on an Internet browser, the
closing of an active window, or any other return mechanism, shall not be
interrupted by ICP through the use of any intermediate screen or other device
not specifically requested by the user, including without limitation through the
use of any html pop-up window or any other similar device.
AOL Look and Feel. ICP acknowledges and agrees that AOL shall own all right,
title and interest in and to the AOL Look and Feel. In addition, AOL shall
retain editorial control over the portions of the AOL pages and forms which
frame the Customized Site or Customized Programming (the "AOL Frames"). AOL
may, at its discretion, incorporate navigational icons, links and pointers or
other Content into such AOL Frames subject to Section 3.1.
Operations. AOL shall be entitled to require reasonable changes to the
Customized Site and Customized Programming to the extent such site will, in
AOL's good faith judgment, adversely affect technical operations of the AOL
Network.
Classifieds and Auctions. ICP shall not implement or promote any classifieds
listing features through Customized Programming or Customized Site without AOL's
prior written approval not to be unreasonably withheld. Such approval may be
conditioned upon, among other things, ICP's conformance with any then-applicable
service-wide technical or other standards related to online classifieds. ICP
shall not conduct any merchandising through the Customized Site or Customized
Programming through auctions, or any method other than a direct sales format
without AOL's prior written consent, except for ICP's relationship with eBay.
Message Boards; Chat Rooms and Comparable Vehicles. Any Content submitted by
ICP or its agents within the AOL Network message boards, chat rooms or any
comparable vehicles will be subject to the license grant relating to submissions
to "public areas" set forth in the AOL Terms of Service. ICP acknowledges that
it has no rights or interest in AOL Member submissions to message boards, chat
rooms or any other vehicles through which AOL Members may make submissions
within the AOL Network. ICP will refrain from editing, deleting or altering,
without AOL's prior approval, any opinion expressed or submission made by an AOL
Member within the Customized Site and Customized Programming except in cases
where ICP has a good faith belief that the Content in question violates an
applicable law, regulation, third party right or the applicable AOL Property's
Terms of Service.
Duty to Inform. ICP shall promptly inform AOL of any information related to the
Customized Site, Customized Programming or the Licensed Content which could
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reasonably lead to a claim, demand or liability of or against AOL and/or its
Affiliates by any third party.
Response to Questions/Comments; Customer Service. ICP shall respond promptly
and professionally to questions, comments, complaints and other reasonable
requests regarding the Customized Site, Customized Programming or the Licensed
Content by AOL Members or on request by AOL, and shall cooperate and assist AOL
in promptly answering the same. ICP shall have sole responsibility for customer
service (including, without limitation, order processing, billing, shipping,
etc.) and AOL shall have no responsibility with respect thereto. ICP shall
comply with all applicable requirements of any federal, state or local consumer
protection or disclosure law.
Statements through AOL Network. ICP shall not make, publish, or otherwise
communicate through the AOL Network any deleterious remarks concerning AOL or
its Affiliates, directors, officers, employees, or agents (including, without
limitation, AOL's business projects, business capabilities, performance of
duties and services, or financial position) which remarks are based on the
relationship established by this Agreement or information exchanged hereunder.
This section is not intended to limit good faith editorial statements made by
ICP based upon publicly available information, or information developed by ICP
independent of its relationship with AOL and its employees and agents.
Production Work. In the event that ICP requests any AOL production assistance,
ICP shall work with AOL to develop detailed production plans for the requested
production assistance (the "Production Plan"). Following receipt of the final
Production Plan, AOL shall notify ICP of (i) AOL's availability to perform the
requested production work, (ii) the proposed fee or fee structure for the
requested production work and (iii) the estimated development schedule for such
work. To the extent the Parties reach agreement regarding implementation of
agreed-upon Production Plan, such agreement shall be reflected in a separate
work order signed by the Parties. All fees to be paid to AOL for any such
production work shall be paid in advance. To the extent ICP elects to retain a
third party provider to perform any such production work, work produced by such
third party provider must generally conform to AOL's production standards
available at Keyword "Styleguide." The specific production resources which AOL
allocates to any production work to be performed on behalf of ICP shall be as
determined by AOL in its sole discretion. With respect to any routine
production, maintenance or related services which AOL reasonably determines are
necessary for AOL to perform in order to support the proper functioning and
integration of the Promotions, Customized Programming and the Customized Site
("Routine Services"), ICP will pay the then-standard fees charged by AOL for
such Routine Services.
Production Tools. AOL shall determine in its sole discretion, which of its
proprietary publishing tools (each a "Tool") shall be made available to ICP in
order to develop and implement the Licensed Content during the Term. ICP shall
be granted a nonexclusive license during the Term to use any such Tool, which
license shall be subject to: (i) ICP's compliance with all rules and regulations
relating to use of the Tools, as published from time to time by AOL, (ii) AOL's
right to withdraw or modify such license at any time, and (iii) ICP's express
recognition that AOL provides all Tools on an "as is" basis, without warranties
of any kind.
Training and Support. AOL shall make available to ICP standard AOL training and
support programs necessary to produce any AOL areas hereunder. ICP can select
its training and support program from the options then offered by AOL. ICP shall
be responsible to pay the fees associated with its chosen training and support
package. In addition, ICP will pay travel and lodging costs associated with its
participation in any AOL training programs (including AOL's travel and lodging
costs when training is conducted at ICP's offices).
Keywords. Any Keyword Search Terms to be directed to the Customized Site shall
be (i) subject to availability for use by ICP and (ii) limited to the
combination of the Keyword search modifier combined with a registered trademark
of ICP. AOL reserves the right to revoke at any time ICP's use of any Keyword
Search Terms which do not incorporate registered trademarks of ICP. ICP
acknowledges that its utilization of a Keyword Search Term will not create in
it, nor will it represent it has, any right, title or interest in or to such
Keyword Search Term, other than the right, title and interest ICP holds in ICP's
registered trademark independent of the Keyword Search Term. Without limiting
the generality of the foregoing, ICP will not: (a) attempt to register or
otherwise obtain trademark or copyright protection in the Keyword Search Term;
or (b) use the Keyword Search Term, except for the purposes expressly required
or permitted under this Agreement. This Section shall survive the completion,
expiration, termination or cancellation of this Agreement.
Accounts. ICP shall be granted [*] per athlete, plus twenty (20) additional
accounts for production purposes, for the exclusive purpose of enabling ICP and
its agents to perform ICP's duties hereunder. The accounts shall be of the type
determined by AOL to be necessary for ICP to perform its duties hereunder. The
twenty (20) accounts granted for production purposes shall be free of charge,
but the [*] per athlete shall be subject to such monthly subscription charges as
AOL shall determine shall be applied to similarly-situated interactive service
providers (not to exceed monthly subscription charges generally available to the
public for a similar type of account). In any event, ICP shall be responsible
for the actions taken under or through its accounts, which actions are subject
to AOL's then-standard Terms of Service, and for any surcharges, including,
without limitation, all premium charges, transaction charges and any applicable
communication charges incurred by any such account. Upon the termination of this
Agreement, all accounts, related screen names and any associated usage credits
or similar rights shall automatically terminate. AOL shall have no liability for
loss of any data or content related to the proper termination of any account.
II. TRADEMARKS
Trademark License. In designing and implementing any marketing, advertising, or
other promotional materials (expressly excluding Press Releases) related to this
Agreement and/or referencing the other Party and/or its trade names, trademarks
and service marks (the "Promotional Materials") and subject to the other
provisions contained herein, ICP shall be entitled to use the following trade
names, trademarks and service marks of AOL: the "America Online" brand service,
"AOL" service/software and AOL's triangle logo and, in connection therewith, ICP
shall comply with the AOL styleguide available at keyword: "style guide"; and
AOL and its Affiliates shall be entitled to use the trade names, trademarks and
service marks of ICP (collectively, together with the AOL marks listed above,
the "Marks"); provided that each Party: (i) does not create a unitary composite
mark involving a Mark of the other Party without the prior written approval of
such other Party and (ii) displays symbols and notices clearly and sufficiently
indicating the trademark status and ownership of the other Party's Marks in
accordance with applicable trademark law and practice. This Section shall
survive the completion, expiration, termination or cancellation of this
Agreement.
Rights. Each Party acknowledges that its utilization of the other Party's Marks
will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.
Quality Standards. Each Party agrees that the nature and quality of its
products and services supplied in connection with the other Party's Marks shall
conform to quality standards communicated in writing by the other Party for use
of its trademarks. Each Party agrees to supply the other Party, upon request,
with a reasonable number of samples of any Materials publicly disseminated by
such Party which utilize the other Party's Marks. Each Party shall comply with
all applicable laws, regulations and customs and obtain any required government
approvals pertaining to use of the other Party's Marks.
Promotional Materials. Each Party will submit to the other Party, for its prior
written approval, which shall not be unreasonably withheld or delayed, any
Promotional Materials; provided, however, that after initial public announcement
of the business relationship between the Parties in accordance with the approval
and other requirements contained herein, either Party's subsequent factual
reference in Promotional Materials to the existence of a business relationship
between AOL and ICP, including, without limitation, the availability of the
Licensed Content through the AOL Network, or use of screen shots relating to the
distribution under this Agreement (so long as the AOL Network is clearly
identified as the source of such screen shots) for promotional purposes shall
not require the approval of the other Party. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the distribution of the Licensed Content through the AOL Network and reused for
such purpose until such approval is withdrawn with reasonable prior notice. In
the event such approval is withdrawn, existing inventories of Promotional
Materials may be depleted.
Infringement Proceedings. Each Party agrees to promptly notify the other Party
of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
III. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party that: (i) such Party has
the full corporate right, power and authority to enter into this Agreement, to
grant the licenses granted hereunder and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of
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its obligations and duties hereunder, do not and will not violate any agreement
to which such Party is a party or by which it is otherwise bound; (iii) when
executed and delivered by such Party, this Agreement will constitute the legal,
valid and binding obligation of such Party, enforceable against such Party in
accordance with its terms; (iv) such Party's Promotional Materials will neither
infringe on any copyright, U.S. patent or any other third party right nor
violate any applicable law or regulation and (v) such Party acknowledges that
the other Party makes no representations, warranties or agreements related to
the subject matter hereof which are not expressly provided for in this
Agreement.
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement. Each Party agrees that it will
take reasonable steps, at least substantially equivalent to the steps it takes
to protect its own proprietary information, during the term of this Agreement,
and for a period of three years following expiration or termination of this
Agreement, to prevent the disclosure of Confidential Information of the other
Party, other than to its employees, or to its other agents who must have access
to such Confidential Information for such Party to perform its obligations
hereunder, who will each agree to comply with this section. Notwithstanding the
foregoing, either Party may issue a press release or other disclosure containing
Confidential Information without the consent of the other Party, to the extent
such disclosure is required by law, rule, regulation or government or court
order or as reasonably advised by legal counsel. In such event, the disclosing
Party will provide at least five (5) business days prior written notice of such
proposed disclosure to the other Party. Further, in the event such disclosure
is required of either Party under the laws, rules or regulations of the
Securities and Exchange Commission or any other applicable governing body, such
Party will (i) redact mutually agreed-upon portions of this Agreement to the
fullest extent permitted under applicable laws, rules and regulations and (ii)
submit a request to such governing body that such portions and other provisions
of this Agreement receive confidential treatment under the laws, rules and
regulations of the Securities and Exchange Commission or otherwise be held in
the strictest confidence to the fullest extent permitted under the laws, rules
or regulations of any other applicable governing body.
V. RELATIONSHIP WITH AOL MEMBERS
Solicitation of Subscribers. (a) During the term of this Agreement and for a
two year period thereafter, ICP will not use the AOL Network (including, without
limitation, the e-mail network contained therein) to solicit AOL Members on
behalf of another Interactive Service. More generally, ICP will not send
unsolicited, commercial e-mail (i.e., "spam") or other online communications
through or into AOL's products or services, absent a Prior Business
Relationship. For purposes of this Agreement, a "Prior Business Relationship"
will mean that the AOL Member to whom commercial e-mail or other online
communication is being sent has voluntarily either (i) engaged in a transaction
with ICP or (ii) provided information to ICP through a contest, registration, or
other communication, which included clear notice to the AOL Member that the
information provided could result in commercial e-mail or other online
communications being sent to that AOL Member by ICP or its agents. Any
commercial e-mail or other online communications to AOL Members which are
otherwise permitted hereunder will (x) include a prominent and easy means to
"opt-out" of receiving any future commercial e-mail communications from ICP and
(y) shall also be subject to AOL's then-standard restrictions on distribution of
bulk e-mail (e.g., related to the time and manner in which such e-mail can be
distributed through or into the AOL product or service in question).
(b) ICP shall ensure that its collection, use and disclosure of information
obtained from AOL Members under this Agreement ("Member Information") complies
with (i) all applicable laws and regulations and (ii) AOL's standard privacy
policies, available on the AOL Service at the keyword term "Privacy" (or, in the
case of the Customized Site, ICP's standard privacy policies so long as such
policies are prominently published on the site and provide adequate notice,
disclosure and choice to users regarding ICP's collection, use and disclosure of
user information). ICP will not disclose Member Information collected hereunder
to any third party in a manner that identifies AOL Members as end users of an
AOL product or service or use Member Information collected under this Agreement
to market another Interactive Service.
Email Newsletters. Any email newsletters sent to AOL Members by ICP or its
agents shall (i) be subject to AOL's policies on use of the email functionality,
including but not limited to AOL's policy on unsolicited bulk email, (ii) be
sent only to AOL Members requesting to receive such newsletters, (iii) not
contain Content which violates AOL's Terms of Service, and (iv) not contain any
advertisements, marketing or promotion for any other Interactive Service.
AOL Member Communications. To the extent ICP is otherwise permitted to send
communications to AOL Members (in accordance with the other requirements
contained herein): in any such communications to AOL Members on or off the
Customized Site (including, without limitation, e-mail solicitations), ICP will
limit the subject matter of such communications to those categories of products,
services and/or content that are specifically contemplated by this Agreement and
will not encourage AOL Members to take any action inconsistent with the scope
and purpose of this Agreement, including without limitation, the following
actions: (i) using an Interactive Site other than the Customized Site for the
purchase of Products, (ii) using Content other than the Licensed Content; (iii)
bookmarking of Interactive Sites; or (iv) changing the default home page on the
AOL browser. Additionally, with respect to such AOL Member communications, in
the event that ICP encourages an AOL Purchaser to purchase products through such
communications, ICP shall ensure that (a) the AOL Network is expressly promoted
as the primary means through which the AOL Purchaser can access the Customized
Site (including without limitation by stating the applicable Keyword Search Term
and including direct links to specific offers within the Customized Site) and
(b) any link to the Customized Site will link to a page which indicates to the
AOL that such user is in a site which is affiliated with the AOL Network.
VI. TREATMENT OF CLAIMS
Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES),
ARISING FROM BREACH OF THIS AGREEMENT, THE USE OF OR INABILITY TO USE THE AOL
NETWORK OR ANY OTHER PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO,
LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS (COLLECTIVELY,
"DISCLAIMED DAMAGES"); PROVIDED THAT EACH PARTY SHALL REMAIN LIABLE TO THE OTHER
PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE CLAIMED BY A THIRD PARTY AND ARE
SUBJECT TO INDEMNIFICATION BELOW. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY"
SECTION, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR MORE THAN THE
AGGREGATE AMOUNTS PAYABLE HEREUNDER IN THE YEAR IN WHICH THE EVENT GIVING RISE
TO SUCH LIABILITY OCCURRED; PROVIDED THAT EACH PARTY SHALL REMAIN LIABLE FOR THE
AGGREGATE AMOUNT OF ANY PAYMENT OBLIGATIONS OWED TO THE OTHER PARTY UNDER THE
PROVISIONS OF THIS AGREEMENT.
No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL NETWORK,
THE AOL TOOLS, OR ANY AOL PUBLISHING TOOLS, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING
THE PROFITABILITY OF AOL NETWORK OR THE CUSTOMIZED SITE.
Indemnity. Each Party will defend, indemnify, save and hold harmless the other
Party and the officers, directors, agents, affiliates, distributors, franchisees
and employees of the other Party from any and all third party claims, demands,
liabilities, costs or expenses, including reasonable attorneys' fees
("Liabilities"), resulting from the indemnifying Party's material breach or
alleged breach of any duty, representation, or warranty of this Agreement. In
addition, ICP will defend, indemnify, save and hold harmless AOL and AOL's
officers, directors, agents, affiliates, distributors, franchisees and employees
from any and all Liabilities arising out of or in any way related to the
Licensed Content.
If a Party entitled to indemnification hereunder (the "Indemnified Party")
becomes aware of any matter it believes is indemnifiable hereunder involving any
claim, action, suit, investigation, arbitration or other proceeding against the
Indemnified Party by any third party (each an "Action"), the Indemnified Party
shall give the other Party (the "Indemnifying Party") prompt written notice of
such Action. Such notice shall (i) provide the basis on which indemnification
is being asserted and (ii) be accompanied by copies of all relevant pleadings,
demands, and other papers related to the Action and in the possession of the
Indemnified Party. The Indemnifying Party shall have a period of ten (10) days
after delivery of such notice to respond. If the Indemnifying Party elects to
defend the Action or does not respond within the requisite ten (10) day period,
the Indemnifying Party shall be obligated to defend the Action, at its own
expense, and by counsel reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall cooperate, at the expense of the Indemnifying Party,
with the Indemnifying Party and its counsel in the defense and the Indemnified
Party shall have the right to participate fully, at its
30
<PAGE>
own expense, in the defense of such Action. If the Indemnifying Party responds
within the required ten (10) day period and elects not to defend such Action,
the Indemnified Party shall be free, without prejudice to any of the Indemnified
Party's rights hereunder, to compromise or defend (and control the defense of)
such Action. In such case, the Indemnifying Party shall cooperate, at its own
expense, with the Indemnified Party and its counsel in the defense against such
Action and the Indemnifying Party shall have the right to participate fully, at
its own expense, in the defense of such Action. Any compromise or settlement of
an Action shall require the prior written consent of both Parties hereunder,
such consent not to be unreasonably withheld or delayed.
Acknowledgment. AOL AND ICP EACH ACKNOWLEDGES THAT THE PROVISIONS OF THIS
AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED, VOLUNTARY ALLOCATION BETWEEN
THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN) ASSOCIATED WITH THE TRANSACTIONS
CONTEMPLATED HEREUNDER. THE LIMITATIONS AND DISCLAIMERS RELATED TO WARRANTIES
AND LIABILITY CONTAINED IN THIS AGREEMENT ARE INTENDED TO LIMIT THE
CIRCUMSTANCES AND EXTENT OF LIABILITY. THE PROVISIONS OF THIS SECTION VI SHALL
BE ENFORCEABLE INDEPENDENT OF AND SEVERABLE FROM ANY OTHER ENFORCEABLE OR
UNENFORCEABLE PROVISION OF THIS AGREEMENT.
VII. ARBITRATION
(a) The Parties shall act in good faith and use commercially reasonable efforts
to promptly resolve any claim, dispute, claim, controversy or disagreement (each
a "Dispute") between the Parties or any of their respective subsidiaries,
affiliates, successors and assigns under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby. If the Parties cannot resolve the Dispute within such
timeframe, the Dispute shall be submitted to the Management Committee for
resolution. For ten (10) days after the Dispute was submitted to the Management
Committee, the Management Committee shall have the exclusive right to resolve
such Dispute; provided further that the Management Committee shall have the
final and exclusive right to resolve Disputes arising from any provision of this
Agreement which expressly or implicitly provides for the Parties to reach mutual
agreement as to certain terms. If the Management Committee is unable to
amicably resolve the Dispute during the ten (10) day period, then the Management
Committee will consider in good faith the possibility of retaining a third party
mediator to facilitate resolution of the Dispute. In the event the Management
Committee elects not to retain a mediator, the Dispute will be subject to the
resolution mechanisms described below. "Management Committee" shall mean a
committee made up of a senior executive from each of the Parties for the purpose
of resolving Disputes under this Section and generally overseeing the
relationship between the Parties contemplated by this Agreement. Neither Party
shall seek, nor shall be entitled to seek, binding outside resolution of the
Dispute unless and until the Parties have been unable to amicably resolve the
dispute as set forth in this paragraph (a) and then, only in compliance with the
procedures set forth in this Section.
(b) Except for Disputes relating to issues of (i) proprietary rights, including
but not limited to intellectual property and confidentiality, and (ii) any
provision of this Agreement which expressly or implicitly provides for the
Parties to reach mutual agreement as to certain terms (which shall be resolved
by the Parties solely and exclusively through amicable resolution as set forth
in paragraph (a), any Dispute not resolved by amicable resolution as set forth
in paragraph (a) shall be governed exclusively and finally by arbitration. Such
arbitration shall be conducted by the American Arbitration Association ("AAA")
in Washington, D.C. and shall be initiated and conducted in accordance with the
Commercial Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes ("Complex
Procedures"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures shall
not apply in order to promote the efficient arbitration of Disputes where the
nature of the Dispute, including without limitation the amount in controversy,
does not justify the application of such procedures.
(c) The arbitration panel shall consist of three arbitrators. Each Party shall
name an arbitrator within ten (10) days after the delivery of the Demand. The
two arbitrators named by the Parties may have prior relationships with the
naming Party, which in a judicial setting would be considered a conflict of
interest. The third arbitrator, selected by the first two, shall be a neutral
participant, with no prior working relationship with either Party. If the two
arbitrators are unable to select a third arbitrator within ten (10) days, a
third neutral arbitrator will be appointed by the AAA from the panel of
commercial arbitrators of any of the AAA Large and Complex Resolution Programs.
If a vacancy in the arbitration panel occurs after the hearings have commenced,
the remaining arbitrator or arbitrators may not continue with the hearing and
determination of the controversy, unless the Parties agree otherwise.
(d) The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and not state law, shall
govern the arbitrability of all Disputes. The arbitrators shall allow such
discovery as is appropriate to the purposes of arbitration in accomplishing a
fair, speedy and cost-effective resolution of the Disputes. The arbitrators
shall reference the Federal Rules of Civil Procedure then in effect in setting
the scope and timing of discovery. The Federal Rules of Evidence shall apply in
toto. The arbitrators may enter a default decision against any Party who fails
to participate in the arbitration proceedings.
(e) The arbitrators shall have the authority to award compensatory damages
only. Any award by the arbitrators shall be accompanied by a written opinion
setting forth the findings of fact and conclusions of law relied upon in
reaching the decision. The award rendered by the arbitrators shall be final,
binding and non-appealable, and judgment upon such award may be entered by any
court of competent jurisdiction. The Parties agree that the existence, conduct
and content of any arbitration shall be kept confidential and no Party shall
disclose to any person any information about such arbitration, except as may be
required by law or by any governmental authority or for financial reporting
purposes in each Party's financial statements.
(f) Each Party shall pay the fees of its own attorneys, expenses of witnesses
and all other expenses and costs in connection with the presentation of such
Party's case (collectively, "Attorneys' Fees"). The remaining costs of the
arbitration, including without limitation, fees of the arbitrators, costs of
records or transcripts and administrative fees (collectively, "Arbitration
Costs") shall be born equally by the parties. Notwithstanding the foregoing,
the arbitrators may modify the allocation of Arbitration Costs and award
Attorneys' Fees in those cases where fairness dictates a different allocation of
Arbitration Costs between the Parties and an award of Attorneys' Fees to the
prevailing Party as determined by the arbitrators.
(g) Any Dispute that is not subject to final resolution by the Management
Committee or to arbitration under this Section or law (collectively, "Non-
Arbitration Claims") shall be brought in a court of competent jurisdiction in
the Commonwealth of Virginia. Each Party irrevocably consents to the exclusive
jurisdiction of the courts of the Commonwealth of Virginia and the federal
courts situated in the Commonwealth of Virginia, over any and all Non-
Arbitration Claims and any and all actions to enforce such claims or to recover
damages or other relief in connection with such claims or to enforce a judgment
rendered in an arbitration proceeding.
VIII. MISCELLANEOUS
Auditing Rights. Each Party shall maintain complete, clear and accurate records
of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, AOL shall have the right, at its expense, to
conduct a reasonable and necessary copying and inspection of portions of the
Records of ICP that are directly related to amounts payable to AOL pursuant to
this Agreement, which right may, at AOL's option, be exercised by [*] an
independent certified public accounting firm to conduct such inspection. For the
sole purpose of ensuring compliance with this Agreement, ICP shall have the
right, at its expense, to direct an independent certified public accounting firm
subject to strict confidentiality restrictions to conduct a reasonable and
necessary copying and inspection of portions of the Records of AOL that are
directly related to amounts payable to ICP pursuant to this Agreement. Any such
audit may be conducted after twenty (20) business days prior written notice,
subject to the following. Such audits shall not be made more frequently than
once every twelve months. No such audit of AOL shall occur during the period
beginning on June 1 and ending October 1. In lieu of providing access to its
Records as described above, AOL shall be entitled to provide ICP with a report
from an independent certified public accounting firm confirming the information
to be derived from such Records.
Excuse. Neither Party shall be liable for, or be considered in breach of or
default under this Agreement on account of, any delay or failure to perform as
required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.
Independent Contractors. The Parties to this Agreement are independent
contractors. Neither Party is an agent, representative or partner of the other
Party. Neither Party shall have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement shall not be interpreted or
construed to create an
31
[*] Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
association, agency, joint venture or partnership between the Parties or to
impose any liability attributable to such a relationship upon either Party.
Notice. Any notice, approval, request, authorization, direction or other
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname
"[email protected]" in the case of AOL) or by confirmed facsimile; (ii) on the
delivery date if delivered personally to the Party to whom the same is directed;
(iii) one business day after deposit with a commercial overnight carrier, with
written verification of receipt; or (iv) five business days after the mailing
date, whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no. 703-
265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of ICP, except as otherwise specified herein, the notice address shall be the
address for ICP set forth in the first paragraph of this Agreement, with the
other relevant notice information, including the recipient for notice and, as
applicable, such recipient's fax number or AOL e-mail address, to be as
reasonably identified by AOL.
No Waiver. The failure of either Party to insist upon or enforce strict
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
Return of Information. Upon the expiration or termination of this Agreement,
each Party shall, upon the written request of the other Party, return or destroy
(at the option of the Party receiving the request) all confidential information,
documents, manuals and other materials specified by the other Party.
Survival. Sections IV, V, VI, VII and VIII of this Exhibit C, shall survive the
completion, expiration, termination or cancellation of this Agreement. In
addition, all payment terms of this Agreement and any provision that expressly
states that it shall survive or which, by its nature, must survive the
completion, expiration, termination or cancellation of this Agreement, shall
survive the completion, expiration, termination or cancellation of this
Agreement.
Entire Agreement. This Agreement sets forth the entire agreement and supersedes
any and all prior agreements of the Parties with respect to the transactions set
forth herein. Neither Party shall be bound by, and each Party specifically
objects to, any term, condition or other provision which is different from or in
addition to the provisions of this Agreement (whether or not it would materially
alter this Agreement) and which is proffered by the other Party in any
correspondence or other document, unless the Party to be bound thereby
specifically agrees to such provision in writing.
Amendment. No change, amendment or modification of any provision of this
Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
Further Assurances. Each Party shall take such action (including, but not
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by the other Party for the implementation or continuing
performance of this Agreement.
Assignment. ICP shall not assign this Agreement or any right, interest or
benefit under this Agreement without the prior written consent of AOL.
Assumption of this Agreement by any successor to ICP (including, without
limitation, by way of merger, consolidation or sale of all or substantially all
of ICP's stock or assets) shall be subject to AOL's prior written approval.
Notwithstanding the foregoing, if AOL's prior written approval for an assumption
is not obtained by ICP in connection with [*], AOL shall have, [*], the right
to terminate this Agreement. Further, in the event of any Change of Control of
ICP or other transaction resulting in control of ICP by an Interactive Service
or an entity that controls, is controlled by or is under common control with an
Interactive Service, AOL shall have, [*], the right to terminate this Agreement
upon written notice to ICP. Subject to the foregoing, this Agreement shall be
fully binding upon, inure to the benefit of and be enforceable by the Parties
hereto and their respective successors and assigns. [*] shall mean a merger,
consolidation, or sale of all or substantially all of the [*], of ICP provided
that (a) the entity assuming this Agreement has adequate capacity (including
financial capacity) to fully perform hereunder, and (b) such assumption shall
not be deemed to release ICP from liability hereunder.
Subcontractors. To the extent ICP desires to utilize consultants or
subcontractors to perform a material portion of its obligations under this
Agreement, utilization of such consultants and/or subcontractors shall be
subject to AOL's prior written approval and ICP shall provide AOL with direct
contact information for the employees of such consultants and/or subcontractors
who are responsible for performing such obligations, which employees shall be
available during business hours for consultation with AOL. ICP shall be
responsible for ensuring that all consultants and subcontractors comply with
this Agreement and ICP shall be liable for any breaches of this Agreement caused
by any consultant or subcontractor.
Construction; Severability. In the event that any provision of this Agreement
conflicts with the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over the Parties to
this Agreement, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
Remedies. Except where otherwise specified, the rights and remedies granted to
a Party under this Agreement are cumulative and in addition to, and not in lieu
of, any other rights or remedies which the Party may possess at law or in
equity.
Applicable Law. This Agreement shall be interpreted, construed and enforced in
all respects in accordance with the laws of the Commonwealth of Virginia except
for its conflicts of laws principles.
Export Controls. Both parties shall adhere to all applicable laws, regulations
and rules relating to the export of technical data and shall not export or re-
export any technical data, any products received from the other Party or the
direct product of such technical data to any proscribed country listed in such
applicable laws, regulations and rules unless properly authorized.
Headings. The captions and headings used in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document. Signatures sent by facsimile shall be deemed original
signatures.
32
* Portions have been omitted pursuant to a confidential treatment request.
<PAGE>
EXHIBIT D
---------
[Intentionally Left Blank]
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EXHIBIT E
---------
TECHNICAL OPERATING STANDARDS
-----------------------------
1. Customized Site Infrastructure. ICP will be responsible for all
communications, hosting and connectivity costs and expenses associated with
the Customized Site. ICP will provide all hardware, software,
telecommunications lines and other infrastructure necessary to meet traffic
demands on the Customized Site from the AOL Network. ICP will design and
implement the network between the AOL Service and Customized Site such that
(i) no single component failure will have a materially adverse impact on
AOL Members seeking to reach the Customized Site from the AOL Network and
(ii) no single line under material control by ICP will run at more than 70%
average utilization for a 5-minute peak in a daily period. In this regard,
ICP will provide AOL, upon request, with a detailed network diagram
regarding the architecture and network infrastructure supporting the
Customized Site. In the event that ICP elects to create a custom version of
the Customized Site in order to comply with the terms of this Agreement,
ICP will bear responsibility for all aspects of the implementation,
management and cost of such customized site.
2. Optimization; Speed. ICP will use commercially reasonable efforts to
ensure that: (a) the functionality and features within the Customized Site
are optimized for the client software then in use by AOL Members; and (b)
the Customized Site is designed and populated in a manner that minimizes
delays when AOL Members attempt to access such site. At a minimum, ICP will
ensure that the Customized Site's data transfers initiate within fewer than
fifteen (15) seconds on average. Prior to commercial launch of any material
promotions described herein, ICP will permit AOL to conduct performance and
load testing of the Customized Site (in person or through remote
communications), with such commercial launch not to commence until such
time as AOL is reasonably satisfied with the results of any such testing.
3. User Interface. ICP will maintain a graphical user interface within the
Customized Site that is competitive in all material respects with
interfaces of other similar sites based on similar form technology. AOL
reserves the right to review and approve the user interface and site design
prior to launch of the Promotions and to conduct focus group testing to
assess compliance with respect to such consultation and with respect to
ICP's compliance with the preceding sentence.
4. Technical Problems. ICP agrees to use commercially reasonable efforts to
address material technical problems (over which ICP exercises control)
affecting use by AOL Members of the Customized Site (an "ICP Technical
Problem") promptly following notice thereof. In the event that ICP is
unable to promptly resolve an ICP Technical Problem following notice
thereof from AOL (including, without limitation, infrastructure
deficiencies producing user delays), AOL will have the right to regulate
the promotions it provides to ICP hereunder until such time as ICP corrects
the ICP Technical Problem at issue.
5. Monitoring. ICP will ensure that the performance and availability of the
Customized Site is monitored on a continuous (24 X 7) basis. ICP will
provide AOL with contact information (including e-mail, phone, pager and
fax information, as applicable, for both during and after business hours)
for ICP's principal business and technical representatives, for use in
cases when issues or problems arise with respect to the Customized Site.
6. Telecommunications. Where applicable the ICP will utilize encryption
methodology to secure data communications between the Parties' data
centers. The network between the Parties will be configured such that no
single component failure will significantly impact AOL Users. The network
will be sized such that no single line over which the ICP has material
control runs at more than 70% average utilization for a 5-minute peak in a
daily period.
7. Security. ICP will utilize Internet standard encryption technologies
(e.g., Secure Socket Layer - SSL) to provide a secure environment for
conducting transactions and/or transferring private member information
(e.g. credit card numbers, banking/financial information, and member
address information) to and from the Customized Site. ICP will facilitate
periodic reviews of the Customized Site by AOL in order to evaluate the
security risks of such site. ICP will promptly remedy any security risks or
breaches of security as may be identified by AOL's Operations Security
team.
8. Technical Performance.
i. ICP will design the Customized Site to support the AOL-Client embedded
versions of the Microsoft Internet Explorer 3.XX and 4.XX browsers
(Windows and Macintosh), the Netscape Browser 4.XX and make
commercially reasonable efforts to support all other AOL browsers
listed at: "http://webmaster.info.aol.com."
ii. To the extent ICP creates customized pages on the Customized Site for
AOL Members, ICP develop and employ a methodology to detect AOL
Members (e.g., examine the HTTP User-Agent field in order to identify
the "AOL Member-Agents" listed at: http://webmaster. info.aol.com and
referenced under the heading "Browser Detection."
iii. ICP will periodically review the technical information made available
by AOL at http://webmaster.info.aol.com.
iv. ICP will design its site to support HTTP 1.0 or later protocol as
defined in RFC 1945 and to adhere to AOL's parameters for refreshing
or preventing the caching of information in AOL's proxy system as
outlined in the document provided at the following URL:
http://webmaster.info.aol.com. ICP is responsible for the manipulation
of these parameters in web based objects so as allow them to be cached
or not cached as outlined in RFC 1945.
v. Prior to releasing material, new functionality or features through the
Customized Site ("New Functionality"), ICP will use commercially
reasonable efforts to either (i) test the New Functionality to confirm
its compatibility with AOL Service client software and (ii) provide
AOL with written notice of the New Functionality so that AOL can
perform tests of the New Functionality to confirm its compatibility
with the AOL Service client software. Should any new material, new
functionality or features through the Customized Site be released
without notification to AOL, AOL will not be responsible for any
adverse member experience until such time that compatibility tests can
be performed and the new material, functionality or features qualified
for the AOL Service.
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<PAGE>
9. AOL Internet Services Partner Support. AOL will provide ICP with access to
the standard online resources, standards and guidelines documentation,
technical phone support, monitoring and after-hours assistance that AOL
makes generally available to similarly situated web-based partners. AOL
support will not, in any case, be involved with content creation on behalf
of ICP or support for any technologies, databases, software or other
applications which are not supported by AOL or are related to any ICP area
other than the Customized Site. Support to be provided by AOL is contingent
on ICP providing to AOL demo account information (where applicable), a
detailed description of the Customized Site's software, hardware and
network architecture and access to the Customized Site for purposes of such
performance and the coordination load testing as AOL elects to conduct.
10. Customized Programming. The terms and conditions of this Exhibit
applicable to the Customized Site shall apply equally to any Customized
Programming that is (a) programmed in HTML or (b) web-based.
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<PAGE>
EXHIBIT G
---------
KEYWORD GUIDELINES
------------------
GRAPHIC: PRINT/TV/"OUT OF HOME"
. Required treatment: (AOL Triangle appears) America Online Keyword: Athletes
Direct
or
America Online Keyword: Athletes Direct
. "America Online" must be spelled out
. Capitalization - listing shall appear in initial caps only
Note: K of Keyword must always be capitalized
. Font, Font style and Size must all be consistent
. Listing size must be of equal prominence to that of any/all other URLs
featured but shall, in any event, be at least10 point font and comprise at
least five percent (5%) of the live area of any print or out of home
promotion and at least 75 scan lines in any television advertisement
AUDIO: TV/RADIO
. "America Online Keyword" must be announced entirely
Example voiceover would read:
"For more information, please visit America Online Keyword: Athletes Direct"
Logo Usage Guidelines
Not Allowed
> No color gradients
> No "filled" icons (must be solid)
> No different colors for triangle and the copy (must be all the same color)
> No words/copy on top of the logo or triangle
> No script writing of "America Online" used alone without triangle
> No adaptations of the icon or logo (i.e., don't turn it into a mountain or
Xmas tree)
> No America Online or AOL in all lower case letters (either use initial caps.
or all caps.)
> No turning logo on its side, upside down, etc.
> No changing the proportion of the logo
> No "deforming" the logo (stretching it out or making it "skinny")
> No giving the logo structural dimension or "blurring" the logo
> No reconfiguring the elements logo (i.e., don't put "America" on the left of
the triangle & "Online" on the right)
Registration marks
> Must have small registration marks ((R)) at the right-hand tip of the
triangle and at the tip of the "e" in "Online"
Approved Colors:
- ----------------
> black
> (reversed-out) white
> PMS 534 blue (NOTE: this is AOL's corporate color)
> PMS 286 blue
> Reflex blue
> PMS 123 yellow
> PMS 2617 purple
NOTE: the entire logo (triangle and type) must always be 100% of the same
color
36
<PAGE>
EXHIBIT 10.20
BROADBAND SPORTS, INC.
STRATEGIC AGREEMENT
This Strategic Agreement (this "Agreement") is made and entered into as of
April 12, 2000 (the "Effective Date"), by and between DIRECTV Enterprises, Inc.,
a Delaware corporation ("Enterprises") and DIRECTV, Inc., a California
corporation and a wholly-owned subsidiary of Enterprises ("DTV"), on the one
hand, and Broadband Sports, Inc., a Delaware corporation ("BBS"), on the other
hand. Enterprises and DTV are sometime referred to herein collectively as
"DIRECTV". Enterprises, DTV and BBS shall each constitute a "Party" under this
Agreement and shall collectively constitute the "Parties" under this Agreement.
RECITALS
WHEREAS, DIRECTV has established a direct broadcast satellite ("DBS")
service-based multi-channel distribution system in the USA currently known as
"DIRECTV";
WHEREAS, BBS is a leading provider of content to sports enthusiasts;
WHEREAS, BBS and DIRECTV desire to enter into this Agreement to set forth
the terms upon which the Parties may engage in investment, programming and
advertising/promotional opportunities;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, BBS and DIRECTV agree as set forth
herein:
1. DEFINITIONS:
-----------
The following terms and variations thereof, as used herein, shall have the
meanings listed below. Terms not defined in this Section shall have the
meanings ascribed to them elsewhere in the Agreement.
"Affiliated Company": With respect to any Person, another Person
controlled by, under common control with or controlling (i.e., the power to
direct affairs by reason of ownership of voting stock, by contract or
otherwise) such Person.
"Ancillary Equity Agreements": The following additional agreements
(individually or collectively, as the context so indicates): (a) the Stock
Purchase Agreement in the form attached hereto as Exhibit "A" and
incorporated herein by this reference; (b) the Warrant Agreement in the
form attached hereto as Exhibit "B" and incorporated herein by this
reference; and (c) the Investor Rights Agreement in the form attached
hereto as Exhibit "C" and incorporated herein by this reference.
"BBS Properties": Internet web sites on the World Wide Web that are owned,
managed, maintained or otherwise controlled by BBS or its agents from time
to time. As of the Effective Date, the BBS Properties includes
AthletesDirect, College Sports Xchange, Pro Sports Xchange, RotoNewsDirect,
SportsAuthenticsDirect and SportsWritersDirect.
"Common Stock": The shares of the common stock of BBS, $.001 par value per
share.
<PAGE>
"Competing Multi-Channel System": Any multi-channel television
distribution system, including without limitation any multi-channel cable
or satellite-delivered television distribution system, operated wholly or
predominantly in the USA, other than the DTV System. By way of example (but
not limitation), a Competing Multi-Channel System would include, for
example, the Dish Network and Time Warner Cable, but would not include, for
example,
"DTV Programming Services": Any programming service, whether owned or
operated by DTV or by a third Person, distributed over the DTV System to
DTV Subscribers.
"DTV Subscribers": Those customers (both residential and non-residential
customers) authorized by DTV to receive the DTV System.
"DTV System": The DBS service owned and operated by DIRECTV and/or its
Affiliates currently known as "DIRECTV" which utilizes DBS communications
satellites located at 101 degrees W.L. to provide programming to
subscribers in the United States (and any successor service).
"Impression": An on-line user's exposure to an advertisement, including,
without limitation, to the applicable advertiser's trademark or logo; or
any teaser, icon, or link to an Internet site of or designated by such
advertiser.
"Internet Sports Provider": An on-line service, web-site or Internet
destination that features, as its predominant category of content, any or
any combination of the following: sports-related news, sports information,
sports programming, sales of sports-related memorabilia and/or sales of
licensed professional/collegiate team wear, apparel or products.
"Laws": Any FCC and any other governmental (whether international, federal,
state, municipal or otherwise) statute, law, rule, regulation, ordinance,
code, directive and order, including, without limitation, any court order.
"Person": Any natural person, corporation, division of a corporation,
partnership, trust, joint venture, limited liability company, association,
company, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Professional League Packages" Those "season packages" of live professional
sports league programming made available by DIRECTV to its DTV Subscribers.
The Professional League Packages currently made available by DTV are the
"MLB Extra Innings" package (comprised of Major League Baseball games) (the
"MLB Package"), "NFL Sunday Ticket" package (comprised of National Football
League games) (the "NFL Package"), the "NBA League Pass" package (comprised
of National Basketball Association games) (the "NBA Package") and the "NHL:
Center Ice" package (comprised of National Hockey League games) (the "NHL
Package").
"Public Financing": The initial public offering of securities of BBS
pursuant to a firmly underwritten sale of Common Stock registered by the
Company in compliance with the Securities Exchange Act of 1934 resulting in
proceeds to BBS of at least $20,000,000.
2
<PAGE>
"TWOS": The full motion video program promoting DTV sports
programming/packages entitled "This Week on Sports" currently running on
the TWOS Channel of the DTV System.
"TWOS Channel": The full motion video programming service promoting DTV
sports programming/packages currently operated and programmed by DTV and
made available to all DTV Subscribers. On the Effective Date, the TWOS
Channel appears on Channel 212 on the DTV System and is currently channel-
mapped to Channels 601 and 701 on the DTV System.
"TWOS Term": The thirty-six (36) month period commencing on August 1, 2000
(subject to the provisions of Section 4.8 below).
2. ISSUANCE OF BBS SECURITIES TO ENTERPRISES:
-----------------------------------------
2.1 Issuance: Subject only to Enterprises' execution and delivery to BBS
--------
of the Ancillary Equity Agreements and Enterprises' delivery to BBS of
the Upfront Stock Purchase Price, BBS shall issue to Enterprises (i)
6,804,417 shares of Common Stock (subject to increase pursuant to
Section 2.2(a), the "Upfront Stock") and (ii) a warrant (the
"Warrant") to purchase an additional 13,608,834 shares of Common
Stock. BBS has advised Enterprises that it anticipates a reverse split
of the number of shares of Common Stock and the Parties expressly
understand that the share numbers described in this Section 2 refer to
pre-split shares.
2.2 Pre-Public Financing Adjustments: Notwithstanding the provisions of
--------------------------------
Section 2.1 above, if, immediately prior to the consummation of a
Public Financing, the then number of shares of Common Stock of BBS
determined on a fully-diluted basis (including all Common Stock
issuable upon the conversion or exercise of any warrant, right or
other security of BBS and excluding the Upfront Stock, the Warrant and
any shares of Common Stock being sold in connection with the Public
Financing) (the "Actual Number of Common Shares") differs from
355,341,779 by more than 1,000,000 shares, then the following shall
apply:
(a) If the Actual Number of Common Shares, is greater than
356,341,779, Enterprises shall have the right, but not the
obligation, prior to the Public Financing, to purchase an
additional number of shares of Common Stock (as Upfront Stock) so
that the aggregate number of shares of Common Stock purchased by
Enterprises as Upfront Stock is equal to two percent (2%) of
ninety percent (90%) of the quotient obtained by dividing the
Actual Number of Common Shares by 0.94 (i.e., 0.018 times [the
Actual Number of Common Shares divided by 0.94]). The per share
purchase price for any such additional shares of Common Stock
shall be as set forth in Section 2.3 below. If Enterprises makes
the foregoing election, then, in addition, BBS shall issue
additional warrants to Enterprises (as part of the Warrant) so
that the aggregate number of shares of Common Stock underlying
the Warrant is equal to four percent (4%) of ninety percent (90%)
of the quotient obtained by dividing the Actual Number of Commons
Shares by 0.94 (i.e., 0.036 times [the Actual Number of Common
Shares divided by 0.94]. The exercise price for any such
additional warrants shall be as set forth in Section 2.4 below.
(b) If the Actual Number of Common Shares, is less than 354,341,779,
then the Parties shall determine the "Adjustment Factor" and an
amount equal to Adjustment Factor (if any) shall be applied
either as a reduction in the Channel Access Payment, a
3
<PAGE>
reduction in the TWOS Sponsorship Payment, a grant to BBS of
additional "spots" on the TWOS Channel (or a combination of the
foregoing, as mutually determined by the Parties). The
"Adjustment Factor" shall equal the product of (i) the positive
difference (the "Adjustment Number") obtained by subtracting an
amount equal to two percent (2%) of ninety percent (90%) of the
quotient obtained by dividing the Actual Number of Common Shares
(post-split) by 0.94 (i.e., 0.018 times [the Actual Number of
Common Shares (post-split) divided by 0.94]) from 6,804,417
(after being adjusted post-split) multiplied by (ii) the positive
difference, if any, obtained by subtracting twelve dollars ($12)
from the actual per share price of Common Stock issued in
connection with the Public Financing.
2.3 Upfront Stock Pricing: The per share price for the Upfront Stock shall
---------------------
be $1.20 per share (for pre-split shares) and the aggregate total
purchase price (the "Upfront Stock Purchase Price") shall be paid by
Enterprises to BBS in cash, against delivery of appropriate stock
certificates.
2.4 Warrant Pricing: The exercise price for the Warrants shall be $1.40
---------------
per share (for pre-split shares); provided, however, that in the event
that, within six (6) months from the Effective Date, BBS shall issue
Common Stock in a single sale or a series of related sales (whether a
private sale, Public Financing or other public sale) involving a
committed stock purchase price of more than $10,000,000 (or a number
of Common Shares in excess of 7,500,000) at a price (taking into
account cash and non-cash consideration received by BBS in connection
with such issuance) other than $1.40 per share (subject to
proportional adjustment to reflect any stock split or similar
recapitalization event), then, with reference to the first such sale
(only and as applicable), the per share exercise price for the
Warrants shall be revised upward or downward (as applicable) to a per
share price equal to the per share price for the Common Stock sold in
connection with such first sale. By way of clarification, the exercise
price of the Warrant shall only be subject to a single adjustment
pursuant to the provisions of this Section 2.4.
2.5 Vesting of the Warrants/Exercise Period: The Warrants shall vest over
---------------------------------------
the three (3) year period commencing on the Effective Date as follows:
one third (1/3) shall vest in four (4) equal quarterly increments
during the one year period commencing on the Effective Date; one third
(1/3) shall vest on the second anniversary of the Effective Date; and
one third (1/3) shall vest on the third anniversary of the Effective
Date. All Warrants shall remain exercisable for a period of three (3)
years from vesting.
2.6 Ancillary Equity Agreements: Concurrently herewith the Parties shall
---------------------------
execute and deliver the Ancillary Equity Agreements. The Parties
respective rights, obligations and restrictions with respect to the
BBS securities being issued under this Agreement (including, without
limitation, registration rights in favor of Enterprises and certain
pre-initial public offering dilution protection in favor of
Enterprises) are, to the extent not described herein, set forth in the
Ancillary Equity Agreements.
2.7 Board Representation: Subject to applicable law in each instance:
--------------------
(a) Upon the closing of the Public Financing, BBS shall immediately
expand the size of the Board of Directors to nine directors and
appoint to the Board of Directors (subject to the majority vote of the
remaining directors, which BBS shall solicit and use its best efforts
to obtain, in accordance with BBS' by-laws), to fill the vacancy, one
individual designated by Enterprises to serve on the Board of
Directors. The director designated by
4
<PAGE>
Enterprises shall, upon his/her appointment, continue to serve as a
director until the next election of directors.
(b) As long as Enterprises continues to own a number of shares of
Common Stock (adjusted for stock splits and similar occurrences) that
is greater than fifty percent (50%) of the aggregate of the number of
Upfront Shares plus the number of shares of Common Stock purchased by
Enterprises (from time-to-time) upon exercises of the Warrants,
Enterprises shall be entitled to designate one individual to be
nominated to the Board of Directors by BBS. Any individual so
designated by Enterprises pursuant to this Section 2.7(b) is referred
to herein as the "Designee."
(c) During the period provided in Section 2.7(b) above, BBS shall
nominate the Designee for election as a director as part of the
management slate that is included in the proxy statement (or consent
solicitation or similar document) of BBS relating to the election of
directors, and shall provide the same support for the election of each
such Designee as it provides to other persons standing for election as
directors of BBS as part of BBS' management slate.
(d) In the event that any Designee shall cease to serve as a director
for any reason (other than the failure of the stockholders of BBS to
elect such person as director), the vacancy resulting therefrom shall
be filled by (subject to the majority vote of the remaining directors,
which BBS shall solicit and use its best efforts to obtain, in
accordance with BBS' by-laws) an individual designated by Enterprises
in accordance with Section 2.7(b) above.
(e) BBS will reimburse each Designee that serves as a director for all
reasonable costs and expenses (including travel expenses) incurred in
connection with such director's attendance at meetings of the Board of
Directors or any committee of the Board of Directors upon which such
director serves, in accordance with BBS' policies regarding
reimbursement of director expenses. BBS shall indemnify and advance
expenses to each such director to the same extent it indemnifies and
advances expenses to its other directors pursuant to its
organizational documents and applicable law.
(f) In each instance, the individual designated by Enterprises as its
Designee (and the individual initially designated by Enterprises under
Section 2.7(a) above) shall be an executive officer of Enterprises.
(g) Following the Public Financing and through the period described in
Section 2.7(b), Enterprises shall have the right to have its designee
participate in all meetings of the Board of Directors of BBS in an
advisory capacity ("Advisory Designee"). The provisions of Section
2.7(f) shall apply with respect to the selection of such Advisory
Designee and the provisions of Section 2.7(e) above with regard to
reimbursement of expenses shall also apply to such Advisory Designee.
Notwithstanding the foregoing, however (i) Enterprises rights under
this Section 2.7(g) shall not apply at any time during which an
individual designated by Enterprises (under Section 2.7(a) above or as
a Designee, as applicable) is a duly appointed/elected member of the
Board of Directors of BBS and (ii) it is understood by the Parties
that the provisions of this Section 2.7(g) are intended to provide a
"back-up" mechanism to ensure that Enterprise will have the ability to
have a designee participate in meetings of the Board of Directors of
BBS in the event that, despite the best efforts of BBS, the Parties
are unsuccessful in having a designee of the Enterprises appointed to
Board of Directors of BBS.
5
<PAGE>
3. TWOS SPONSORSHIP:
----------------
3.1 Primary Internet Sports Advertising Sponsor: During the TWOS Term,
-------------------------------------------
DIRECTV agrees that it shall not provide or permit advertising on the
TWOS Channel for any other Internet Sports Provider, other than the
following (collectively, the "Special Internet Sports Providers"):
3.2 Payment for the TWOS Sponsorship: BBS shall pay to DIRECTV the amount
--------------------------------
of $2,400,000 (the "TWOS Sponsorship Payment") over the TWOS Term, as
follows: (a) $750,000 equally over the five (5) month period
commencing on August 1, 2000 and ending December 31, 2000; and (b)
$1,650,000 equally over the thirty-one (31) month period commencing
January 1, 2001. However, if, pursuant to the provisions of Section
4.8 below, the TWOS Term does not commence until October 1, 2000, then
the foregoing payments (and the aforesaid five (5) month and thirty-
one (31) month payment periods) shall be correspondingly delayed.
Monthly payments of the TWOS Sponsorship Payments shall be paid by BBS
after the conclusion of the applicable month but no later than forty-
five (45) days after receipt by BBS of an invoice from DIRECTV.
3.3 Sponsorship Elements: In exchange for agreeing to make the TWOS
--------------------
Sponsorship Payment, BBS shall be entitled to the following
programming/promotional time on the TWOS Channel during the TWOS Term
("Sponsorship Elements"):
(a) During each annual period during the TWOS Term (the first
annual period being the twelve month period commencing on
the first day of the TWOS Term and so forth), BBS shall have
the right to include feature segments (
) focusing on specific BBS
personality/product/promotion (approximately 3 minutes in
duration) (each, a "Feature Segment"). The Feature Segments
shall be run as part of, or adjacent to each airing of TWOS
(other than the BBS Programming and subject to the
provisions of Section 3.4 below) that may be aired on the
TWOS Channel, but in no event less frequently than once per
hour (other than during the BBS Programming Block(s) and
subject to the provisions of Section 3.4 below).
(b) One (1) :30 segment to air adjacent to each airing of the
Feature Segments noted above, utilizing an in-studio host
directing viewers to AthleteDirect web sites (or, at BBS'
election, to other BBS Properties ) (each, a "Tie-In
Segment").
(c) :30 second avails per hour in each hour for the
portion of any month when the Feature Segments provided in
subparagraph (a) above are not being
6
<PAGE>
aired, for use in conjunction with the promotion of BBS
Programming and/or BBS Properties.
All of the above segments and avails shall be subject to DIRECTV's
editorial standards and practices. DIRECTV shall provide BBS with a
copy of its editorial standards and practices prior to the
commencement of the TWOS Term and shall provide BBS with a copy of any
modifications made thereto by DIRECTV from time-to-time during the
TWOS Term.
3.4 Programming Adjustments: Currently, DIRECTV continuously loops TWOS on
-----------------------
the TWOS Channel twenty-four (24) hours a day, seven (7) days a week.
Of the daily programming time remaining on the TWOS Channel after
excluding the Primary Programming Block (and, if applicable, the
Additional Programming Block) described in Section 4 below, DIRECTV
shall be entitled to decrease by up to four (4) hours per day the
number of hours that TWOS runs on the TWOS Channel without having any
obligation to BBS to run the Feature Segment or Tie-In Segment or
provide the avails described in subparagraph (c) of Section 3.3 above
in conjunction with the replacement programming inserted in place of
TWOS during such four (4) hour period. If, however, DIRECTV decreases
the hours that TWOS is airing on the TWOS Channel by more than four
(4) hours per day (again, after excluding the Primary Programming
Block and, if applicable, the Additional Programming Block, described
in Section 4.2 below), then, in those hours calculated beyond such
four (4) hours (the "Reprogrammed Hours"), the following shall apply:
(a) With respect to up to four (4) Reprogrammed Hours per day,
DIRECTV shall be entitled to air its replacement programming
without any obligation to attach or include BBS' applicable
Feature Segment and Tie-In Segment in or to such replacement
programming. However, during each such Reprogrammed Hour, (i)
during the week when the Featured Segment is otherwise being
aired, BBS shall be entitled to :30 second avails per
hour in each Reprogrammed Hour (for promotional use in accordance
with the provisions of subparagraph (c) of Section 3.3 above) and
(ii) during the balance of the month, BBS shall continue to be
entitled to its avails in each such hour under subparagraph (c)
of Section 3.3 above. In addition, with respect to the week(s)
when the Featured Segment and Tie-In Segment would have otherwise
been aired during the Reprogrammed Hours, DIRECTV shall calculate
the number of hours when the Featured Segment and Tie-In Segment
are not aired during such Reprogrammed Hours and, at such time as
the amount of such "shortfall" hours is equal to an entire
"programming week equivalent" (i.e., 168 hours less the number of
hours in a week represented by the BBS Programming Block(s) and
less the number of hours in a week represented by the up to four
(4) hours per day of replacement programming referenced in the
second sentence of this Section 3.4), then in the immediately
following month DIRECTV shall be required to air an additional
week of Featured Segments and Tie-In Segments to "make good" to
BBS for such lost programming time (it being understood that
during such "make good" week, the provisions of subparagraph (c)
of Section 3.3 above shall not apply, except and to the extent
that BBS would be entitled to such avails pursuant to clause (i)
of this subparagraph (a), if applicable with respect to the "make
good" week).
(b) With respect to any Reprogrammed Hours per day in excess of the
four (4) Reprogrammed Hours per day referred to in subparagraph
(a) above, BBS' rights
7
<PAGE>
with respect to its Sponsorship Elements shall apply with respect
to the replacement programming to the same extent that they apply
to TWOS.
3.5 TWOS Channel Carriage: At all times during the TWOS Term, DIRECTV
---------------------
shall provide the TWOS Channel to all DTV Subscribers as part of
DIRECTV's "basic" tier. At present, the Parties do not contemplate
that, at any time during the TWOS Term, DIRECTV will carry any other
channel on the DTV System that is primarily programmed to promote
sports programming and sports packages that is/are available on the
DTV System, excluding, however, the following (the "Exempt Promotional
Channels"): (a) any non-full motion, sports programming "menu" or
schedule channel, (b) any non-full motion channel for ordering DTV
sports programming and sports packages and (c) DIRECTV's "Big Event"
channel, so long as the most significant portion of the sports
programming/packages promotions thereon are promoting, directly or
indirectly, the special events featured on "Big Event'). However, if
DIRECTV does determine to carry any other channel on the DTV System
that is primarily programmed to promote sports programming and sports
packages that is/are available on the DTV System) (each, a "Covered
Promotional Channel", which term expressly excludes the TWOS Channel
and any Exempt Promotional Channels), then, with respect to each such
Covered Promotional Channel, the following shall apply: (i) BBS shall
be entitled to four (4): 30 second avails per hour on each such
Covered Promotional Channel during each hour that such Covered
Promotional Channel is on the air (for promotional use in accordance
with the provisions of subparagraph (c) of Section 3.3 above); (ii)
the provisions in favor of BBS under Section 3.1 shall equally apply
to each such Covered Promotional Channel; and (iii) if DIRECTV is
prepared to allow a third Person to produce/provide programming for
any such Covered Promotional Channel, then, prior to entering into a
production/programming agreement with such third Person, DIRECTV shall
give BBS a right of first negotiation to discuss in good faith the
possibility of BBS being the Person that provides such
production/programming services. Notwithstanding the provisions of the
foregoing clause (iii), if the third Person with whom DIRECTV is in
discussions regarding production/programming services for a Covered
Promotional Channel is
, then DIRECTV shall be entitled to
enter into an arrangement with such Person in connection with such
Covered Promotional Channel without offering BBS the "first
negotiation" right set forth in clause (iii) above.
4. BBS PROGRAMMING BLOCK (S):
-------------------------
4.1 Channel Access Consideration: As partial consideration for DIRECTV
----------------------------
making the channel access described below in this Section 4 available
to BBS, BBS shall make payment to DIRECTV of a channel access fee of
$1,000,000 (the "Channel Access Fee"), payable in three installments
of $333,333, $333,333 and $333,334 on the first, second and third
anniversary of the commencement of the TWOS Term, respectively.
Notwithstanding the foregoing, if,
, the Channel Access
Fee shall be increased by an amount equal to product of (a) the number
of shares of Upfront Stock purchased by Enterprises (as recalculated
post-split, but after deducting from such number an amount equal to
the Adjustment Number, if any, under Section 2.2(b) above)
8
<PAGE>
multiplied by (b) the difference between fourteen dollars ($14) and
the greater of twelve dollars ($12) or the actual per share price of
Common Stock issued in connection with the Public Financing, such
product to be either, at BBS' option, (i) grossed-up to take into
account the time value of money (calculated using the prevailing
federal funds rate) and proportionally spread across the three (3)
installments of the Channel Access Fee set forth in this Section 4.1
or (ii) paid in full on the first anniversary of the commencement of
the TWOS Term.
4.2 Access to Programming Time: At all times during the TWOS Term, DIRECTV
--------------------------
shall make the TWOS Channel available to BBS for no less than five (5)
hours per day for BBS to provide sports-related programming, as
described below (the "BBS Programming") (the "Primary Programming
Block"). The BBS Programming shall run during one of the two following
time periods, to be selected by DIRECTV no later than May 1, 2000: 5
pm - 10 pm EST (Time Period 1) or 9 pm - 2 am EST (Time Period 2). At
the option of DIRECTV, DIRECTV may also make available to BBS three
(3) additional hours per day of programming on the TWOS Channel (the
"Additional Programming Block" and, together with the Primary
Programming Block, the "BBS Programming Block(s)"), which capacity
shall be provided in a single block of time that may or may not be
contiguous to the Primary Programming Block, but which shall, in any
event, run no earlier than 8 am EST. Such option to provide the
Additional Programming Block must be exercised by DIRECTV no later
than March 1, 2001. If DIRECTV exercises such option, DIRECTV shall
maintain the ability to run TWOS on additional DIRECTV channels on the
DTV System, in DIRECTV's discretion, during the time period of the BBS
Programming Block(s), provided, however, that (a) the Sponsorship
Elements shall be made available with (or in, as applicable) TWOS on
such additional channel(s) during such times and (b) the provisions of
Section 3.1 in favor of BBS with respect to the TWOS Channel shall
extend to such additional channels at all times during the period of
the BBS Programming Block(s) on the TWOS Channel.
4.3 Content of BBS Programming Blocks: BBS shall integrate promotional
---------------------------------
content for DIRECTV sports package offerings into the BBS Programming.
The Parties agree that (i) all such programming shall be at least
thirty (30) minutes in length (including commercial and promotional
time in and adjacent to such programming), (ii) the BBS Programming
will be originally produced by or on behalf of BBS, with new
programming (in whole or in part) to be provided on a weekly basis (at
least 48 weeks/year), (iii) subject to clause (i), BBS shall be
entitled to "loop" its BBS Programming (in whole or in part) during
the BBS Programming Block(s) and (iv) the BBS Programming shall not be
co-branded with, nor otherwise be presented as being a co-production
between BBS and, any third party DTV Programming Service that features
sports programming (e.g., ESPN, etc.). The BBS Programming, production
values, content and look and feel shall: (a) be of a quality at least
equivalent to that of the current TWOS show; (b) be subject to
DIRECTV's editorial and creative approval, which shall not be
unreasonably withheld (
), and (c) provide a
direct tie-in to the sports packages offered by DIRECTV. BBS and
DIRECTV shall negotiate and agree within the sixty (60) day period
commencing on the Effective Date on the procedures and schedules to
enable DIRECTV to approve the BBS Programming and to discuss the
extent to which BBS may "brand" the BBS Programming Block(s) (in
addition to "branding" the BBS Programming itself). The BBS
Programming Block(s)shall contain
9
<PAGE>
no more than twelve (12) minutes of: 30 second avails per hour, of
which DIRECTV shall have the right to use three (3) minutes of such:
30 second avails at no charge to DIRECTV; such avails shall be used
for the placement of advertising by DIRECTV or such third Persons as
DIRECTV may designate, provided that such third Persons shall not
include any other Internet Sports Provider, other than a Special
Internet Sports Provider. BBS shall be responsible for selling avails
aired during the BBS Programming Block(s), except for avails provided
to DIRECTV as described above. Advertising contained in the BBS
Programming Block(s) shall be subject to DIRECTV's contractual
obligations and restrictions
and DIRECTV's standard
advertising policies and guidelines (with DIRECTV agreeing to provide
BBS with a copy of such policies and guidelines prior to the
commencement of the TWOS Term and with a copy of any modifications
made thereto by DIRECTV from time-to-time during the TWOS Term), and
such advertising shall not advertise any
. BBS and DIRECTV shall mutually agree on the
rate card for advertising contained in the BBS Programming, consistent
with DIRECTV's then-current rate card for TWOS advertising (to be
provided by DIRECTV to BBS from time-to-time, but at least quarterly),
such mutual agreement to include mutual agreement as to appropriate
discounts off the rate card, if any, to be made available to
advertisers. The BBS Programming may include such items as features,
interview segments, sports updates and sports merchandising segments,
provided that no more than of BBS Programming
time will be devoted to merchandising. DIRECTV shall receive a royalty
of of net sales of products and merchandise (net
sales being defined as cash received by BBS less product costs,
shipping and fulfillment costs, credit card charges, taxes and
returns) sold on BBS Programming during the BBS Programming Blocks.
BBS shall pay DIRECTV's applicable royalties, if any, on a quarterly
basis, with adjustments to be made between quarterly periods for
reserves and other occurrences requiring a calculation adjustment.
Prior to BBS' inclusion of any merchandising segments, the Parties
shall meet to discuss the manner in which BBS intends to track and
differentiate sales of merchandise to which DIRECTV is entitled to a
royalty, such methodology to also focus on trying to direct BBS'
merchandising customers to BBS and away from DIRECTV for related
customer assistance. DIRECTV shall have audit rights with respect to
the merchandising royalty contemplated herein, such audit right to be
(a) limited to reviewing the relevant books and records of BBS
pertaining to the applicable merchandising activities, (b) exercisable
once per annum, during normal business hours and for not more than ten
(10) business days and (c) conducted by a Big 5 accounting firm or
such other accounting firm requested by DIRECTV and approved by BBS.
4.4 BBS Programming Operations: Upon notice by DIRECTV (which notice
--------------------------
DIRECTV shall use commercially reasonable efforts to provide within
six (6) months after the Effective Date), the BBS Programming will be
delivered by BBS, at BBS's sole cost and expense, to DIRECTV's Los
Angeles uplink center via fiber, pursuant to DIRECTV's standard
delivery requirements. Until such notice, the BBS Programming will be
taped and will be delivered to DIRECTV in accordance with DIRECTV's
standard procedures. DIRECTV
10
<PAGE>
shall bear no liability for any tapes that are not received by DIRECTV
or that are received after the relevant deadlines for such tapes, or
are otherwise received after the relevant deadlines for such tapes, or
are otherwise not delivered in accordance with the DIRECTV procedures.
4.5 Other Considerations: DIRECTV will at all times during the TWOS Term
--------------------
continue to "channel map" the TWOS Channel to at least one channel
"slot" located adjacent to (and preceding) the channel grouping on the
DTV System that is dedicated to sports programming. The BBS
Programming shall be branded by BBS (in accordance with the "branding"
discussions contemplated by Section 4.3 above), provided that BBS will
make such branding consistent with the look and feel of the TWOS
Channel, and provided further that such branding, when exhibited on
the TWOS Channel, shall contain a secondary reference to DIRECTV (and,
at DIRECTV's election, DIRECTV will have the right to superimpose the
DIRECTV "bug" on-air during the BBS Programming). The BBS branding
will appear on the banner description included as part of the DIRECTV
on-screen guide when BBS Programming is delivered.
4.6 Promotion of the TWOS Channel/BBS Programming: DIRECTV will continue
---------------------------------------------
to promote the TWOS Channel consistent with past practices, including
on-air (: 30 avails) and bill stuffer promotions; provided, however,
DIRECTV will air no less than total on-air
avails for the TWOS Channel per week. During every quarter, no less
than of such TWOS on-air promotions shall
be used to promote the BBS Programming on TWOS (the "BBS Programming
Spots"). Such promotional materials promoting the BBS Programming
shall be produced by BBS, subject to review and approval by DIRECTV,
not to be unreasonably withheld, it being understood and agreed that
such promotional materials shall be "branded" by BBS and may, at BBS'
option, include a promotional component (of up to ten (10) seconds)
identifying the location of BBS Properties on-line. The BBS
Programming Spots shall be dispersed on a representative basis across
the DTV Programming Services (and across the day parts of such DTV
Programming Services;
) described on Exhibit "D" attached hereto and incorporated
herein by this reference;
. By way of clarification, if BBS does not elect to utilize the
full complement of its BBS Programming Spots in a particular week, the
un-utilized spots will be deemed forfeited (i.e., they cannot be
"banked" and rolled into a subsequent period).
4.7 Additional Promotion of the TWOS Channel: DIRECTV shall also provide
----------------------------------------
BBS with one (1) page, at no cost to BBS, in each edition of ON Sports
Magazine during the TWOS Term to promote BBS Programming on the TWOS
Channel.
4.8 Delay in Commencement of TWOS Term: The Parties have determined that
----------------------------------
the TWOS Term will commence August 1, 2000; however:
11
<PAGE>
(a) On or prior to May 15, 2000, BBS shall provide DIRECTV with
written notice confirming that BBS will be able to commence
programming the Primary Programming Block (in accordance with the
requirements of this Section 4) on August 1, 2000. If BBS is
unable to provide such confirmation, then the commencement of the
TWOS Term shall be delayed (for all purposes under this
Agreement, including, without limitation, the provisions of this
Section 4 and Section 3 above) to October 1, 2000 (but the
duration of the TWOS Term, as so delayed, shall remain thirty-six
(36) months); provided further, that in the event that BBS is
unable to commence programming the Primary Programming Block (in
accordance with the requirements of this Section) prior to
January 1, 2001 (and/or does not provide DIRECTV with at least
sixty (60) days prior notice of its capability to commence
programming the Primary Programming Block (in accordance with the
requirements of this Section) prior to January 1, 2001), then BBS
shall forfeit the rights and privileges provided under this
Section 4; and
(b) If BBS has not consummated the Public Financing by August 1,
2000, then the commencement of the TWOS Term shall be delayed
(for all purposes under this Agreement, including, without
limitation, the provisions of this Section 4 and Section 3 above)
to October 1, 2000 (but the duration of the TWOS Term, as so
delayed, shall remain thirty-six (36) months).
5. CROSS PROMOTION OF PRODUCTS: DIRECTV and BBS will use commercially
---------------------------
reasonable efforts to cross-market products (such as BBS' My Baseball
Daily and DIRECTV's Professional League Packages) to each other's
subscriber base.
6. MARKETING OBLIGATIONS:
---------------------
6.1 Incentives: If DIRECTV so requests, BBS will provide DIRECTV with the
----------
following in-kind promotional incentives, during the three (3) year
period commencing on August 1, 2000. BBS shall provide electronic
product subscriptions to BBS' on-line subscription products (e.g., My
Baseball Daily) mutually agreed by the Parties in the amount of up to
in the first 12 months and up to (in the
aggregate) over the next 24 months, and shall also provide up to
in sports memorabilia to be mutually selected, during each of
the three (3) annual twelve (12) month periods commencing August 1,
2000. In calculating the value of the electronic product subscriptions
and the sports memorabilia, (a) in the case of electronic product
subscriptions, reference shall be made to (i) the prices at which BBS
currently makes such products available to consumers (other than
during special promotional periods), with respect to those electronic
product subscriptions currently published by BBS or (ii) the prices at
which BBS is generally selling such subscriptions (other than during
special promotional periods), with respect to those electronic product
subscriptions hereafter published by BBS, and (b) in the case of
memorabilia, reference shall be made to the prices at which BBS is
then making such products available to consumers. DIRECTV shall
determine the households, in its sole discretion, that are to be
provided with the materials contemplated under this Section 6.1
(provided, however, that each such household shall be (or become) a
subscriber to one or more of DIRECTV's sports packages) and the
Parties shall hereafter meet to establish appropriate procedures for
affecting the on-line delivery of the electronic product subscriptions
to such identified households.
12
<PAGE>
6.2 Athlete Appearances: In addition, during each year of the three (3)
-------------------
year period set forth in Section 6.1 above, BBS will make at least
(in the aggregate) "A" level talent athletes from the BBS
roster of "signed" athlete available to DIRECTV for an appearance or
interview/photo session promoting relevant Professional League
Packages on the DTV System ("Athlete Appearances"). DIRECTV may use
such material to promote its Professional League Packages across such
media as On Sports, TWOS, DIRECTVsports.com and other on-air spots,
printed advertising and online advertising. The content and the extent
of the use of such promotions and its placement shall be subject to
the approval of the athlete in all cases, which approval shall not be
unreasonably withheld. BBS and DIRECTV shall, upon DIRECTV's request,
meet from time-to-time to discuss possible candidates for Athlete
Appearances and the scope of activities/usage likely to be approved by
such candidates; provided, that BBS agrees to provide Athlete
Appearances in the particular sport(s) requested by DIRECTV (so long
as
); provided
further, that while BBS agrees to give due consideration to the
requests and desires of DIRECTV, BBS shall continue to have, subject
only to the immediately preceding proviso, the right, as between BBS
and DIRECTV, in its sole discretion to make the final determination as
to which "A" level talent athletes shall provide the Athlete
Appearances.
. Examples of "A" level talent include:
(d)
BBS will handle all expenses associated with providing athletes to DTV
(appearance fees, travel/ boarding expenses, etc.) in connection with
Athlete Appearances.
6.3 DIRECTV Purchase of Advertising on BBS Web-Sites: If DIRECTV does not
------------------------------------------------
exercise its option to have BBS program the Additional Programming
Block, then DIRECTV shall purchase advertising Impressions on the BBS
Properties ("BBS Advertising") equal to not less than the following
aggregate sums (as measured using BBS' then standard advertising rate
card, but with an appropriate discount to reflect a level of discount,
if any, then provided by BBS for comparably sized advertising
commitments): $1,250,000 during the period of April 1, 2002 to March
31, 2003 and $1,250,000 during the period of April 1, 2003 to March
31, 2004. The timing and placement of the purchased advertising (if
applicable) shall be mutually agreed upon by the Parties at the time.
DIRECTV may use any BBS Advertising purchased hereunder only as
follows: (a) DIRECTV may use the BBS Advertising for the placement of
advertising regarding DIRECTV's equipment, generic DIRECTV service
offers that do not identify any particular programming, DIRECTV's
Professional League Packages or DIRECTV programming
packages/programming offers in connection with customer acquisition
and/or customer up-grade (it being agreed that such offers may make
reference to "Total Choice Sports" but shall not otherwise emphasize,
although they may incidentally refer to, any DTV Programming Service
that emphasizes sports); and (b) DIRECTV may use up to of the BBS
Advertising in any calendar quarter to promote third party
13
<PAGE>
products and services unrelated to DIRECTV, subject, however, to BBS'
prior written consent, which shall not be unreasonably withheld (the
"Third Party Advertising"). BBS shall be deemed to have pre-approved
Third Party Advertising by the following third Persons, subject to
approval of the creative elements (to assure compliance with BBS'
standards and practices regarding Third Party Advertising on the BBS
Properties): DIRECTV system hardware manufacturers, retailers of
DIRECTV system hardware and DIRECTV services and DIRECTV advanced
product partners, such as WINK and TiVo.
7. RIGHTS TO "MATCH":
-----------------
7.1 Default Internet Sports Website: If DIRECTV determines to provide
-------------------------------
access to Internet websites through the DTV System, and if, in
connection therewith, DIRECTV elects to group such Internet websites
by theme or content category, then the following shall apply: if the
Internet sports websites (if any) are grouped in a distinct area and
such area is accessed through a central "click through" or "button-
through" device, and if DIRECTV is prepared to allow any Internet
sports website to be the "default" Internet sports website within such
area (e.g., to be the first Internet sports website to appear upon
entry to such area or the Internet sports website that will be
"defaulted" to if no further viewing election is made by a viewer
while in such area), then BBS shall be provided the opportunity to bid
to match any offer provided by (or made to) DIRECTV to become the
"default" Internet sports website on the DTV System, provided, that
BBS understands it cannot match an offer (and DIRECTV shall not be
obligated to offer BBS the opportunity to match an offer) in which a
principle component of consideration includes an item or items for
which BBS cannot provide a reasonable equivalent type (as opposed to
amount) of consideration, including, without limitation, cross
promotion in non-Internet media. By way of clarification, DIRECTV's
obligations under this Section 7.1 shall not be applicable to the
distribution of web sites by third party Internet service providers
(e.g., AOL or WebTV) that utilize DIRECTV receiving equipment as a
means of supporting delivery to consumers of Internet content, so long
as DIRECTV does not have any editorial control over, or any control
over the selection of the Internet sports web sites delivered by, such
third party Internet service providers.
7.2 Advertising Inventory Opportunity: BBS shall be provided the
---------------------------------
opportunity to purchase available advertising avails on sports and
non-sports related DTV Programming Services, in an amount no less than
that level of inventory made available by DIRECTV to any other
Internet provider focused primarily on sports.
7.3 Mechanics: The procedures attendant to the opportunities provided to
---------
BBS under Sections 7.1 and 7.2 above shall be hereafter negotiated in
good faith by the Parties, it being the intent of the Parties that
such procedures be fair and reasonable and give due regard to each
Parties' interests and concerns.
8. WEB-SITE CARRIAGE: If DIRECTV shall hereafter enter into an agreement to
-----------------
deliver one or more third Person sports websites (that are otherwise
accessible over the Internet) on the DTV System (excluding, for this
purposes, websites belonging to the professional sports leagues that
provide DIRECTV with the Professional Sports Packages), DIRECTV shall so
advise BBS and, upon BBS's request, negotiate in good faith with BBS with
respect to the delivery of one or more BBS Properties on the DTV System,
it being understood that DIRECTV shall have no further obligation other
than to negotiate in good faith. By way of clarification, DIRECTV's
obligations under this Section 8 shall not be applicable to the
distribution of web sites by third party Internet service providers
(e.g., AOL or WebTV) that
14
<PAGE>
utilize DIRECTV receiving equipment as a means of supporting delivery to
consumers of Internet content, so long as DIRECTV does not have any
editorial control over, or any control over the selection of the Internet
sports web sites delivered by, such third party Internet service
providers.
9. CROSS LICENSES: Each of the Parties hereby grants to the other a limited
--------------
license to use the trademarks and logos of the other in connection with
activities expressly contemplated by this Agreement; all such usage by
the applicable licensee shall be within the applicable licensor's
guidelines for the protection and preservation of such trademarks and
logos (such guidelines, and any updates, to be provided by each Party to
the other from time-to-time during the term of this Agreement). From and
after the Effective Date, the Parties shall negotiate and enter into more
formal reciprocal license agreements more particularly setting forth the
terms and conditions of use. Nothing herein shall be construed to provide
for a transfer or assignment by a Party to the other Parties of any
rights to such first Party's trademarks and logos (beyond the limited
license contemplated by the first sentence of this Section 9).
10. CONFIDENTIALITY: Each Party understands that during the term of this
---------------
Agreement it may have access to, or there may be disclosed to it
("Recipient"), certain information not generally known to the public
about the other party ("Discloser") or other parties with whom Discloser
is doing business (including, without limitation, information relating to
its technical, marketing, product and/or business affairs) (hereinafter
collectively referred to as "Confidential Information"). During and after
the term of this Agreement, Recipient will (a) take such precautions (but
no less than reasonable precautions) to protect the confidentiality of
the Confidential Information of Discloser as Recipient takes to protect
its own similar confidential information; and (b) not disclose any
Confidential Information of Discloser to any third party without the
express authorization of an officer of Discloser other than to (a) those
of its employees, agents and advisors who have a need to know such
information to enable Recipient to perform its obligations hereunder, who
are advised of the confidential and proprietary nature of such
information, and who are subject to a duty of loyalty and confidentiality
to Recipient and (b) a potential private investor in a Party or a
potential purchaser of a Party (or of all or substantially all of the
assets of a Party) and its representatives, all on a need to know basis
and subject to such potential investor/purchaser executing a
confidentiality agreement pursuant to which such potential
investor/purchaser agrees, on behalf of itself and its representatives,
to comply with the confidentiality provisions of this Section.
In the event Recipient is directed to disclose any Confidential
Information of Discloser by operation of law or in connection with a
judicial or governmental proceeding or inquiry, it will promptly notify
Discloser in writing and will assist Discloser in seeking a suitable
protective order or assurance of confidential treatment and in taking any
other steps deemed reasonably necessary by Discloser to preserve the
confidentiality of any such information; nevertheless, Recipient may
disclose only that portion of Discloser's Confidential Information as is
required to comply with any applicable judicial or governmental order and
will afford Discloser a reasonable opportunity to review and comment on
the text of any such disclosure before it is made by Recipient.
Recipient's obligations contained in this paragraph will not apply to any
information that: (i) is rightfully in the possession of Recipient from a
source other than Discloser prior to the time of disclosure of said
information to Recipient hereunder ("Time of Receipt"); (ii) is in the
public domain prior to the Time of Receipt; (iii) becomes part of the
public domain after the Time of Receipt by any means except an
unauthorized act or omission or breach of this Agreement on the part of
Recipient or any of
15
<PAGE>
its employees, agents or advisors; (iv) is supplied to Recipient after
the Time of Receipt without restriction by a third party who is under no
obligation to Discloser to maintain such information in confidence; or
(v) is developed by or for Recipient independently of and without
reference to any Confidential Information of Discloser.
11. REPRESENTATIONS AND WARRANTIES:
------------------------------
11.1 Of BBS: BBS represents and warrants that: (i) BBS has full authority
------
to enter into this Agreement and to make the grants and licenses made
hereunder without violating the rights of, or any agreement
involving, any other Person; (ii) all obligations owed or to be owed
to third Persons by BBS with respect to the activities contemplated
to be undertaken by BBS pursuant to this Agreement are or will be
fully satisfied by BBS, such that DIRECTV will not have any
obligations with respect thereto; and (iii) BBS is not contractually
or legally restricted from performing its obligations under this
Agreement.
11.2 Of DIRECTV: DIRECTV represents and warrants that: (i) it has full
----------
authority to enter into this Agreement and to make the grants and
licenses made hereunder without violating the rights of, or any
agreement involving, any other Person; (ii) all obligations owed or
to be owed to third Persons by DIRECTV with respect to the activities
contemplated to be undertaken by DIRECTV pursuant to this Agreement
are or will be fully satisfied by DIRECTV, such that BBS will not
have any obligations with respect thereto; and (iii) DIRECTV is not
contractually or legally restricted from performing its obligations
under this Agreement.
12. INDEMNIFICATION:
---------------
12.1 Indemnification Obligations: Each Party (the "Indemnifying Party")
---------------------------
shall indemnify, defend and hold harmless the other Party (the
"Indemnified Party") and the Indemnified Party's Affiliates,
officers, directors, employees, agents, successors and assigns
(collectively with the Indemnified Party, the "Indemnified Group")
from, against and with respect to any and all claims, damages,
liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and costs) incurred in connection with any
claim against the Indemnified Group arising out of (a) the
Indemnifying Party's breach of any of its obligations, agreements or
covenants under this Agreement, (b) a breach of any representation or
warranty made by the Indemnifying Party under this Agreement, (c) any
libel, slander, defamation, invasion of privacy or violation or
infringement of copyright, trademark or other third party proprietary
rights as a result of any services, materials, programming, channel
capacity or advertising performed or provided by the Indemnifying
Party pursuant to or in furtherance of the activities contemplated
under this Agreement, (d) any violation of Law committed by the
Indemnified Party or (e) in the case of BBS, the presentation,
marketing or selling of any products or services on the BBS
Programming Block (s) (other than those included in the "spots"
appearing during the BBS Programming Block(s) that were made
available to DIRECTV pursuant to Section 4.3 above) and/or the use by
consumers of such products or services.
12.2 Defense of Third Party Claims: The Indemnified Party shall promptly
-----------------------------
notify the Indemnifying Party in writing of any third party claim or
litigation to which the indemnification provisions of Section 12.1
apply, and the Indemnifying Party shall assume the defense of any
such claim or litigation (provided, that the Indemnified Party shall
have the right to engage separate counsel of its choice and
participate in the defense, negotiation and settlement of such action
or proceeding, but shall bear the fees and
16
<PAGE>
expenses of such separate counsel retained by the Indemnified Party
and the Indemnified Party shall cooperate in the defense of such
claim at no cost or charge to the Indemnifying Party, other than for
performing such acts as the Indemnifying Party shall request). If,
for any reason, the Indemnifying Party shall fail to appoint counsel
on a timely basis, or otherwise fails to confirm its assumption of
the defense of any applicable claim, the Indemnified Party may engage
its own counsel and the reasonable costs and expenses made in
connection therewith shall be paid by the Indemnifying Party. The
Indemnified Party shall have the right to approve or disapprove the
settlement or disposition of any such claim or litigation proposed by
the Indemnifying Party, which right shall expire twenty (20) days
following the Indemnified Party's receipt of written notice thereof.
The Indemnifying Party shall not have the right to enter into any
settlement or compromise unless, in connection therewith, the
Indemnifying Party obtains from the claimants a full release of all
related claims against the Indemnified Group and does not otherwise
purport to adversely affect or curtail the Indemnified Group's
proprietary rights or interests.
13. LIMITATION OF LIABILITY: SUBJECT TO THE INDEMNIFICATION OBLIGATIONS OF
-----------------------
THE PARTIES UNDER SECTION 12 WHICH APPLY IN THE EVENT OF ANY THIRD PARTY
CLAIM GIVING RISE TO SUCH INDEMNIFICATION OBLIGATIONS, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY WITH RESPECT TO ITS OBLIGATIONS UNDER
THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL,
INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES EVEN IF THE PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
14. SPECIAL TERMINATION PROVISIONS: The following shall be in addition to the
------------------------------
termination rights of the Parties under Section 15 below:
(a) If the Public Financing has not occurred prior to the day after the
six (6) month anniversary of the Effective Date, DIRECTV shall have
the right, exercisable by written notice provided to BBS not later
than five (5) business days after such anniversary, to terminate
this Agreement upon ten (10) business days prior written notice. In
the event of any such termination under this subparagraph (a), (i)
DIRECTV shall nevertheless retain all of its Upfront Stock plus any
Warrants exercised prior to said termination, (ii) DIRECTV shall
forfeit any further rights to (including any rights to exercise) any
then unvested or unexercised Warrants, (iii) BBS shall nevertheless
remain obligated to make the Channel Access Payment in accordance
with the provisions of Section 4.1 above) and shall promptly pay
DIRECTV the additional sum of $3,500,000 and (iv) the remaining
obligations of the Parties hereunder (including, without limitation,
those arising under Sections 3, 4 and 5) shall terminate on a
prospective basis, except as provided in Section 16.5 below.
(b) If this Agreement is otherwise terminated by DIRECTV pursuant to the
provisions of Section 15.2 below, then, BBS shall promptly pay to
DIRECTV (without limiting, and in addition to, any damages that
DIRECTV may be entitled to elsewhere in this Agreement for such
breach) (a) (i) the sum of $3,500,000 if such breach occurs during
2000 or (ii) $1,500,000 if such breach occurs during 2001 plus (b)
the then remaining unpaid portion of the Channel Access Fee.
17
<PAGE>
(c)
, then BBS shall have the
right, exercisable by written notice provided to DIRECTV not later
than thirty (30) days after BBS's receipt of written notice from
DIRECTV of such future obligations and restrictions, to terminate
this Agreement upon sixty (60) days prior written notice. In the
event of any such termination under this subparagraph (c), the
consequences shall be the same as arise in connection with a
termination under subparagraph (a) above (except that the $3,500,000
figure in clause (iii) of subparagraph (a) shall be reduced to
$1,500,000 if such termination occurs in 2001 and shall not be
payable, in whole or in part, if such termination occurs after
2001).
15. TERMINATION: This Agreement may be terminated by a Party, in its
-----------
discretion, at any time after any of the following occurrences:
15.1 Termination by BBS: BBS may terminate this Agreement under the
------------------
following circumstances:
(a) Breach of Material Obligation: DIRECTV fails to perform any
-----------------------------
material agreement, term or covenant under this Agreement,
unless (i) DIRECTV cures such failure within thirty (30) days
after receipt of such written notice thereof from BBS or (ii)
DIRECTV has diligently commenced reasonable steps to cure such
failure within such thirty (30) day period and thereafter
diligently and completely cures such failure within an
additional thirty (30) day period;
(b) Breach of Representation/Warranty: Any representation or
---------------------------------
warranty made by DIRECTV hereunder proves to be inaccurate in
any material respect, in which case BBS shall have the right to
terminate this Agreement upon thirty (30) days prior written
notice to DIRECTV of such inaccuracy.
(c) Insolvency: Upon the filing of a voluntary or involuntary
----------
petition in bankruptcy by or against DIRECTV or upon the
appointment of a receiver, trustee, liquidator or custodian for
all or a substantial part of DIRECTV's property, provided, that
in the case of an involuntary petition or appointment, BBS shall
not have the right to terminate if the applicable involuntary
action is vacated within thirty (30) days.
15.2 Termination by DIRECTV: DIRECTV may terminate this Agreement under
----------------------
the following circumstances:
(a) Breach of Material Obligation: BBS fails to perform any material
-----------------------------
agreement, term or covenant under this Agreement, unless (i) BBS
cures such failure within thirty (30) days after receipt of such
written notice thereof from DIRECTV or (ii) BBS has diligently
commenced reasonable steps to cure such failure within such
thirty (30) day period and thereafter diligently and completely
cures such failure within an additional thirty (30) day period;
18
<PAGE>
(b) Breach of Representation/Warranty: Any representation or
---------------------------------
warranty made by BBS hereunder proves to be inaccurate in any
material respect, in which case DIRECTV shall have the right to
terminate this Agreement upon thirty (30) days prior written
notice to BBS of such inaccuracy.
(c) Insolvency: Upon the filing of a voluntary or involuntary
----------
petition in bankruptcy by or against BBS or upon the appointment
of a receiver, trustee, liquidator or custodian for all or a
substantial part of BBS's property, provided, that in the case
of an involuntary petition or appointment, DIRECTV shall not
have the right to terminate if the applicable involuntary action
is vacated within thirty (30) days.
15.3 Remedies: The foregoing termination rights are in addition to a
--------
Party's other rights at law or in equity or pursuant to any other
provision of this Agreement.
16. MISCELLANEOUS:
-------------
16.1 Invoices: The Parties agree that, in respect of any payment hereunder
--------
not otherwise specifically provided for as to date of payment, each
Party shall invoice the other Party for any amount due to it
hereunder and payment shall be due and payable no later than forty-
five (45) calendar days following receipt of such invoice. The
failure by a Party to provide a timely invoice to another Party shall
not constitute a waiver by it of its right to receive such amounts
but the corresponding payment shall not be deemed due and payable
until the expiration of the due date as determined in this Section.
16.2 Severability: If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by reason of any Law
or public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to either Party.
Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner
in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
16.3 No Waiver: The failure of either Party to partially or fully exercise
---------
any right or the waiver by either Party of any breach, shall not
prevent a subsequent exercise of such right or be deemed a waiver of
any subsequent breach of the same or any other term of this
Agreement.
16.4 Assignment: Neither Party may assign any of its rights or obligations
----------
under this Agreement to any other Person without the other Party's
prior written consent; provided, that either Party may assign its
rights and obligations under this Agreement to an Affiliate, to a
third Person which acquires all or substantially all of such Party's
assets or to a third Person into which such Party may be merged or
consolidated, provided that the applicable assignee agrees to assume
all of the assigning Party's obligations hereunder and subject to the
further understanding that the assigning Party shall nevertheless
remain liable for its obligations hereunder (notwithstanding such
assignment) in the absence of a contrary written agreement with the
non-assigning Party. However, in the event this Agreement is assigned
by BBS to a provider of sports video programming (i.e., a Person
19
<PAGE>
who distributes one or more cable programming sports channels in the
United States such as ESPN, FoxSports, etc.), then the BBS
Programming Restrictions set forth below shall apply, commencing as
of the effective date of such assignment. Notwithstanding anything to
the contrary set forth above: (a) BBS may not assign this Agreement
or delegate any of its obligations under this Agreement to a Person
that controls, is controlled by or is under common control with one
or more Competing Multi-Channel System(s) (a "CMCS Person"); and (b)
in the event of a change-of-control of BBS by way of a merger,
consolidation or otherwise that results in BBS being controlled by a
CMCS Person, DIRECTV shall have the right to terminate this Agreement
upon sixty (60) days prior written notice (the consequences of such
termination being the same as arise in connection with a termination
under Section 14.(c) above). The "BBS Programming Restrictions" are
as follows: The BBS Programming is not intended to provide a vehicle
for delivery of a sports programming channel (or portion thereof)
that would ordinarily be the subject of a programming affiliation
agreement between DIRECTV and the provider, nor is it intended to
provide a forum to create subscriber demand for such an affiliation
agreement. Accordingly, the BBS Programming shall not be modified,
promoted or provided in any way that would contravene such intended
restrictions. In addition, (i) the branding of the BBS Programming
shall not be changed without the consent of DIRECTV, which may be
withheld in its discretion and (ii) references to programming
channels or programming providers (whether or not currently
distributed on the DIRECTV System) in the content of the BBS
Programming shall be subject to the consent of DIRECTV, which may be
withheld in its discretion.
16.5 Survival: Upon expiration or termination of this Agreement, the
--------
provisions of Sections 10, 12 and 14 above shall survive.
16.6 Governing Law/Jurisdiction: This Agreement and all matters collateral
--------------------------
hereto shall be construed and enforced in accordance with the laws of
the State of California applicable to contracts executed and
performed entirely therein. Each of the Parties hereby irrevocably
agrees that the state and federal courts located in Los Angeles,
California shall have sole jurisdiction over any suit or other
proceeding arising out of or based upon this Agreement and each Party
hereto hereby waives any claim that it is not subject personally to
the jurisdiction of said courts of that any such suit or proceeding
is brought in an inconvenient forum or improper venue. Each of the
Parties hereto irrevocably agrees that service of process in any such
suit or other proceeding shall be properly made (without limitation)
if delivered to the address(es) set forth in Section 16.12 below.
16.7 Third Party Beneficiaries: No other Persons shall be deemed a third
-------------------------
party beneficiary of this Agreement. Nothing in this Agreement,
express or implied, is intended to confer upon any other Person any
legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
16.8 Amendments: This Agreement may not be amended or modified except by
----------
an instrument in writing signed by both BBS and DIRECTV.
16.9 Force Majeure: Neither Party shall be liable to the other Party for
-------------
any losses or damages incurred by such other Party for breach of any
representation, warranty or covenant made by it in this Agreement or
for failure or delay in providing any services or content described
in this Agreement where such breach, failure or delay is due to acts
of God, failure of carriers, labor disputes, war, public disaster,
failure or delay in software encoding, any failure or degradation in
performance of the DBS satellite(s) or
20
<PAGE>
transponders on such satellites (as applicable) or of the DTV
System, or any other cause beyond its control (each, a "Force
Majeure Event"). Any failure or delay in performance of this
Agreement shall be excused for the period of time such Force Majeure
Event(s) causes such non-performance; provided, however, that if
DIRECTV determines in its sole discretion that it is commercially or
technically unfeasible to cure a Force Majeure Event with respect to
the DTV System or DBS satellite(s) and so notifies BBS, then either
Party may terminate this Agreement effective upon written notice to
the other Party (the consequences of such termination being the same
as provided in the event of a termination under Section 14.(c)
above). The Parties acknowledge and agree that although the TWOS
Channel (including BBS Programming) may at any given time be
uplinked to only one of several DBS satellites, failure or
degradation in any of such DBS satellites may require DIRECTV to
reduce the number of services available for allocation among all of
the DBS satellites, with such reduction including, without
limitation, curtailment or termination of the distribution of the
TWOS Channel (including BBS Programming) by DIRECTV, at DIRECTV's
sole discretion; in such instance, however, each of the Parties
shall have the termination rights set forth in the immediately
preceding sentence.
16.10 Program Guides: During the TWOS Term, DIRECTV shall provide BBS with
--------------
the monthly program guide for the DTV System, not later than the
time that DIRECTV provides such monthly guides to its DTV
Subscribers.
16.11 Counterparts: This Agreement may be executed in one or more
------------
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.
16.12 Notices: All notices hereunder shall be in writing and shall be sent
-------
by certified mail (return receipt requested) or registered mail, by
air courier service, by personal delivery or by facsimile confirmed
by mail (provided that notices of breaches under this Agreement may
not be made by facsimile) to the address (or fax number) of the
Party for whom it is intended, as follows:
BBS: Broadband Sports, Inc., 2120 Colorado Avenue, Suite 200, Santa
Monica, California 90404, Fax No. 310\453-8101, Attn: Vice
President, Business Development, with a separate copy to the
attention of Vice President, General Counsel.
To DIRECTV: DIRECTV, 2230 E. Imperial Hwy, El Segundo, California
90245, Fax No. 310\535-5420, Attn: Vice President of New Ventures,
with a separate copy to the attention of the General Counsel, Fax
No. 310\726-4991.
All notices shall be deemed to have been given (a) on the fifth
business days after the date when sent by registered or certified
mail, if sent by mail, (b) on the first business day after the date
of delivery to an air courier service, if sent by air courier or (c)
on the date of receipt, if sent by personal delivery or facsimile.
21
<PAGE>
16.13 Captions: The headings of sections and subsections contained in this
--------
Agreement are intended for convenience only, and they shall not be
of any effect in construing the contents of the respective sections
and subsections.
16.14 Entire Agreement: This Agreement, together with the Ancillary
----------------
Security Agreements, sets forth the entire agreement between the
Parties on this subject and supersedes all prior negotiations,
understandings and agreements between the Parties concerning the
subject matter.
IN WITNESS WHEREOF, BBS and DIRECTV have each executed this
Agreement as of the Effective Date.
BROADBAND SPORTS, INC. DIRECTV ENTERPRISES, INC.
By: By:
----------------------------- --------------------------
Name: Name:
Title: Title:
DIRECTV, INC.
By:
--------------------------
Name:
Title:
22
<PAGE>
EXHIBIT A
---------
STOCK PURCHASE AGREEMENT
23
<PAGE>
EXHIBIT B
---------
WARRANT AGREEMENT
24
<PAGE>
EXHIBIT C
---------
INVESTOR RIGHTS AGREEMENT
25
<PAGE>
EXHIBIT D
---------
LIST OF DTV PROGRAMMING SERVICES FOR PURPOSES OF SECTION 4.5
26
<PAGE>
EXHIBIT 10.21
BROADBAND SPORTS, INC.
ADVERTISING AGREEMENT
This Advertising Agreement (this "Agreement") is made and entered into as
of April 12, 2000 (the "Effective Date"), by and between DIRECTV, Inc., a
California corporation ("DIRECTV") and Broadband Sports, Inc., a Delaware
corporation ("BBS"). DTV and BBS shall each constitute a "Party" under this
Agreement and shall collectively constitute the "Parties" under this Agreement.
RECITALS
WHEREAS, DIRECTV has established a direct broadcast satellite ("DBS")
service-based multi-channel distribution system in the USA currently known as
"DIRECTV";
WHEREAS, an important component of DIRECTV's programming format for the DTV
System is sports programming and packages of sports programming;
WHEREAS, BBS is a leading provider of content to sports enthusiasts and
operates, programs or controls a number of on-line websites and other on-line
destinations devoted to sports;
WHEREAS, BBS and DIRECTV desire to enter into this Agreement to set forth
the terms upon which the Parties may engage in advertising/promotional
opportunities;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, BBS and DIRECTV agree as set forth
herein:
1. DEFINITIONS:
-----------
The following terms and variations thereof, as used herein, shall have the
meanings listed below. Terms not defined in this Section shall have the
meanings ascribed to them elsewhere in the Agreement.
"Affiliated Company": With respect to any Person, another Person
controlled by, under common control with or controlling (i.e., the power to
direct affairs by reason of ownership of voting stock, by contract or
otherwise) such Person.
"BBS Advertising": Advertising Impressions on the BBS Properties.
"BBS Properties": Internet web sites on the World Wide Web that are owned,
managed, maintained or otherwise controlled by BBS or its agents from time
to time. As of the Effective Date, the BBS Properties includes
AthletesDirect, College Sports Xchange, Pro Sports Xchange, RotoNewsDirect,
SportsAuthenticsDirect and SportsWritersDirect.
"Competing Multi-Channel System": Any multi-channel television
distribution system, including without limitation any multi-channel cable
or satellite-delivered television distribution system, operated wholly or
predominantly in the USA, other than the DTV System. By way of example
(but not limitation), a Competing Multi-Channel System would include, for
example, the Dish Network and Time Warner Cable, but would not include, for
example,
<PAGE>
"DTV Programming Services": Any programming service, whether owned or
operated by DTV or by a third Person, distributed over the DTV System to
DTV Subscribers.
"DTV System": The DBS service owned and operated by DIRECTV and/or its
Affiliates currently known as "DIRECTV" which utilizes DBS communications
satellites located at 101 degrees W.L. to provide programming to
subscribers in the United States (and any successor service).
"DTV Subscribers": Those customers (both residential and non-residential
customers) authorized by DTV to receive the DTV System.
"Impression": An on-line user's exposure to an advertisement, including,
without limitation, to the applicable advertiser's trademark or logo; or
any teaser, icon, or link to an Internet site of or designated by such
advertiser.
"Internet Sports Provider": An on-line service, web-site or Internet
destination that features, as its predominant category of content, any or
any combination of the following: sports-related news, sports information,
sports programming, sales of sports-related memorabilia and/or sales of
licensed professional/collegiate team wear, apparel or products.
"Laws": Any FCC and any other governmental (whether international, federal,
state, municipal or otherwise) statute, law, rule, regulation, ordinance,
code, directive and order, including, without limitation, any court order.
"Person": Any natural person, corporation, division of a corporation,
partnership, trust, joint venture, limited liability company, association,
company, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Professional League Packages" Those "season packages" of live professional
sports league programming made available by DIRECTV to its DTV Subscribers.
The Professional League Packages currently made available by DTV are the
"MLB Extra Innings" package (comprised of Major League Baseball games) (the
"MLB Package"), "NFL Sunday Ticket" package (comprised of National Football
League games) (the "NFL Package"), the "NBA League Pass" package (comprised
of National Basketball Association games) (the "NBA Package") and the "NHL:
Center Ice" package (comprised of National Hockey League games) (the "NHL
Package").
2. ADVERTISING PLACEMENT COMMITMENT:
--------------------------------
2.1 Aggregate Commitment: DIRECTV hereby agrees to purchase BBS
--------------------
Advertising in the amount of $7,625,000, in the aggregate, for
Impressions in the period commencing on the Effective Date and ending
June 30, 2002 (the "Initial Period").
2.2 Allocation of Advertising Commitment: BBS Advertising committed to by
------------------------------------
DIRECTV with respect to the Initial Period shall be allocated among
each calendar year during the Initial Period in accordance with the
following, unless DIRECTV and BBS otherwise agree:
2
<PAGE>
Within each of the aforesaid calendar years, DIRECTV's minimum
aggregate BBS Advertising commitment for such calendar year shall be allocated
among each applicable calendar quarter in accordance with the following, unless
DIRECTV and BBS otherwise agree:
3
<PAGE>
DIRECTV may (i) vary the dollar figures applicable to the quarterly periods
of calendar year 2000 by as much as 5% in a quarter, provided that the
total for 2000 equals at least , (ii) vary the dollar figures
applicable to the quarterly periods of calendar year 2001 by as much as 5%
in a quarter, provided that the total for 2001 equals at least
and (iii) vary the dollar figures applicable to the first two (2) quarterly
periods of calendar year 2002 by as much as 5% in a quarter, provided that
the total for the first two (2) quarters of 2002 equals at least
. Notwithstanding the foregoing provisions (including, without
limitation, the provisions of the immediately preceding sentence), DIRECTV
at all times reserve the right to accelerate any or all of its advertising
commitment within a given year and between years, and payments made in
excess of the minimum in connection with any such acceleration shall reduce
corresponding payment amounts required in future calendar periods.
2.3 Payments For BBS Advertising: Payment by DIRECTV for the BBS
----------------------------
Advertising shall be made on a monthly basis, with payment for any
month made no later than forty-five (45) days after DIRECTV's receipt
of an invoice for such month
2.4 DIRECTV Option: DIRECTV shall have the option, exercisable upon
--------------
written notice provided no later than November 1, 2001, to continue to
purchase the BBS Advertising for an additional twenty-four (24) month
period commencing upon the expiration of the Initial Period (the
"Extension Period") on the same terms as are applicable during the
Initial Period (including, without limitation, the category
exclusivity set forth in Section 2.8 below, which would then run
through the end of the Extension Period), with the exception that the
amount of purchase for the Extension Period would be no less than
$8,500,000 for BBS Advertising. BBS Advertising committed to by
DIRECTV with respect to the Extension Period shall be allocated among
each of the two (2) twelve month periods comprising the Extension
Period in accordance with the following, unless DIRECTV and BBS
otherwise agree:
BBS Advertising committed to by DIRECTV with respect to the Extension
Period shall be further allocated among each calendar quarter during the
Extension Period in accordance with the following, unless DIRECTV and BBS
otherwise agree:
4
<PAGE>
DIRECTV may (i) vary the dollar figures applicable to the quarterly periods
of the First Extension Year by as much as 5% in a quarter, provided that
the total for the First Extension Year equals at least and (ii)
vary the dollar figures applicable to the quarterly periods of the Second
Extension Year by as much as 5% in a quarter, provided that the total for
the Second Extension Year equals at least . Notwithstanding the
foregoing provisions (including, without limitation, the provisions of the
immediately preceding sentence), DIRECTV at all times reserve the right to
accelerate any or all of its advertising commitment within the First
Extension Year and within the Second Extension Year and between the First
Extension Year and the Second Extension Year, and payments made in excess
of the minimum in connection with any such acceleration shall reduce
corresponding payment amounts required in future calendar periods.
2.5 Rate Card: BBS Advertising shall be purchased by DIRECTV under this
---------
Agreement on an Impressions basis, using BBS' standard rate card (as
modified by BBS from time-to-time, the "Rate Card"; a copy of the
current Rate Card is attached hereto as Exhibit "A"); provided, that
all BBS Advertising purchased by DIRECTV under this Agreement shall be
sold at of the Rate Card rate. To the extent that
any "make goods" should become necessary due to shortfalls in
Impressions delivered, the additional Impressions shall be promptly
provided (i.e., provided in the next succeeding calendar quarter), at
no additional cost, in additional advertising placement on BBS
Properties, with such placement (across the various BBS Properties and
within any particular BBS Property) to be reasonably approved by
DIRECTV .
2.6 Placement and Scheduling of BBS Advertising: Within thirty (30) days
-------------------------------------------
after the Effective Date, the Parties shall mutually agree upon the
placement (across the various BBS Properties and within any particular
BBS Property) and scheduling of DIRECTV's advertising on the BBS
Properties for the first half of 2000. The Parties shall thereafter
meet and agree on the upcoming schedule and placement for subsequent
periods on a quarterly basis. All scheduling shall be consistent with
the requirements of Section 2.2 above.
5
<PAGE>
2.7 Use of Purchased BBS Advertising: DIRECTV may use the BBS Advertising
--------------------------------
purchased hereunder only as follows: (a) DIRECTV may use the BBS
Advertising for the placement of advertising regarding DIRECTV's
equipment, generic DIRECTV service offers that do not identify any
particular programming, DIRECTV's Professional League Packages or
DIRECTV programming packages/programming offers in connection with
customer acquisition and/or customer up-grade (it being agreed that
such offers may make reference to "Total Choice Sports" but shall not
otherwise emphasize, although they may incidentally refer to, any DTV
Programming Service that emphasizes sports); and (b) DIRECTV may use
up to of the BBS Advertising in any calendar quarter to promote
third party products and services unrelated to DIRECTV, subject,
however, to BBS' prior written consent, which shall not be
unreasonably withheld (the "Third Party Advertising"). BBS shall be
deemed to have pre-approved Third Party Advertising by the following
third Persons, subject to approval of the creative elements (to
assure compliance with BBS' standards and practices regarding Third
Party Advertising on the BBS Properties): DIRECTV system hardware
manufacturers, retailers of DIRECTV system hardware and DIRECTV
services and DIRECTV advanced product partners, such as WINK and
TiVo. DIRECTV shall be responsible for payment of all Third Party
Advertising.
2.8 Category Exclusivity: During the three (3) year period commencing
--------------------
August 1, 2000, DIRECTV shall be the exclusive multi-channel
that is advertised on the BBS
Properties and BBS shall not sell, during such period, advertising on
the BBS Properties to any or
supporting a (for
example,
2.9 Further Coordination: Within thirty (30) days after the Effective
--------------------
Date, the Parties shall meet to discuss and coordinate related
matters such as (a) technical specifications, (b) ad-insertion
mechanics and (c) BBS' standards and practices regarding advertising
content (with BBS agreeing to advise DIRECTV, from time-to-time, of
any changes to such standards and practices).
2.10 Periodic Statements: BBS has advised DIRECTV that BBS does not
-------------------
customarily send Impressions reports to third party advertisers on
the BBS Properties with respect to the BBS Advertising that such
third party advertisers have purchased. However, BBS agrees that it
will, on a quarterly basis and upon DIRECTV's request from time-to-
time, provide DIRECTV with redacted copies of the Impressions reports
that BBS receives from DART (Double-Click), to the extent necessary
to provide DIRECTV with confirmation regarding the number of
Impressions received by the BBS Advertising purchased by DIRECTV
under this Agreement.
3. CONFIDENTIALITY: Each Party understands that during the term of this
---------------
Agreement it may have access to, or there may be disclosed to it
("Recipient"), certain information not generally known to the public
about the other party ("Discloser") or other parties with whom Discloser
is doing business (including, without limitation, information relating to
its technical, marketing, product and/or business affairs) (hereinafter
collectively referred to as
6
<PAGE>
"Confidential Information"). During and after the term of this Agreement,
Recipient will (a) take such precautions (but no less than reasonable
precautions) to protect the confidentiality of the Confidential
Information of Discloser as Recipient takes to protect its own similar
confidential information; and (b) not disclose any Confidential
Information of Discloser to any third party without the express
authorization of an officer of Discloser other than to (a) those of its
employees, agents and advisors who have a need to know such information
to enable Recipient to perform its obligations hereunder, who are advised
of the confidential and proprietary nature of such information, and who
are subject to a duty of loyalty and confidentiality to Recipient and (b)
a potential private investor in a Party or a potential purchaser of a
Party (or of all or substantially all of the assets of a Party) and its
representatives, all on a need to know basis and subject to such
potential investor/purchaser executing a confidentiality agreement
pursuant to which such potential investor/purchaser agrees, on behalf of
itself and its representatives, to comply with the confidentiality
provisions of this Section.
In the event Recipient is directed to disclose any Confidential
Information of Discloser by operation of law or in connection with a
judicial or governmental proceeding or inquiry, it will promptly notify
Discloser in writing and will assist Discloser in seeking a suitable
protective order or assurance of confidential treatment and in taking any
other steps deemed reasonably necessary by Discloser to preserve the
confidentiality of any such information; nevertheless, Recipient may
disclose only that portion of Discloser's Confidential Information as is
required to comply with any applicable judicial or governmental order and
will afford Discloser a reasonable opportunity to review and comment on
the text of any such disclosure before it is made by Recipient.
Recipient's obligations contained in this paragraph will not apply to any
information that: (i) is rightfully in the possession of Recipient from a
source other than Discloser prior to the time of disclosure of said
information to Recipient hereunder ("Time of Receipt"); (ii) is in the
public domain prior to the Time of Receipt; (iii) becomes part of the
public domain after the Time of Receipt by any means except an
unauthorized act or omission or breach of this Agreement on the part of
Recipient or any of its employees, agents or advisors; (iv) is supplied
to Recipient after the Time of Receipt without restriction by a third
party who is under no obligation to Discloser to maintain such
information in confidence; or (v) is developed by or for Recipient
independently of and without reference to any Confidential Information of
Discloser.
4. REPRESENTATIONS AND WARRANTIES: Each of the Parties (as applicable, the
------------------------------
"Warranting Party") hereby represents and warrants to the other that: (i)
the Warranting Party has full authority to enter into this Agreement and
to perform its obligations hereunder without violating the rights of, or
any agreement involving, any other Person; and (ii) all obligations owed
or to be owed to third Persons by the Warranting Party with respect to
the activities contemplated to be undertaken by the Warranty Party
pursuant to this Agreement are or will be fully satisfied by the
Warranting Party, such that the other Party will not have any obligations
with respect thereto; and (iii) the Warranting Party is not contractually
or legally restricted from performing its obligations under this
Agreement. In addition, BBS hereby further represents and warrants that
the rate card provided to DIRECTV as BBS' Rate Card (from time-to-time,
as contemplated by Section 2.5 above) shall, in each instance, reflect
rates that are representative of the rates generally sought by BBS, and
received by BBS (within a twenty percent (20%) price variance) from the
majority of its customers, in connection with ordinary course ad sales
(other than (i) ad sales involving customers with whom BBS otherwise has
significant/strategic dealings, (ii) ad sales that are part of
introductory or special incentive programs and (iii) ad sales with a
committed value of more than $25,000).
7
<PAGE>
5. INDEMNIFICATION:
---------------
5.1 Indemnification Obligations: Each Party (the "Indemnifying Party")
---------------------------
shall indemnify, defend and hold harmless the other Party (the
"Indemnified Party") and the Indemnified Party's Affiliates, officers,
directors, employees, agents, successors and assigns (collectively with
the Indemnified Party, the "Indemnified Group") from, against and with
respect to any and all claims, damages, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees and costs)
incurred in connection with any claim against the Indemnified Group
arising out of (a) the Indemnifying Party's breach of any of its
obligations, agreements or covenants under this Agreement, (b) a breach
of any representation or warranty made by the Indemnifying Party under
this Agreement, (c) any libel, slander, defamation, invasion of privacy
or violation or infringement of copyright, trademark or other third
party proprietary rights as a result of any services, materials or
advertising performed or provided by the Indemnifying Party pursuant to
or in furtherance of the activities contemplated under this Agreement,
or (d) any violation of Law committed by the Indemnified Party.
5.2 Defense of Third Party Claims: The Indemnified Party shall promptly
-----------------------------
notify the Indemnifying Party in writing of any third party claim or
litigation to which the indemnification provisions of Section 5.1
apply, and the Indemnifying Party shall assume the defense of any such
claim or litigation (provided, that the Indemnified Party shall have
the right to engage separate counsel of its choice and participate in
the defense, negotiation and settlement of such action or proceeding,
but shall bear the fees and expenses of such separate counsel retained
by the Indemnified Party and the Indemnified Party shall cooperate in
the defense of such claim at no cost or charge to the Indemnifying
Party, other than for performing such acts as the Indemnifying Party
shall request). If, for any reason, the Indemnifying Party shall fail
to appoint counsel on a timely basis, or otherwise fails to confirm its
assumption of the defense of any applicable claim, the Indemnified
Party may engage its own counsel and the reasonable costs and expenses
made in connection therewith shall be paid by the Indemnifying Party.
The Indemnified Party shall have the right to approve or disapprove the
settlement or disposition of any such claim or litigation proposed by
the Indemnifying Party, which right shall expire twenty (20) days
following the Indemnified Party's receipt of written notice thereof.
The Indemnifying Party shall not have the right to enter into any
settlement or compromise unless, in connection therewith, the
Indemnifying Party obtains from the claimants a full release of all
related claims against the Indemnified Group and does not otherwise
purport to adversely affect or curtail the Indemnified Group's
proprietary rights or interests.
6. DISCLAIMERS OF WARRANTY: THE WARRANTIES SET FORTH IN SECTION 4 ARE
-----------------------
LIMITED WARRANTIES AND ARE THE ONLY WARRANTIES MADE BY THE RESPECTIVE
PARTIES. THE PARTIES EXPRESSLY DISCLAIM, AND HEREBY EXPRESSLY WAIVE, ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. BBS
SPECIFICALLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO: (a) THE BBS PROPERTIES, INCLUDING, WITHOUT LIMITATION, THAT (i)
FUNCTIONALITY OF THE BBS PROPERTIES WILL BE UNINTERRUPTED OR ERROR-FREE,
(ii) THE BBS PROPERTIES WILL NOT CONTAIN VIRUSES OR OTHER HARMFUL
COMPONENTS, (iii) THE SECURITY METHODS EMPLOYED WITH RESPECT TO THE BBS
PROPERTIES WILL BE SUFFICIENT, AND (iv) ANY CONTENT ON THE
8
<PAGE>
BBS PROPERTIES IS CORRECT, ACCURATE OR RELIABLE; AND (b) ANY PRODUCT OR
SERVICE OFFERED OR SOLD THROUGH THE BBS PROPERTIES, INCLUDING WITHOUT
LIMITATION WARRANTIES OF TITLE OR NON-INFRINGEMENT OR IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7. LIMITATION OF LIABILITY: SUBJECT TO THE INDEMNIFICATION OBLIGATIONS OF
-----------------------
THE PARTIES UNDER SECTION 4 WHICH APPLY IN THE EVENT OF ANY THIRD PARTY
CLAIM GIVING RISE TO SUCH INDEMNIFICATION OBLIGATIONS, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY WITH RESPECT TO ITS OBLIGATIONS UNDER
THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL,
INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES EVEN IF THE PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8. TERMINATION: This Agreement may be terminated by a Party, in its
-----------
discretion, at any time after any of the following occurrences:
8.1 Termination by BBS: BBS may terminate this Agreement under the
------------------
following circumstances:
(a) Breach of Material Obligation: DIRECTV fails to perform any
-----------------------------
material agreement, term or covenant under this Agreement, unless
(i) DIRECTV cures such failure within thirty (30) days after
receipt of such written notice thereof from BBS or (ii) DIRECTV
has diligently commenced reasonable steps to cure such failure
within such thirty (30) day period and thereafter diligently and
completely cures such failure within an additional thirty (30)
day period;
(b) Breach of Representation/Warranty: Any representation or warranty
---------------------------------
made by DIRECTV hereunder proves to be inaccurate in any material
respect, in which case BBS shall have the right to terminate this
Agreement upon thirty (30) days prior written notice to DIRECTV
of such inaccuracy.
(c) Insolvency: Upon the filing of a voluntary or involuntary
----------
petition in bankruptcy by or against DIRECTV or upon the
appointment of a receiver, trustee, liquidator or custodian for
all or a substantial part of DIRECTV's property, provided, that
in the case of an involuntary petition or appointment, BBS shall
not have the right to terminate if the applicable involuntary
action is vacated within thirty (30) days.
8.2 Termination by DIRECTV: DIRECTV may terminate this Agreement under the
----------------------
following circumstances:
(a) Breach of Material Obligation: BBS fails to perform any material
-----------------------------
agreement, term or covenant under this Agreement, unless (i) BBS
cures such failure within thirty (30) days after receipt of such
written notice thereof from DIRECTV or (ii) BBS has diligently
commenced reasonable steps to cure such failure within such
thirty (30) day period and thereafter diligently and completely
cures such failure within an additional thirty (30) day period;
9
<PAGE>
(b) Breach of Representation/Warranty: Any representation or warranty
---------------------------------
made by BBS hereunder proves to be inaccurate in any material
respect, in which case DIRECTV shall have the right to terminate
this Agreement upon thirty (30) days prior written notice to BBS
of such inaccuracy.
(c) Insolvency: Upon the filing of a voluntary or involuntary
----------
petition in bankruptcy by or against BBS or upon the appointment
of a receiver, trustee, liquidator or custodian for all or a
substantial part of BBS's property, provided, that in the case of
an involuntary petition or appointment, DIRECTV shall not have
the right to terminate if the applicable involuntary action is
vacated within thirty (30) days.
8.3 Remedies: The foregoing termination rights are in addition to a
--------
Party's other rights at law or in equity or pursuant to any other
provision of this Agreement.
9. MISCELLANEOUS:
-------------
9.1 Invoices: The Parties agree that, in respect of any payment hereunder
--------
not otherwise specifically provided for as to date of payment, each
Party shall invoice the other Party for any amount due to it hereunder
and payment shall be due and payable no later than forty-five (45)
calendar days following receipt of such invoice. The failure by a
Party to provide a timely invoice to another Party shall not
constitute a waiver by it of its right to receive such amounts but the
corresponding payment shall not be deemed due and payable until the
expiration of the due date as determined in this Section.
9.2 Severability: If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by reason of any Law
or public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to either Party. Upon
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner
in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
9.3 No Waiver: The failure of either Party to partially or fully exercise
---------
any right or the waiver by either Party of any breach, shall not
prevent a subsequent exercise of such right or be deemed a waiver of
any subsequent breach of the same or any other term of this Agreement.
9.4 Assignment: Neither Party may assign any of its rights or obligations
----------
under this Agreement to any other Person without the other Party's
prior written consent; provided, that either Party may assign its
rights and obligations under this Agreement to an Affiliate, to a
third Person which acquires all or substantially all of such Party's
assets or to a third Person into which such Party may be merged or
consolidated, provided that the applicable assignee agrees to assume
all of the assigning Party's obligations hereunder and subject to the
further understanding that the assigning Party shall nevertheless
remain liable for its obligations hereunder (notwithstanding such
assignment) in the absence of a contrary written agreement with the
non-assigning Party.
10
<PAGE>
9.5 Survival: Upon expiration or termination of this Agreement, the
--------
provisions of Sections 3, 5, 6 and 7 above shall survive.
9.6 Governing Law/Jurisdiction: This Agreement and all matters collateral
---------------------------
hereto shall be construed and enforced in accordance with the laws of
the State of California applicable to contracts executed and performed
entirely therein. Each of the Parties hereby irrevocably agrees that
the state and federal courts located in Los Angeles, California shall
have sole jurisdiction over any suit or other proceeding arising out
of or based upon this Agreement and each Party hereto hereby waives
any claim that it is not subject personally to the jurisdiction of
said courts of that any such suit or proceeding is brought in an
inconvenient forum or improper venue. Each of the Parties hereto
irrevocably agrees that service of process in any such suit or other
proceeding shall be properly made (without limitation) if delivered to
the address(es) set forth in Section 9.11 below.
9.7 Third Party Beneficiaries: No other Persons shall be deemed a third
-------------------------
party beneficiary of this Agreement. Nothing in this Agreement,
express or implied, is intended to confer upon any other Person any
legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
9.8 Amendments: This Agreement may not be amended or modified except by an
----------
instrument in writing signed by both BBS and DIRECTV.
9.9 Force Majeure: Neither Party shall be liable to the other Party for
-------------
any losses or damages incurred by such other Party for breach of any
representation, warranty or covenant made by it in this Agreement or
for failure or delay in providing any services or content described in
this Agreement where such breach, failure or delay is due to acts of
God, failure of carriers, labor disputes, war, public disaster,
failure or delay in software encoding, or any other cause beyond its
control.
9.10 Counterparts: This Agreement may be executed in one or more
------------
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.
9.11 Notices: All notices hereunder shall be in writing and shall be sent
-------
by certified mail (return receipt requested) or registered mail, by
air courier service, by personal delivery or by facsimile confirmed by
mail (provided that notices of breaches under this Agreement may not
be made by facsimile) to the address (or fax number) of the Party for
whom it is intended, as follows:
BBS: Broadband Sports, Inc., 2120 Colorado Avenue, Suite 200, Santa
Monica, California 90404, Fax No. 310\453-8101, Attn: Vice President,
Business Development, with a separate copy to the attention of Vice
President, General Counsel.
To DIRECTV: DIRECTV, 2230 E. Imperial Hwy, El Segundo, California
90245, Fax No. 310\535-5420, Attn: Vice President of New Ventures,
with a separate copy to the attention of the General Counsel, Fax No.
310\726-4991.
All notices shall be deemed to have been given (a) on the fifth
business days after the date when sent by registered or certified
mail, if sent by mail, (b) on the first business day after the date of
delivery to an air courier service, if sent by air courier or (c) on
the date of receipt, if sent by personal delivery or facsimile.
11
<PAGE>
9.12 Captions: The headings of sections and subsections contained in this
--------
Agreement are intended for convenience only, and they shall not be of
any effect in construing the contents of the respective sections and
subsections.
9.13 Entire Agreement: This Agreement sets forth the entire agreement
----------------
between the Parties on this subject and supersedes all prior
negotiations, understandings and agreements between the Parties
concerning the subject matter.
IN WITNESS WHEREOF, BBS and DIRECTV have each executed this Agreement
as of the Effective Date.
BROADBAND SPORTS, INC. DIRECTV, INC.
By: By:
--------------------------------- --------------------------------
Name: Name:
Title: Title:
12
<PAGE>
EXHIBIT A
---------
BBS' CURRENT RATE CARD
13
<PAGE>
EXHIBIT 10.22
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Common Stock of
Broadband Sports, Inc.
Dated as of April 12, 2000 (the "Effective Date")
WHEREAS, Broadband Sports, Inc., a Delaware corporation (the "Company") has
entered into a Strategic Agreement dated as of April 12, 2000 (the "Strategic
Agreement") with DIRECTV Enterprises, Inc. (the "Warrantholder");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in consideration of the Strategic Agreement, the Company
and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 13,608,834 fully paid and non-
assessable shares of the Company's Common Stock ("Common Stock"), subject to
such shares having vested pursuant to Section 2, at a purchase price of $1.40
per share (the "Exercise Price"). The number and purchase price of such shares
are subject to adjustment as provided in Section 8 hereof; provided, however,
that in the event that, within six (6) months from the Effective Date, the
Company shall issue Common Stock in a single sale or a series of related sales
involving a committed stock purchase price of more than $10,000,000 (or a number
of shares of Common Stock in excess of 7,500,000) at a price (taking into
account cash and non-cash consideration received by the Company in connection
with such issuance) other than $1.40 share (subject to proportional adjustment
to reflect any stock split or similar recapitalization event), then, with
reference to the first such sale (only and as applicable), the per share
exercise price for the Warrants shall be revised upward or downward (as
applicable) to a per share price equal to the per share price for the Common
Stock sold in connection with such first sale. By way of clarification, the
exercise price of the Warrant shall only be subject to a single adjustment
pursuant to the provisions of this Section.
-1-
<PAGE>
2. TERM AND VESTING.
(a) Vesting. The following number of shares of Common Stock purchasable
upon exercise of the Warrants as stated in Section 1 shall vest as follows:
<TABLE>
<CAPTION>
<S> <C>
1,134,069 shares July 1, 2000
1,134,070 shares October 1, 2000
1,134,069 shares January 1, 2001
1,134,070 shares April 1, 2001
4,536,278 shares April 1, 2002
4,536,278 shares April 1, 2003
</TABLE>
; provided that the Strategic Agreement has not been terminated as of the date
of vesting set forth above. If the Strategic Agreement has been terminated,
then no additional shares of Common Stock shall vest and the right to purchase
such additional shares under this Agreement shall terminate.
(b) Term. Subject to the terms of this Warrant, including the vesting
schedule set forth above in Section 2(a), the Warrant may be exercised, at any
time after the Effective Time, in whole or from time to time in part, at the
option of the Holder until 5:00 p.m., Los Angeles Time, within three years from
the date of vesting (each a "Termination Date").
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit A (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Common Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit B (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Common Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where:X = the number of shares of Common Stock to be issued to the
Warrantholder.
-2-
<PAGE>
Y = the number of shares of Common Stock requested to be exercised under
this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of Common
Stock shall mean with respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC, then
the fair market value per share shall be the initial "Price to Public" specified
in the final prospectus with respect to the offering;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a five (5) day
period ending three days before the day the current fair market value of the
securities is being determined; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked prices quoted on
the NASDAQ system (or similar system) over the five (5) day period ending three
days before the day the current fair market value of the securities is being
determined.
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of the Common Stock shall be at the highest price per
share which the Company could obtain on the date of calculation from a willing
buyer (not a current employee or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good faith by
its Board of Directors, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Common Stock shall be
deemed to be the value received by the holders of the Company's Common Stock on
a common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
-3-
<PAGE>
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
Authorization and Reservation of Shares. During the term of this Warrant
Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights to purchase Common Stock as provided for herein.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company, including the right to
receive dividends, prior to the exercise of the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Common Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be (i) a capital
reorganization of the shares of the Company's Common Stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or (ii) a merger or consolidation of the Company with or
into another corporation whether or not the Company is the surviving
corporation, or (iii) the sale of all or substantially all of the Company's
properties and assets to any other person (a "Merger-Event"), this Warrant
shall, after such reorganization, consolidation, merger or sale, be exercisable,
upon payment of the Exercise Price, for the kind and number of shares of stock
or other securities or property of the Company or of the corporation resulting
from such consolidation or surviving such merger or to which such properties and
assets shall have been sold to which such holder would have been entitled if he
had held the common stock issuable upon the exercise hereof immediately prior to
such reorganization, consolidation, merger or sale. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
Agreement with respect to the rights and
-4-
<PAGE>
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Common Stock purchasable) shall be applicable to
the greatest extent possible.
(b) Reclassification, etc. If the Company, at any time while this Warrant
or any portion hereof remains outstanding and unexpired, by reclassification of
securities or otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted.
(c) Split, Subdivision or Combination of Shares. If the Company, at any
time while this Warrant or any portion hereof remains outstanding and unexpired,
shall split, subdivide or combine the securities as to which purchase rights
under this Warrant exist into a different number of securities of the same
class, the Exercise Price for such securities and the number of securities into
which this Warrant is convertible shall be proportionately adjusted.
(d) Stock Dividends. If , at any time while the Warrants, or any portion
hereof, are outstanding and unexpired, the holders of the securities issuable
upon exercise thereof 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 therefore, other or additional stock or other
securities or property (other than cash) of the Company, by way of dividend or
other distribution, then and in each case, such Warrant shall thereafter
represent the right to acquire, in addition to the number of shares of the
security issuable upon exercise of such Warrant, and without payment by the
Holder of any additional consideration therefor, the amount of such other or
additional stock or other securities or property (other than cash) of the
Company that such Holder would have held on the date of such exercise had such
Holder been the holder of record of the security receivable upon exercise of
such Warrant on the date of this Agreement and had thereafter, during the period
from the date of this Agreement to and including the date of such exercise,
retained such shares and/or all other additional stock available to it as
aforesaid during such period, giving effect to all adjustments called for during
such period by the provisions of this Section.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its Common Stock, whether in cash, property, stock or other
securities; (ii) there shall be any Merger Event; or (iii) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; and (B) in
the
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<PAGE>
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(f) All such notices, advises and communications shall be deemed to have
been received, (i) indicates the personal delivery on the date of such delivery,
(ii) in the case of mailing by first-class mail, on the fifth business day
following the date of such mailing, and (iii) in the case of delivery by over-
night courier, on the first business day following the date of mailing.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Common Stock. The Common Stock issuable upon exercise
of the Warrantholder's rights has been duly and validly reserved and, when
issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances created by the Company of any nature whatsoever;
provided, however, that the Common Stock issuable pursuant to this Warrant
Agreement may be subject to restrictions on transfer under state and/or Federal
securities laws, this Warrant Agreement and the Bylaws of the Company. The
issuance of certificates for shares of Common Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance tax
in respect thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Common Stock. The Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved and the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Common Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant Agreement is not
inconsistent with the Company's Charter or Bylaws, does not contravene any law
or governmental rule, regulation or order applicable to it, does not and will
not contravene any material provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument to which it is a party or by
which it is bound, and this Warrant Agreement constitutes a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and
-6-
<PAGE>
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws.
(e) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Common Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of California state
securities laws.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Common Stock, or the Common
Stock issuable upon exercise of the Warrantholder's rights contained herein and
the Common Stock issuable upon conversion of the Common Stock will be acquired
for investment and not with a view to the sale or distribution of any part
thereof, and the Warrantholder has no present intention of selling or engaging
in any public distribution of the same .
(b) Private Issue. The Warrantholder understands (i) that the Common Stock
issuable upon exercise of this Warrant is not registered under the 1933 Act or
qualified under applicable state securities laws on the ground that the issuance
contemplated by this Warrant Agreement will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth in this Section
10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Common Stock or
the Common Stock, unless and until (i) it shall have notified the Company of the
proposed disposition, and (ii) if requested by the Company, it shall have
furnished the Company with an opinion of counsel (which counsel may either be
inside or outside counsel to the Warrantholder)
-7-
<PAGE>
satisfactory to the Company and its counsel to the effect that (A) appropriate
action necessary for compliance with the 1933 Act has been taken, or (B) an
exemption from the registration requirements of the 1933 Act is available.
Notwithstanding the foregoing, the restrictions in this Section 10(c) imposed
upon the transferability of any of its rights to acquire Common Stock, or Common
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Common Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Common Stock then outstanding as to which
such restrictions have terminated shall be entitled to receive from the Company,
without expense to such holder, one or more new certificates for the Warrant or
for such shares of Common Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Common Stock pursuant to this Warrant Agreement, or (ii) the
Common Stock issuable upon exercise hereof, it may be required to hold such
securities for an indefinite period. The Warrantholder also understands that any
sale of its rights of the Warrantholder to purchase Common Stock which might be
made by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D.
(g) Investor Rights Agreement. The Warrantholder shall become a party to
the Company's existing Investor Rights Agreement dated as of May 21, 1999, as
amended from time to time and agrees to be bound by the provisions therein,
including the "Market Startup Policies".
-8-
<PAGE>
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee upon the prior written consent
of the Company (which such consent shall not be unreasonably withheld), provided
that Warrantholder may, without the consent of the Company, transfer this
Warrant Agreement to any direct, or indirect, wholly-owned subsidiary of
Warrantholder. The transfer shall be recorded on the books of the Company upon
receipt by the Company of a notice of transfer in the form attached hereto as
Exhibit C (the "Transfer Notice"), at its principal offices and the payment to
the Company of all transfer taxes and other governmental charges imposed on such
transfer. No transfer of this Warrant Agreement, any shares of Common Stock
issuable upon exercise hereof shall be effective unless the Company shall first
receive from such proposed transferee a written agreement, satisfactory to the
Company, providing that such transferee is subject to all of the terms and
conditions hereof.
12. MISCELLANEOUS.
(a) Effective Date. Except as otherwise provided herein, the provisions of
this Warrant Agreement shall be construed and shall be given effect in all
respects as if it had been executed and delivered by the Company on the date
hereof. This Warrant Agreement shall be binding upon any successors or assigns
of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
California.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
DIRECTV, 2230 East Imperial Highway, El Segundo, California 90245, Fax No. (310)
535-5420, Attn: Vice President of New Ventures, with a separate copy to the
attention of the General Counsel, Fax No. (310) 726-4991; and (ii) to the
Company at 2120 Colorado Blvd. 2nd Floor, Santa Monica, CA 90404, Attention:
General Counsel (and/or if by facsimile,
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<PAGE>
(310) 453-8101) or at such other address as any such party may subsequently
designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, 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 in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
[This space intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its officer thereunto duly authorized as of the date first set forth
above.
The Company:
BroadBand Sports, Inc.
By:
-------------------------------
Its:
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The Warrantholder:
DIRECTV ENTERPRISES, INC.
By:
-------------------------------
Its:
------------------------------
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<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and in the
headnote under "Selected Consolidated and Combined Financial Data" and to the
use of our report dated February 9, 2000 in Amendment No. 3 to the
Registration Statement on Form S-1 (SEC File No. 333-91801) and related
Prospectus of Broadband Sports, Inc. for the registration of 3,795,000 shares
of its common stock.
/s/ Ernst & Young LLP
Los Angeles, California
April 17, 2000
