AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1997
REGISTRATION STATEMENT NO. 333-25259
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SPORTSLINE USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7375 65-0470894
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
---------------
6340 N.W. 5TH WAY
FORT LAUDERDALE, FLORIDA 33309
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
---------------
MICHAEL LEVY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SPORTSLINE USA, INC.
6340 N.W. 5TH WAY
FORT LAUDERDALE, FLORIDA 33309
(954) 351-2120
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
KENNETH C. HOFFMAN, ESQ. ELLEN B. CORENSWET, ESQ.
GREENBERG, TRAURIG, HOFFMAN, BRIAN B. MARGOLIS, ESQ.
LIPOFF, ROSEN & QUENTEL, P.A. BROBECK, PHLEGER & HARRISON LLP
1221 BRICKELL AVENUE 1633 BROADWAY
MIAMI, FLORIDA 33131 NEW YORK, NEW YORK 10019
PHONE: (305) 579-0500 PHONE: (212) 581-1600
FAX: (305) 579-0717 FAX: (212) 586-7878
</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 on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1997
SPORTSLINE USA LOGO
Shares
COMMON STOCK
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD
BY SPORTSLINE USA, INC. ("SportsLine USA" or the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
See "Underwriting" for a discussion of the factors considered in determining
the initial public offering price. It is currently anticipated that the initial
public offering price of the Common Stock will be between $ and $ per
share. The Company has applied to have the Common Stock approved for quotation
on the Nasdaq National Market under the symbol "SPLN."
----------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY (1)
<S> <C> <C> <C>
Per Share ...... $ $ $
Total (2) ...... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Before deducting offering expenses payable by the Company, estimated at
$ .
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $ , $ and $ , respectively.
----------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any
order in whole or in part. It is expected that delivery of such shares will be
made through the offices of Robertson, Stephens & Company LLC ("Robertson,
Stephens & Company"), San Francisco, California, on or about , 1997.
Robertson, Stephens & Company
COWEN & COMPANY
MONTGOMERY SECURITIES
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
Creating a Global Sports Brand
PICTURE OF THE COMPANY'S WELCOME WEB PAGE ACCOMPANIED BY TEXT, LINKS TO
ARTICLES, "Hunting for Gators" and "Top News" and LINKS TO THE COMPANY'S OTHER
WEB PAGES AND SERVICES, including "Free Trial Membership, Index, Search, NFL,
College Football, Baseball, NBA, NHL, Golf, Tennis, More Sports, Scoreboard,
Superstars, Live Radio, Personal Sports, Contest, Fantasy Sports, Columns,
Newsroom, City Pages, Superstore, Chat, E World, Java Scores, Member Services,
About SportsLine, FAQ Sponsor Index"
PICTURE OF THE COMPANY'S WINTER OLYMPICS WEB PAGE ACCOMPANIED BY TEXT," TIME
WARP AND LINKS TO THE COMPANY'S OTHER WINTER OLYMPICS WEB PAGES, Cross Country,
Giant Slalom and Slalom, Downhill and SuperGiant Slalom, Ski Jumping, Nordic
Combined, Freestyle Skiing, Snow Bording, Short Track Speed Skating, Figure
Skating, Ice Hockey, Bobsleigh, Luge, Curling and Biathlon
PICTURE OF THE COMPANY'S BASEBALL WEB PAGE ACCOMPANIED BY TEXT, "Northern
Exposure" and "Top News" and LINKS TO THE COMPANY OTHER WEB PAGES AND SERVICES,
Free Trial Membership, Home, Index Search, Library Teams, Players, Minors,
Columns, Baseball Live!, Contests, Fantasy, Your MLB Page, Schedules, Standings,
Injuries, Transactions, Analysis and Team Reports
PICTURE OF THE COMPANY'S JAVA FOOTBALL LINE WEB PAGE ACCOMPANIED BY ANIMATED
GRAPHIC OF A FOOTBALL FIELD AND SCOREBOARD
PICTURE OF THE COMPANY'S CRICKET WEB PAGE ACCOMPANIED BY TEXT, "Sailing the
Indies" LINKS TO OTHER ARTICLES, "Top News" and LINKS TO THE COMPANY'S OTHER WEB
PAGES AND SERVICES, "Free Trial Membership, Home, Index, Search, By Country and
Columns"
PICTURE OF THE COMPANY'S 1997 U.S. OPEN WEB PAGE ACCOMPANIED BY TEXT LINKS TO
GOLF RELATED ARTICLES, "Nerves of Steel", Golf News Articles and LINKS TO THE
COMPANY'S OTHER WEB PAGES AND SERVICES, including, "U.S. Open Leaderboard, Golf
News, The Field, Home, Index, Search, Congressional Country Club, Photos, Eye
on Tiger, Arnold Palmer, John Daly, History and Audio"
Advertising & Sponsorship
PICTURE OF THE COMPANY'S AUTO RACING WEB PAGE ACCOMPANIED BY OLDSMOBILE
SPONSORSHIP ADVERTISING, "360/degrees/ Interior" . . . and LINKS TO THE
COMPANY'S OTHER WEB PAGES AND SERVICES, including "Free Trial Membership, Home,
Index, Search, Indy 500, PPG CART, Columns, SportsLine Audio, Allsports Photos
and Reuters Photos
PICTURE OF THE COMPANY'S COCA-COLA 600 WEB PAGE ACCOMPANIED BY TEXACO
SPONSORSHIP ADVERTISING, "Presented by Texaco", TEXT AND ARTICLES, "It's Jeff's
World" and "Top News" dated Monday, August 4, 12:16 P.M. and LINKS TO THE
COMPANY'S OTHER WEB PAGES AND SERVICES, Auto Racing, Home, Index and Search
A SAMPLE OF THE NAMES AND LOGOS OF THE COMPANY'S ADVERTISERS AND SPONSORS
BellSouth [Logo]
INFORMATION ON THE COMPANY'S WEB SITES SHALL NOT BE DEEMED TO CONSTITUTE A
PART OF THIS PROSPECTUS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
Oldsmobile [Logo]
Bell Atlantic [Logo]
1-800-Flowers [Logo]
Buick [Logo]
Sprint [Logo]
Intel [Logo]
Honda [Logo]
Pepsi [Logo]
Visa [Logo]
Toyota [Logo]
Ford [Logo]
Sears [Logo]
US Robotics [Logo]
Army [Logo]
Perry Ellis MensWear [Logo]
Philips [Logo]
Mountain Dew [Logo]
Delta AirLines [Logo]
American Greeting [Logo]
Selsun Blue [Logo]
DirecTV [Logo]
AT&T [Logo]
American Express Travel [Logo]
The Coca-Cola [Logo]
Microsoft [Logo]
Sun Microsystems [Logo}
Chase Manhattan [Logo]
IBM [Logo}
Merchandise
PICTURE OF THE COMPANY'S SUPERSTORE WEB PAGE ACCOMPANIED BY TEXT, "Member
Exclusive. . .CBS SportsLine Member SAVE 10% on Merchandise! Not a Member? Click
for your CBS SportsLine FREE Trial?" and LINKS TO THE COMPANY'S OTHER WEB PAGES
AND SERVICES, including "Superstore, Home, Index, Search, Product Index, Help,
Shopping Cart, Apparel, Art, Books, Memorabilia, Photos, Sporting Goods and
Trading Cards."
PICTURE OF THE COMPANY'S ERA RE - VISITED JOE NAMATH AUTOGRAPHED THROWBACK
JERSEY WEB PAGE AND ACCOMPANIED BY TEXT RELATING TO THE ITEM FOR SALE
PICTURE OF THE COMPANY'S MICHAEL JORDAN SIGNATURE MINI-BACKETBALL WEB PAGE AND
ACCOMPANIED BY TEXT RELATING TO THE ITEM FOR SALE
PICTURE OF THE COMPANY'S BOOKSTORE WEB PAGE AND ACCOMPANIED BY TEXT RELATING TO
THE ITEMS FOR SALE
<PAGE>
Membership & Premium Products
PICTURE OF THE COMPANY'S FANTASY FOOTBALL WEB PAGE ACCOMPANIED BY TEXT, AND
LINKS TO ARTICLES, "Chief Concerns" and "Columns" and LINKS TO THE COMPANY'S
OTHER WEB PAGES AND LINKS, including, "Fantasy Sports, Home, Index, Search,
Challenge Game, Advance Scout, Commissioner and Interact"
PICTURES OF THE COMPANY'S PERSONAL SPORTS WEB PAGE ACCOMPANIED BY SAMPLES AND
TEXT, "Personal Sportspage . . Your Teams, Your Stories . . Your Home Page . .
Personal SportsMail . . . When You Can't Pick It up . . . We'll Deliver It" and
LINKS TO THE COMPANY'S WEB PAGE TO SUBSCRIBE TO THE PERSONAL SPORTS PAGE AND
PERSONAL SPORTS MAIL
PICTURE OF THE COMPANY'S FANTASY BASEBALL COMMISSIONER WEB PAGE ACCOMPANIED WITH
ADVERTISING, "Brought to you by DirecTV [Logo]"
PICTURE OF THE COMPANY'S EXCLUSIVE MEMBER BENEFITS WEB PAGE
PICTURE OF THE COMPANY'S NEWSSTAND WEB PAGE ACCOMPANIED BY LINK TO THE
COMPANY'S, "Pro Football Newsstand, College Football Newsstand"
Additional Revenue Opportunities
PICTURE OF THE COMPANY'S SHAQ WORLD WEB PAGE ACCOMPANIED BY A PICTURE OF
SHAQUILLE O'NEAL AND LINKS TO THE COMPANY'S OTHER WEB PAGES, including "Hot
Spot, B Ball, Shaq Paq, The Show, The Shop, Live Chat and SportsLine USA"
PICTURE OF THE COMPANY'S MICHAEL JORDAN WEB PAGE ACCOMPANIED BY LINKS TO THE
COMPANY'S OTHER WEB PAGES, including, "Career, Bulls, NBA, Chat, Audio/Video,
Game, Shop, Index"
PICTURE OF THE COMPANY'S LIVE RADIO! WEB PAGE AND LINKS TO THE COMPANY'S WEB
SITES, INCLUDING, "Schedule, Upcoming Guests, Archives, Radio Cam, Email,
Partners, Free Trial Memberhip, Home, Index and Search"
PICTURE OF THE COMPANY'S ORANGE BOWL WEB PAGE ACCOMPANIED BY "FEDEX Orange
Bowl" [Logo]. .
PICTURE OF THE COMPANY'S VEGAS INSIDER WEB PAGE ACCOMPANIED BY TEXT AND
ARTICLES, "What's Hot; What a Line" and Preseason Power Rating" and othersports
LINKS TO THE COMPANY'S OTHER WEB PAGES, including Odds, Picks, Matchups,
Injuries, Weather, Scores, Interact, Handicappers, NFL, College Football, NBA,
College Basketball, Hockey, Other Sports.
PICTURE OF THE COMPANY'S TIGER WOODS WEB PAGE ACCOMPANIED BY A PICTURE OF TIGER
WOODS AND LINKS TO THE COMPANY'S OTHER WEB PAGES, Including "All About Tiger,
Tiger Watch, Chat, The Shop, Index and Shop
[SportsLine is pursuing multiple revenue opportunities, including membership and
premium service fees, third parry web site development, content licensing, and
radio syndications.]
<PAGE>
No dealer, sales representative or any other person has been authorized to
give any INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary .............................................................................. 4
Risk Factors ........................................................................ 7
Use of Proceeds ..................................................................... 20
Dividend Policy ..................................................................... 20
Capitalization ..................................................................... 21
Dilution ........................................................................... 22
Selected Financial Data ............................................................ 23
Management's Discussion and Analysis of Financial Condition and Results of Operations 24
Business ........................................................................... 29
Management ........................................................................... 45
Certain Transactions ............................................................... 54
Principal Shareholders ............................................................... 56
Description of Capital Stock ......................................................... 58
Shares Eligible for Future Sale ...................................................... 61
Underwriting ........................................................................ 63
Legal Matters ........................................................................ 64
Experts .............................................................................. 64
Additional Information ............................................................... 65
Index to Financial Statements ...................................................... F-1
</TABLE>
----------------
The Company intends to furnish to its shareholders annual reports
containing audited financial statements examined by an independent accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing interim, unaudited financial information.
"SportsLine" is a registered service mark of the Company. The CBS "eye
device" is a registered trademark of CBS Inc. This Prospectus also includes
trademarks and trade names of companies other than the Company and CBS Inc. All
other company or product names are trademarks or registered trademarks of their
respective owners.
3
<PAGE>
SUMMARY
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION, INCLUDING "RISK FACTORS," AND THE FINANCIAL STATEMENTS
AND NOTES THERETO, APPEARING ELSEWHERE IN THE PROSPECTUS. EXCEPT AS OTHERWISE
NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES (I) THE CONVERSION INTO
14,496,109 SHARES OF COMMON STOCK OF ALL OUTSTANDING SHARES OF THE COMPANY'S
PREFERRED STOCK UPON THE COMPLETION OF THIS OFFERING, (II) THE FILING OF AN
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION WHICH, AMONG OTHER THINGS,
AUTHORIZES THE ISSUANCE OF "BLANK CHECK" PREFERRED STOCK AND (III) NO EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION OR OUTSTANDING OPTIONS OR WARRANTS.
THE COMPANY
SportsLine USA is a leading Internet-based sports media company that
provides branded, interactive information and programming as well as
merchandise to sports enthusiasts worldwide. cbs.sportsline.com, the Company's
flagship site on the World Wide Web (the "Web"), delivers real-time, in-depth
and compelling sports content and programming that capitalizes on the Web's
unique graphical and interactive capabilities. The Company's other Web sites
include those devoted to sports superstars such as Joe Namath, Shaquille O'Neal
(shaq.com), Cal Ripken, Jr. (2131.com) and Wayne Gretzky (gretzky.com) and to
electronic odds and information on major sports events (vegasinsider.com). The
Company also has entered into exclusive agreements to create Web sites for
Michael Jordan, Tiger Woods and Joe Montana, all of which are expected to be
launched during 1997. The Company's objective is to become the leading
Internet-based sports media company and to create a global sports brand. To
this end, the Company focuses exclusively on sports and distinguishes itself
from other content providers by offering innovative, timely and comprehensive
sports content. To date, the Company has achieved only limited revenues and has
incurred operating losses in each period. However, traffic on the Company's Web
sites has increased significantly since the commercial launch of the Company's
first Web site in August 1995 to a daily average of 1,200,000 page views and
206,000 visits during June 1997, increases of 63% and 117%, respectively, from
December 31, 1996 to June 30, 1997, and the Company's Web sites had
approximately 38,000 paying members as of June 30, 1997.
The Company distributes a broad range of up-to-date news, scores, player
and team statistics and standings, photos and audio and video clips obtained
from leading sports news organizations and the Company's superstar athletes;
offers instant odds and picks; produces and distributes entertaining,
interactive and original programming such as editorials and analyses from its
in-house staff and freelance journalists; produces and offers contests, games,
fantasy league products and fan clubs; and sells sports-related merchandise and
memorabilia. The Company also owns and operates a state-of-the-art radio studio
from which it produces the only all-sports radio programming broadcast
exclusively over the Internet.
A key element of the Company's strategy is to establish strategic
relationships to increase consumer awareness of the SportsLine brand and build
traffic on its Web sites. In March 1997, the Company established a strategic
alliance with CBS Inc. ("CBS") pursuant to which CBS acquired a minority
ownership interest in the Company and the Company's flagship Web site was
renamed "cbs.sportsline.com." The CBS agreement provides for cbs.sportsline.com
to receive, among other things, at least $57 million of network television
advertising and on-air promotion during the next five years, primarily during
CBS television sports broadcasts such as the 1998 Winter Olympics, NCAA Men's
Basketball Tournament, NCAA Football, PGA Tour events, U.S. Open tennis and the
Daytona 500. The Company believes that its relationship with CBS, in particular
the branding of its flagship Web site as "cbs.sportsline.com" and the promotion
the Company will receive on CBS
4
<PAGE>
television broadcasts, will enable it to establish SportsLine as a broadly
recognized consumer brand. In July 1997, the Company entered into a strategic
programming and distribution agreement with America Online Inc. ("AOL"),
pursuant to which cbs.sportsline.com became the first "anchor tenant" on AOL's
Sport Channel, allowing AOL's more than 9 million subscribers to access the
Company's Web sites from within the AOL service. The AOL agreement also
provides the Company the opportunity to market memberships, premium services
and merchandise to AOL's subscribers and to integrate its sports content and
programming into all major sports areas of the AOL service. The Company also
recently entered into an agreement with Microsoft Corporation ("Microsoft")
under which cbs.sportsline.com will be integrated into Microsoft's "Active
Desktop" as part of Microsoft's forthcoming release of the latest version of
Internet Explorer ("IE4") and operating system ("Windows 98").
cbs.sportsline.com is also featured as a default content "channel" in the
Channel Finder of Netscape Communication Corporation's ("Netscape") recently
released Netcaster software, which utilizes "push" delivery to give users the
ability to subscribe to dynamic Web content and to browse these channels and
Web sites offline from their desktop. The Company has also established
strategic marketing relationships with sports superstars, personalities,
organizations and affinity groups.
The Company's strategy is to capitalize on the market opportunities
created by the popularity of sports. Participatory and spectator sports are
among the leading pastimes of Americans as demonstrated by the popularity of
sports media and by the time and money consumers spend on sports events,
products and services. Based on industry sources, the Company estimates that
attendance at Major League Baseball, NFL, NBA and NHL games during the
1995-1996 season was approximately 120 million, generating gate receipts of
over $3 billion. Sports television programming also consistently draws large
audiences, with sports broadcasts comprising eight of the top ten most widely
viewed television programs in 1996, according to Nielsen Media Research. The
popularity of sports is also demonstrated by the success of sports
publications, the top five of which had, according to Advertising Age, a paid
weekly circulation of 8.9 million and generated over $800 million in
advertising revenue in 1996. In addition, the U.S. retail market for licensed
sports merchandise and apparel was approximately $14 billion in 1996, according
to the Sporting Goods Manufacturers Association. Due to the popularity of
sports among males between the ages of 18 and 49, advertisers consider sports
events and media as attractive venues to reach this audience. Based on industry
sources, the Company estimates that approximately $4.2 billion was spent on
sports television advertising and approximately $5.4 billion was spent on
sponsorships of sports events in 1996.
The Company generates revenue from multiple sources. Since March 31, 1996,
a majority of the Company's revenue has been derived from advertising. Although
most of the content on the Company's Web sites is free, users can purchase
memberships and premium content and products. The Company also expects to
derive future revenue from transactions on its Web sites, including the sale of
limited edition memorabilia, licensed apparel and other sports-related
products, syndication of its programming in other media, and development of Web
sites for third parties.
The Company was incorporated in Delaware in February 1994. Its principal
executive offices are located at 6340 N.W. 5th Way, Fort Lauderdale, Florida
33309, and its telephone number is (954) 351-2120. Unless the context otherwise
requires, the terms "Company" or "SportsLine USA" refer to SportsLine USA,
Inc., and the terms "cbs.sportsline.com" and "vegasinsider.com" refer to the
Company's Web sites, located at http://cbs.sportsline.com and
http://www.vegasinsider.com, respectively. All references to cbs.sportsline.com
include, where appropriate, www.sportsline.com, which was the address of the
Company's flagship Web site prior to March 1997.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby ........................... shares
Common Stock to be outstanding after the Offering ...... shares (1)
Use of Proceeds ....................................... For working capital and other general
corporate purposes, including possible
acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol .................. "SPLN"
</TABLE>
SUMMARY FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
FEBRUARY 23, 1994
(INCEPTION) SIX MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, --------------------------- ---------------------------
1994 1995 1996 1996 1997
------------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue .............................. $ -- $ 52 $ 2,437 $ 535 $ 2,803
Gross margin (deficit) ............... -- (705) (883) (595) 14
Loss from operations .................. (442) (5,372) (13,084) (5,100) (11,469)
Net loss .............................. $ (404) $ (5,330) $ (12,855) $ (5,070) $ (11,116)
Pro forma net loss per share (2) ...... $ $ $ $ $
Weighted average pro forma common
and common equivalent shares
outstanding (2)(3) ..................
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------
PRO FORMA
ACTUAL AS ADJUSTED (2)(4)
--------- -------------------
(Unaudited)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ...... $13,634 $
Working capital ............... 17,052
Total assets .................. 24,910
Long-term obligations ......... 212
Total shareholders' equity ...... 20,732
</TABLE>
- ----------------
(1) Excludes 2,188,688 shares of Common Stock issuable pursuant to stock
options outstanding as of June 30, 1997 (of which options to purchase
577,877 shares were exercisable) with a weighted average exercise price of
$1.24 per share and 4,444,153 shares of Common Stock issuable upon the
exercise of warrants outstanding as of June 30, 1997 (of which warrants to
purchase 3,594,153 shares were exercisable) with a weighted average
exercise price of $2.75 per share. See "Management-- Stock Plans" and
"Description of Capital Stock--Options and Warrants." Also excludes
9,669,317 shares of Common Stock issuable pursuant to the Company's
agreement with CBS (including 3,800,000 shares issuable upon the exercise of
warrants to be granted to CBS). See "Certain Transactions--CBS Agreement."
(2) Gives effect to the conversion of all outstanding shares of the Company's
preferred stock into 14,496,109 shares of Common Stock upon completion of
this offering.
(3) See Note 2 of Notes to Financial Statements for an explanation of the
determination of the weighted average common and common equivalent shares
used to compute net loss per share.
(4) Adjusted to give effect to the sale of the shares of Common Stock
offered hereby at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds therefrom. See
"Use of Proceeds."
6
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS. IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS,
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED BY THIS
PROSPECTUS.
RISK FACTORS RELATED TO THE COMPANY'S OPERATIONS
LIMITED OPERATING HISTORY; ANTICIPATION OF CONTINUING LOSSES; ACCUMULATED
DEFICIT
The Company was incorporated in February 1994 and commercially introduced
its first Web site in August 1995. The Company first recognized revenue from
operations in the quarter ended September 30, 1995. Accordingly, the Company
has a limited operating history upon which an evaluation of the Company and its
prospects can be based. The Company's prospects must be considered in light of
the risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in the
new and rapidly evolving Internet-based advertising, information services and
commerce markets. To address these risks, the Company must, among other things,
provide compelling and original content to Internet users, maintain existing
relationships and effectively develop new relationships with advertisers, their
advertising agencies and other third parties, develop and upgrade its
technology, respond to competitive developments and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will
succeed in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, results of operations and
financial condition. Since its inception, the Company has incurred substantial
costs to develop and enhance its technology, to create, introduce and enhance
its service offerings, to acquire and develop content, to build traffic on its
Web sites, to acquire members, to establish marketing relationships and to
build an administrative organization. The Company intends to continue these
efforts and, in addition, to increase its spending for content development and
acquisition and for marketing. As a consequence, the Company has incurred
operating losses in each of its fiscal quarters and years since inception and
expects to continue to incur significant operating losses until at least the
end of 1998. As of June 30, 1997, the Company had an accumulated deficit of
$29,705,002. The Company has achieved only limited revenue to date and its
ability to generate significant revenue is subject to substantial uncertainty.
There can be no assurance that the Company will ever generate sufficient
revenue to meet its operating expenses or achieve or maintain profitability and
the failure to do so would have a material adverse effect on the Company's
business, results of operations and financial condition. Further, in view of
the rapidly evolving nature of the Company's business and its limited operating
history, the Company believes that period-to-period comparisons of its
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
UNPREDICTABILITY OF FUTURE REVENUE; POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS; SEASONALITY
As a result of the Company's limited operating history and the emerging
nature of the markets in which it competes, the Company is unable to accurately
forecast its revenue. The Company expects in the future to derive revenue from
a mix of advertising, membership and premium service fees, merchandise sales,
Web site development and syndication fees. Through June 30, 1997, transaction
and site development revenue have not been significant, and the Company had not
received any syndication revenue. Because changes in revenue from memberships
and premium services are expected to occur over a period of time while
advertising revenue will be recognized when the advertisements appear,
fluctuations in quarterly revenue and operating results are likely to be
particularly affected by the level of advertising revenue within each quarter.
The Company's current and future expense levels are based largely on its
expectations concerning future revenue and are to a large extent fixed.
Accordingly, the
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Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall, and a shortfall in revenue in relation to the
Company's expectations could have a material adverse effect on the Company's
business, results of operations and financial condition. In addition, the
Company currently intends to significantly increase its operating expenses to
develop and enhance its technology, to create, introduce and enhance its
service offerings, to acquire and develop content, to acquire members and to
establish marketing relationships. To the extent that such expenses precede or
are not subsequently followed by increased revenue, the Company's business,
results of operations and financial condition could be materially adversely
affected.
The Company's quarterly operating results have fluctuated in the past and
are expected to continue to fluctuate in the future as a result of a variety of
factors, many of which are outside the Company's control. These factors
include: the level of usage of the Internet; the level of traffic on the
Company's Web sites; demand for Internet advertising; seasonal trends in both
Internet usage and advertising placements; the addition or loss of advertisers;
the advertising budgeting cycles of individual advertisers; the number of users
that purchase memberships, merchandise or premium services; the amount and
timing of capital expenditures and other costs relating to the expansion of the
Company's operations; the introduction of new sites and services by the Company
or its competitors; price competition or pricing changes in the industry;
technical difficulties or system downtime; general economic conditions; and
economic conditions specific to the Internet, electronic commerce and online
media.
The Company expects that its revenue will be higher leading up to and
during major U.S. sport seasons and lower at other times of the year,
particularly during the summer months when the only major U.S. sports season in
progress is Major League Baseball. The Company believes that advertising sales
in traditional media, such as television, generally are lower in the first and
third calendar quarters of each year, and that advertising expenditures
fluctuate significantly with economic cycles. Depending on the extent to which
the Internet is accepted as an advertising medium, seasonality and cyclicality
in the level of Internet advertising expenditures could become more pronounced.
The foregoing factors could have a material adverse effect on the Company's
business, results of operations and financial condition.
Due to all of the foregoing factors, it is possible that the Company's
operating results will fall below the expectations of securities analysts or
investors in some future quarter. In such event, the trading price of the
Common Stock would likely be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON CBS RELATIONSHIP
In March 1997, the Company entered into a five-year agreement with CBS,
pursuant to which the Company's flagship Web site was renamed
"cbs.sportsline.com." Over the term of the agreement, the Company has the right
to use certain CBS logos and television-related sports content and expects to
receive, among other things, at least $57 million of network television
advertising and on-air promotions. Such network television advertising and
on-air promotions, as well as the association of the Company's brand with CBS,
are important elements of the Company's strategy to increase awareness of the
SportsLine brand and build traffic on its Web sites. Under the agreement, CBS
has the right to receive 60% of the Company's advertising revenue sold on
cbs.sportsline.com pages related to certain "signature events" and 50% of the
Company's advertising revenue sold on cbs.sportsline.com pages containing other
CBS television-related sports content. CBS has the right to terminate the
agreement upon the acquisition by a CBS competitor of 40% or more of the voting
power of the Company's outstanding equity securities or in certain other
circumstances, including if the Company breaches a material term or condition
of the agreement or becomes insolvent or subject to bankruptcy or similar
proceedings. There can be no assurance that CBS will perform its obligations
under the agreement, or that the agreement will significantly increase consumer
awareness of the Company's brand or build traffic on its Web sites. Any failure
of CBS to perform its material obligations under the agreement, or the
termination of the agreement prior to the end of the term in accordance with
its terms, would have a material adverse effect on the Company's business,
results of operations and financial condition. See "Certain Transactions--CBS
Agreement."
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DEPENDENCE ON STRATEGIC RELATIONSHIPS
In addition to its relationship with CBS, the Company has entered into
other strategic relationships with sports superstars, personalities,
organizations and affinity groups, commercial online services, third party Web
sites and developers of browsers and other Internet-based products to increase
awareness of its brand among consumers, to create revenue opportunities and to
obtain content for its Web sites. There can be no assurance that any party to a
strategic agreement with the Company will perform its obligations as agreed or
that any such agreement would be specifically enforceable by the Company. Many
of the Company's agreements with its strategic partners may be terminated by
either party on short notice. The failure to maintain its existing strategic
relationships, to establish additional strategic relationships or to fully
capitalize on any such relationship could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business--Strategic Relationships."
INTENSE COMPETITION
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of Web sites on the Internet competing for consumers'
attention and spending has proliferated with no substantial barriers to entry,
and the Company expects that competition will continue to intensify. The
Company competes, directly and indirectly, for advertisers, viewers, members,
content providers, merchandise sales and rights to sports events with the
following categories of companies: (i) online services or Web sites targeted to
sports enthusiasts generally (such as ESPN SportsZone and CNN and Sports
Illustrated's CNN/SI) or to enthusiasts of particular sports (such as Web sites
maintained by Major League Baseball, the NFL, the NBA and the NHL); (ii)
publishers and distributors of traditional off-line media (such as television,
radio and print), including those targeted to sports enthusiasts, many of which
have established or may establish Web sites; (iii) general purpose consumer
online services such as America Online, CompuServe and Microsoft Network, each
of which provides access to sports-related content and services; (iv) vendors
of sports information, merchandise, products and services distributed through
other means, including retail stores, mail, facsimile and private bulletin
board services; and (v) Web search and retrieval services, such as Excite,
InfoSeek, Lycos and Yahoo!, and other high-traffic Web sites, such as those
operated by C|NET and Netscape. The Company anticipates that the number of its
direct and indirect competitors will increase in the future. Management
believes that the Company's most significant competition is ESPN SportsZone, a
Web site which offers a variety of sports content.
Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, significantly greater name recognition and substantially larger user
or membership bases than the Company and, therefore, have a significantly
greater ability to attract advertisers and users. In addition, many of these
competitors may be able to respond more quickly than the Company to new or
emerging technologies and changes in Internet user requirements and to devote
greater resources than the Company to the development, promotion and sale of
their services. There can be no assurance that the Company's current or
potential competitors will not develop products and services comparable or
superior to those developed by the Company or adapt more quickly than the
Company to new technologies, evolving industry trends or changing Internet user
preferences. Increased competition could result in price reductions, reduced
margins or loss of market share, any of which would materially and adversely
affect the Company's business, results of operations and financial condition.
In addition, as the Company expands internationally it may face new
competition. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, or that competitive
pressures faced by the Company would not have a material adverse effect on its
business, results of operations and financial condition. See
"Business--Competition."
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DEPENDENCE ON CONTENT PROVIDERS; SIGNIFICANT PAYMENTS REQUIRED TO BE MADE TO
CONTENT PROVIDERS; RISK OF THIRD PARTY CLAIMS
The Company relies on independent content providers for sports news,
scores, statistics and other sports information. The Company's future success
depends, in significant part, on its ability to maintain its existing
relationships with such content providers and to build new relationships with
other content providers. The Company's agreements with content providers
generally are short-term and may be terminated by the content provider if the
Company fails to fulfill its obligations under the applicable agreement. Some
of the Company's content providers compete with one another and, to some
extent, with the Company for advertising and members. Termination of one or
more significant content provider agreements would decrease the availability of
sports news and information which the Company can offer its customers and could
have a material adverse effect on the Company's business, results of operations
and financial condition.
The Company's agreements with most of its content providers are
nonexclusive, and many of the Company's competitors offer, or could offer,
content that is similar or the same as that obtained by the Company from such
content providers. In addition, the growing reach and use of the Internet have
further intensified competition in this industry. Consumers have gained free
access to certain information provided directly on the Internet by certain
content providers. To the extent that content providers, including but not
limited to the Company's current suppliers, provide information to users at a
lower cost than the Company or at minimal or no cost, the Company's business,
results of operations and financial condition could be materially adversely
affected.
Fees payable to content providers constitute a significant portion of the
Company's cost of revenue. There can be no assurance that the Company's content
providers will enter into prospective agreements with the Company on the same
or similar terms as those currently in effect. If the Company is required to
increase the fees payable to its content providers, such increased payments
could have a material adverse effect on the Company's business, results of
operations and financial condition. Moreover, the Company may in the future be
subject to third party claims, for defamation, negligence, copyright or
trademark infringement or other theories based on the nature and content of
information supplied by its content providers, and any such claims may have a
material adverse effect on the Company's business, results of operations and
financial condition. See "--Intellectual Property; Risk of Third Party Claims
for Infringement," "--Liability for Information Retrieved from the Internet"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
TRADEMARK LITIGATION
On March 25, 1997, Weatherline, Inc. ("Weatherline"), a company that
provides pre-recorded weather and sports information by telephone, filed a
complaint against the Company in the United States District Court for the
Eastern District of Missouri. Weatherline owns a United States trademark
registration for the mark "Sportsline" for use in promoting the goods and
services of others by making sports information available to customers of
participating businesses through the telephone, and claims to have used the
mark for this purpose since 1968. The complaint alleges that the Company's use
of the mark "SportsLine USA" and other marks utilizing the term "SportsLine"
infringes upon and otherwise violates Weatherline's rights under its registered
trademark and damages Weatherline's reputation. The complaint seeks a
preliminary and permanent injunction against the Company from using marks
containing the term "Sportsline" or any other similar name or mark which would
be likely to cause confusion with Weatherline's mark. The complaint also seeks
actual and punitive damages and attorneys' fees. The Company believes that its
use of the "SportsLine" mark and "SportsLine" derivative marks does not
infringe upon or otherwise violate Weatherline's trademark rights. The Company
has filed an answer in which it denied all material allegations of the
complaint and asserted several affirmative defenses. The action is still in the
discovery stage, and both parties have agreed to attempt to settle the action
through court-ordered mediation. In the event the Company is unable to obtain a
favorable settlement, the Company intends to vigorously defend itself against
the action. The legal costs that may be incurred by the Company in defending
itself against this action could be
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substantial, and the litigation could be protracted and result in diversion of
management and other resources of the Company. In a separate matter, a request
for an extension of time to oppose the Company's application to register the
current version of the SportsLine USA logo has been filed by Weatherline with
the United States Patent and Trademark Office ("USPTO"). There can be no
assurance that the Company will prevail in the lawsuit or any related
opposition proceeding at the USPTO, and an adverse decision in this lawsuit
could result in the Company being prohibited from further use and registration
of the "SportsLine" mark and "SportsLine" derivative marks and being ordered to
pay substantial damages and attorneys' fees to Weatherline, either of which
could have a material adverse effect on the Company's business, results of
operations and financial condition.
INTELLECTUAL PROPERTY; RISK OF THIRD PARTY CLAIMS FOR INFRINGEMENT
The Company's performance and ability to compete are dependent to a
significant degree on its internally developed content and technology. The
Company relies on a combination of copyright and trademark laws, trade secret
protection, confidentiality and non-disclosure agreements with its employees
and with third parties and contractual provisions to establish and protect its
proprietary rights. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate, that the Company
will be able to secure trademark registrations for all of its marks in the
United States and/or foreign countries, or that third parties will not infringe
upon or misappropriate the Company's copyrights, trademarks, service marks and
similar proprietary rights. In addition, effective copyright and trademark
protection may be unenforceable or limited in certain foreign countries, and
the global nature of the Internet makes it impossible to control the ultimate
destination of the Company's services. In the future, litigation may be
necessary to enforce and protect the Company's trade secrets, copyrights and
other intellectual property rights.
There can be no assurance that third parties will not bring copyright or
trademark infringement claims against the Company in addition to the lawsuit
filed by Weatherline referred to above, or claim that the Company's use of
certain technologies violates a patent. If it is determined that the Company
has infringed upon a third party's proprietary rights, there can be no
assurance that any necessary licenses or rights could be obtained on terms
satisfactory to the Company, if at all. The inability to obtain any required
license on satisfactory terms could have a material adverse effect on the
Company's business, results of operations and financial condition. The Company
may also be subject to litigation to defend against claims of infringement of
the rights of others or to determine the scope and validity of the intellectual
property rights of others. If competitors of the Company prepare and file
applications in the United States that claim trademarks used or registered by
the Company, the Company may oppose those applications and have to participate
in proceedings before the USPTO to determine priority of rights to the
trademark, which could result in substantial costs to the Company, even if the
eventual outcome is favorable to the Company. An adverse outcome could require
the Company to license disputed rights from third parties or to cease using
such trademark. Any such litigation would be costly and divert management's
attention, either of which could have a material adverse effect on the
Company's business, results of operations and financial condition. Adverse
determinations in such litigation could result in the loss of certain of the
Company's proprietary rights, subject the Company to significant liabilities,
require the Company to seek licenses from third parties, and prevent the
Company from selling its services, any one of which could have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, inasmuch as the Company licenses a substantial portion
of its content from third parties, its exposure to copyright infringement
actions may increase because the Company must rely upon such third parties for
information as to the origin and ownership of such licensed content. The
Company generally obtains representations as to the origins and ownership of
such licensed content and generally obtains indemnification to cover any breach
of any such representations; however, there can be no assurance that such
representations will be accurate or that such indemnification will provide
adequate compensation for any breach of such representations.
In 1996, the Company was issued a United States trademark registration for
its former SportsLine USA logo. The Company has applied to register in the
United States its current SportsLine USA logo and a number of other marks,
several of which include the term "SportsLine." The Company has filed
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applications to register "SportsLine" marks in Australia and the United
Kingdom. There can be no assurance that the Company will be able to secure
adequate protection for these trademarks in the United States or in foreign
countries. Many foreign countries have a "first-to-file" trademark registration
system and thus the Company may be prevented from registering its marks in
certain countries if third parties have previously filed applications to
register or have registered the same or similar marks. It is possible that
competitors of the Company or others will adopt product or service names
similar to the Company's, thereby impeding the Company's ability to build brand
identity and possibly leading to customer confusion. The inability of the
Company to protect its "SportsLine" and other marks adequately would have a
material adverse effect on the Company's business, results of operations and
financial condition.
As part of its confidentiality procedures, the Company generally enters
into agreements with its employees and consultants and limits access to and
distribution of its software, documentation and other proprietary information.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that agreements entered into for that
purpose will be enforceable. Notwithstanding the precautions taken by the
Company, it might be possible for a third party to copy or otherwise obtain and
use the Company's software or other proprietary information without
authorization or to develop similar software independently. Policing
unauthorized use of the Company's technology is difficult, particularly because
the global nature of the Internet makes it difficult to control the ultimate
destination or security of software or other data transmitted. The laws of
other countries may afford the Company little or no effective protection of its
intellectual property.
The Company also relies on a variety of technology that it licenses from
third parties, including its Internet server software, which is used in the
Company's Web sites to perform key functions. There can be no assurance that
these third party technology licenses will continue to be available to the
Company on commercially reasonable terms. The loss of or inability of the
Company to maintain or obtain upgrades to any of these technology licenses
could materially adversely affect the Company's business, results of operations
and financial condition.
MANAGEMENT OF GROWTH
The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion of its operations will continue to be
required in order to address potential market opportunities. The Company
expanded from five employees at January 1, 1995 to 174 employees at June 30,
1997 and the Company expects to add additional key personnel in the near
future. Such growth has placed, and any future growth may continue to place,
substantial strain on the Company's management, operational and financial
resources and systems. To manage its growth, the Company must implement,
improve and effectively utilize its operational, management, marketing and
financial systems and train and manage its employees. In addition, it may
become necessary for the Company to increase the capacity of its software,
hardware and telecommunications systems on short notice. There can be no
assurance that the Company will be able to effectively manage the expansion of
its operations or that the Company's systems or procedures or controls will be
adequate to support the Company's operations. Any failure of management to
effectively manage the Company's growth would have a material adverse effect on
the Company's business, results of operations and financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
The Company intends to expand internationally and expects that its
international operations will be subject to most of the risks inherent in its
business generally. In addition, there are certain risks inherent in doing
business in international markets, such as changes in regulatory requirements,
tariffs and other trade barriers, fluctuations in currency exchange rates,
potentially adverse tax consequences and difficulties in managing or overseeing
foreign operations, and there are likely to be different consumer preferences
and requirements in such markets. There can be no assurance that one or more of
such factors would not have a material adverse effect on the Company's current
or future international operations and, consequently, on the Company's
business, results of operations and financial condition.
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RISK OF SYSTEM FAILURE, DELAYS AND INADEQUACY
The performance of the Company's Web sites is critical to its reputation
and ability to attract and retain users, advertisers and members. Services
based on sophisticated software and computer systems often encounter
development delays and the underlying software may contain undetected errors or
failures when introduced. Any system error or failure that causes interruption
in availability or an increase in response time could result in a loss of
potential or existing users, advertisers or members and, if sustained or
repeated, could reduce the attractiveness of the Company's Web sites to users
and advertisers. A sudden and significant increase in the number of users of
the Company's Web sites also could strain the capacity of the software,
hardware or telecommunications systems deployed by the Company, which could
lead to slower response time or system failures. In addition, if the number of
Web pages or users of the Company's Web sites increases substantially, there
can be no assurance that the Company's hardware and software infrastructure
will be able to adequately handle the increased demand. The Company's
operations also are dependent upon receipt of timely feeds and computer
downloads from its content providers, and any failure or delay in the
transmission or receipt of such feeds and downloads, whether on account of
system failure of the Company, its content providers, the public network or
otherwise, could disrupt the Company's operations. Any failure or delay that
causes interruptions in the Company's operations could have a material adverse
effect on the Company's business, results of operations and financial
condition. The Company relies on private third party providers to provide it
with access to the Internet. Any disruption in the Company's Internet access or
any failure of the Company's third party provider to handle higher volumes of
users could have a material adverse effect on the Company's business, results
of operations and financial condition. The Company is also dependent upon Web
browsers and Internet service providers ("ISPs") and online service providers
("OSPs") to provide Internet users access to the Company's Web sites, and
members and users may experience difficulties accessing or using the Company's
Web sites due to system failures or delays unrelated to the Company's systems.
The Company's operations are dependent on its ability to maintain its
computer and telecommunications equipment in effective working order and to
protect its systems against damage from fire, hurricanes, power loss,
telecommunications failure, break-ins, computer viruses and other events beyond
the Company's control. Although the Company has developed an out-of-state
disaster recovery plan to respond to system failures and also maintains
property insurance for its equipment, there can be no assurance that the
Company's disaster recovery plan is capable of being implemented successfully,
if at all, or that such insurance will be adequate to compensate the Company
for all losses that may occur or to provide for costs associated with business
interruption. Any damage or failure that causes system disruptions or other
significant interruptions in the Company's operations could have a material
adverse effect on the Company's business, results of operations and financial
condition.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends, in significant part, upon the
continued service of its senior management and other key personnel. The Company
maintains $2 million of key man life insurance covering Michael Levy, the
Company's President and Chief Executive Officer. However, the loss of the
services of Mr. Levy or one or more of the Company's other executive officers
or key employees could have a material adverse effect on the Company, and there
can be no assurance that the Company will be able to retain its key personnel.
See "Management--Executive Officers and Directors."
The Company's future success also depends on its continuing ability to
attract and retain highly qualified technical, editorial and managerial
personnel. Competition for such personnel is intense, and the Company has, at
times, experienced difficulties in attracting the desired number of such
individuals. There can be no assurance that the Company will be able to attract
or retain a sufficient number of highly qualified employees in the future. If
the Company is unable to hire and retain personnel in key positions, the
Company's business, results of operations and financial condition could be
materially adversely affected.
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RISKS RELATED TO THE INTERNET INDUSTRY
EMERGING MARKET FOR THE COMPANY'S SERVICES
The Company operates in a market that is at a very early stage of
development, is rapidly evolving and is characterized by an increasing number
of market entrants who have introduced or developed competing products and
services. As is typical in the case of a new and rapidly evolving industry,
demand and market acceptance for recently introduced products and services are
subject to a high level of uncertainty and risk. Because the market for the
Company's Web sites is new and evolving, it is difficult to predict, with any
assurance, the size of this market and its growth rate, if any. In addition, it
is not known whether individuals will utilize the Internet to any significant
degree as a means of purchasing goods and services. The adoption of the
Internet for commerce, particularly by those individuals and companies which
historically have relied upon traditional means of commerce, will require a
broad acceptance of new methods of conducting business and exchanging
information. There can be no assurance that the market for the Company's Web
sites will develop or that demand for the Company's service will emerge or be
sustainable. If the market fails to develop, develops more slowly than expected
or becomes saturated with competitors, or if the Company's Web sites do not
achieve or sustain market acceptance, the Company's business, results of
operations and financial condition would be materially adversely affected.
DEPENDENCE ON ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM; RELIANCE ON
SHORT-TERM ADVERTISING CONTRACTS; COMPETITION FOR ADVERTISERS
The Company expects to derive a substantial portion of its revenue from
the sale of advertisements on its Web sites. The Company's ability to generate
advertising revenue will depend on, among other factors, the development of the
Internet as an advertising medium, the amount of traffic on and the membership
bases of the Company's Web sites and the Company's ability to achieve and
demonstrate user and member demographic characteristics that are attractive to
advertisers. Most potential advertisers and their advertising agencies have
only limited experience with the Internet as an advertising medium and have not
devoted a significant portion of their advertising expenditures to
Internet-based advertising. There can be no assurance that advertisers or
advertising agencies will be persuaded to allocate or continue to allocate
portions of their budgets to Internet-based advertising or, if so persuaded,
that they will find such advertising to be effective for promoting their
products and services relative to traditional print and broadcast media. No
standards have yet been widely accepted for the measurement of the
effectiveness of Internet-based advertising, and there can be no assurance that
such standards will develop sufficiently to support Internet-based advertising
as a significant advertising medium. In addition, the widespread adoption of
technologies that permit Internet users to selectively block out unwanted
graphics, including advertisements, attached to Web pages could adversely
affect the growth of the Internet as an advertising medium. Acceptance of the
Internet among advertisers and advertising agencies will also depend, to a
large extent, on the level of use of the Internet by consumers, which is highly
uncertain, and upon growth in the commercial use of the Internet. If widespread
commercial use of the Internet does not develop, or if the Internet does not
develop as an effective and measurable medium for advertising, the Company's
business, results of operations and financial condition would be materially
adversely affected.
The Company's advertising revenue to date has been derived under
short-term contracts. Consequently, the Company's advertising customers can
move their advertising to competing Web sites or to other media quickly and
without penalty, thereby increasing the Company's exposure to competitive
pressures. There can be no assurance that the Company's current advertisers
will continue to purchase advertisements, or that the Company will be able to
secure new advertising contracts from existing or future customers at
attractive rates or at all. Any failure of the Company to achieve sufficient
advertising revenue would have a material adverse effect on the Company's
business, results of operations and financial condition.
There is intense competition for the sale of advertising on high-traffic
Web sites, which has resulted in a wide range of rates quoted by different
vendors for a variety of advertising services, making it
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difficult to project levels of Internet advertising that will be realized
generally or by any specific company. Competition for advertisers among present
and future Web sites, as well as competition with other traditional media for
advertising placements, could result in significant price competition. Most of
the Company's advertisements to date have been sold on the basis of the number
of "impressions," or times that an advertisement appears in page views
downloaded by users, rather than on the number of "click-throughs," or user
requests for additional information made by clicking on the advertisement.
There can be no assurance that the Company's future advertising customers will
continue to pay on a per-impression basis rather than on a "click-through"
basis. In addition, there can be no assurance that the Company's advertising
customers will accept the internal and third-party measurements of impressions
received by advertisements on the Company's Web sites, or that such
measurements will not contain errors. The foregoing factors and uncertainties
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business--Advertising and Sales."
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET
The Company's success is highly dependent upon continued growth in the use
of the Internet generally and, in particular, as a medium for advertising,
information services and commerce. Use of the Internet by consumers is at a
very early stage of development, and market acceptance of the Internet as a
medium for advertising, information services and commerce is subject to a high
level of uncertainty. The rapid growth of global commerce and the exchange of
information on the Internet and other online services is new and evolving,
making it difficult to predict whether the Internet will prove to be a viable
commercial marketplace. The Company believes that its future success will
require the development and widespread acceptance of the Internet and online
services as a medium for advertising and commerce. In particular, the Company's
future financial success will be dependent on the sale of advertising on its
Web sites and its ability to attract and retain paying members and to sell
merchandise and premium services. There can be no assurance that the Internet
will be a successful commerce and information channel. The Internet may not
prove to be a viable commercial marketplace due to inadequate development of
the necessary infrastructure, such as reliable network backbones, or
complementary services, such as high speed modems and security procedures for
financial transactions. Consumer concern over Internet security has been, and
could continue to be, a barrier to commercial activities requiring consumers to
send their credit card information over the Internet. The Internet has
experienced, and is expected to continue to experience, significant growth in
the number of users and amount of traffic. There can be no assurance that the
Internet infrastructure will continue to be able to support the demands placed
on it by sustained growth.
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE
The Internet industry is characterized by rapid technological
developments, evolving industry standards, changes in user and customer
requirements, frequent new service and product introductions and enhancements.
The introduction of services or products embodying new technologies or the
emergence of new industry standards and practices could render the Company's
existing Web sites and proprietary technology obsolete and unmarketable or
require significant unanticipated investments in product development. The
Company's performance will depend, in part, on its ability to license leading
technologies, enhance its existing services, develop new proprietary
technologies that address the increasingly sophisticated and varied needs of
Web users and advertisers and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The
development of Web sites and other proprietary technologies entails significant
technical and business risks. There can be no assurance that the Company will
be successful in using new technologies effectively or adapting its Web sites
and proprietary technologies to customer requirements or emerging industry
standards. If the Company is unable, for technical, legal, financial or other
reasons, to adapt in a timely manner in response to technological developments,
evolving industry standards, changing market conditions or customer
requirements, or if the Company's Web sites do not achieve market acceptance,
the Company's business, results of operations and financial condition would be
materially adversely affected.
15
<PAGE>
INTERNET COMMERCE SECURITY RISKS
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. The
Company relies on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary to effect secure
transmission of confidential information. There can be no assurance that
advances in computer capabilities, new discoveries in the field of cryptography
or other events or developments will not result in a compromise or breach of
the algorithms used by the Company to protect customer transaction data. If any
such compromise of the Company's security were to occur it could have a
material adverse effect on the Company's business, results of operations and
financial condition. A party who is able to circumvent the Company's security
measures could misappropriate proprietary information or cause interruptions in
the Company's operations. The Company may be required to expend significant
capital and other resources to protect against the threat of such security
breaches or to alleviate problems caused by such breaches. Concerns over the
security of Internet transactions and the privacy of users may also inhibit the
growth of the Internet generally, and the Web in particular, especially as a
means of conducting commercial transactions. To the extent that activities of
the Company or third party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
expose the Company to a risk of loss or litigation and possible liability.
There can be no assurance that the Company's security measures will prevent
security breaches or that failure to prevent such security breaches would not
have a material adverse effect on the Company's business, results of operations
and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is subject to various laws and governmental regulations
applicable to businesses generally. The Company believes it is currently in
compliance with such laws and that such laws do not have a material impact on
its operations. In addition, although there are currently few laws or
regulations directly applicable to access to or commerce on the Internet, due
to the increasing popularity and use of the Internet, it is possible that more
stringent consumer protection laws and regulations may be adopted with respect
to the Internet, covering issues such as user privacy and expression, pricing,
intellectual property, information security, anti-competitive practices, the
convergence of traditional channels with Internet commerce, characteristics and
quality of products and services and the taxation of subscription fees or gross
receipts of ISPs. On June 26, 1997, the United States Supreme Court held
unconstitutional provisions of the Communications Decency Act of 1996, which,
among other things, imposed criminal penalties on anyone who distributes
obscene, lascivious or indecent communications over the Internet. The enactment
or enforcement of other federal or state laws or regulations in the future may
increase the Company's cost of doing business or decrease the growth of the
Internet and could in turn decrease the demand for the Company's products and
services, increase the Company's costs, or otherwise have an adverse effect on
the Company's business, results of operations and financial condition.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, libel and personal
privacy is uncertain, may take years to resolve and could expose the Company to
substantial liability for which the Company might not be indemnified by the
content providers or other third parties. Any such new legislation or
regulation or the application of existing laws and regulations to the Internet
could have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company's contests and sweepstakes may be subject to state and federal
laws governing lotteries and gambling. The Company seeks to design its contest
and sweepstakes rules to fall within exemptions from such laws and restricts
participation to individuals over 18 years of age who reside in jurisdictions
within the United States and Canada in which the contests and sweepstakes are
lawful. There can be no assurance that the Company's contests and sweepstakes
will be exempt from such laws or that the applicability of such laws to the
Company would not have a material adverse effect on the Company's business,
results of operations and financial condition.
Tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in Internet commerce. New state
tax regulations may subject the Company to
16
<PAGE>
additional state sales and income taxes. As the Company's service is available
over the Internet in multiple states and foreign countries, such jurisdictions
may claim that the Company is required to qualify to do business as a foreign
corporation in each such state and foreign country. The failure by the Company
to qualify as a foreign corporation in a jurisdiction where it is required to
do so could subject the Company to taxes and penalties for the failure to
qualify. It is possible that the governments of other states and foreign
countries also might attempt to regulate the Company's transmissions of content
on its Web sites or prosecute the Company for violations of their laws. There
can be no assurance that violations of local laws will not be alleged or
charged by state or foreign governments, that the Company might not
unintentionally violate such law or that such laws will not be modified, or new
laws enacted, in the future.
In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission (the "FCC") in the same manner as other telecommunications services.
For example, America's Carriers Telecommunications Association has filed a
petition with the FCC for this purpose. In addition, because the growing
popularity and use of the Internet has burdened the existing telecommunications
infrastructure and many areas with high Internet use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate ISPs and OSPs in a manner similar to long
distance telephone carriers and to impose access fees on the ISPs and OSPs. If
either of these petitions are granted, or the relief sought therein is
otherwise granted, the costs of communicating on the Internet could increase
substantially, potentially slowing the growth in use of the Internet. Any such
new legislation or regulation or application or interpretation of existing laws
could have a material adverse effect on the Company's business, results of
operations and financial condition.
LIABILITY FOR INFORMATION RETRIEVED FROM THE INTERNET
Due to the fact that materials may be downloaded from Web sites operated
by the Company and may be subsequently distributed to others, there is a
potential that claims will be made against the Company for defamation,
negligence, copyright or trademark infringement or other theories based on the
nature and content of such materials. Such claims have been brought, sometimes
successfully, against online services in the past. In addition, the Company
could be subject to liability with respect to content that may be accessible
through the Company's Web sites or third party Web sites linked from the
Company's Web sites. For example, claims could be made against the Company if
material deemed inappropriate for viewing by children could be accessed through
the Company's Web sites. Although the Company carries general liability
insurance, the Company's insurance may not cover potential claims of this type
or may not be adequate to cover all costs incurred in defense of potential
claims or to indemnify the Company for all liability that may be imposed. Any
costs or imposition of liability that is not covered by insurance or in excess
of insurance coverage could have a material adverse effect on the Company's
business, results of operations and financial condition.
RISKS RELATED TO THE OFFERING
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after this offering. The initial
public offering price will be determined by negotiation between the Company and
the representatives of the Underwriters based upon several factors and may not
be indicative of future market prices. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering price.
The trading price of the Company's Common Stock could be subject to
fluctuations in response to quarterly variations in results of operations,
announcements of technological innovations or new services or products by the
Company or its competitors, changes in financial estimates by securities
analysts, the operating and stock price performance of other companies and
other events or factors. In addition, the stock market has experienced
volatility that has particularly affected the market prices of equity
securities of companies within certain industry groups such as
17
<PAGE>
technology companies generally and Internet-related companies in particular,
and that often has been unrelated to the operating performance of such
companies. These broad market fluctuations may materially adversely affect the
trading price of the Company's Common Stock.
CONTROL BY EXISTING SHAREHOLDERS
Upon completion of this offering, the Company's present directors and
executive officers, greater than 5% shareholders and their respective
affiliates will beneficially own approximately % of the outstanding Common
Stock (approximately % of the outstanding Common Stock assuming full
exercise of the Underwriters' overallotment option). As a result, these
shareholders, if they act as a group, will be able to control all matters
requiring shareholder approval, including the election of directors and
approval of significant corporate transactions. Such control may have the
effect of delaying or preventing a change in control of the Company. See
"Management," "Principal Shareholders" and "Description of Capital Stock."
MANAGEMENT'S DISCRETION AS TO USE OF UNALLOCATED NET PROCEEDS
The Company has not designated any specific use for the net proceeds from
the sale by the Company of the Common Stock offered hereby. Rather, the Company
intends to use the net proceeds from this offering for working capital and
other general corporate purposes, including expansion of the Company's
marketing and advertising sales efforts, content development and licensing,
international expansion and capital expenditures. A portion of the net proceeds
also may be used for the acquisition of or investments in businesses, products
and technologies that are complementary to those of the Company. Consequently,
the Board of Directors and management of the Company will have significant
flexibility in applying the net proceeds of this offering. The failure of
management to apply such funds effectively could have a material adverse effect
on the Company's business, results of operations and financial condition. See
"Use of Proceeds."
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CHARTER AND BYLAWS
The Company is organized under the laws of the State of Delaware. Certain
provisions of Delaware law may have the effect of delaying, deferring or
preventing a change in control of the Company. In addition, certain provisions
of the Company's Amended and Restated Certificate of Incorporation (the
"Certificate") and Amended and Restated Bylaws (the "Bylaws") may be deemed to
have anti-takeover effects and may delay, defer or prevent a takeover attempt
that a shareholder might consider in its best interest. The Certificate will
authorize the Board to determine the rights, preferences, privileges and
restrictions of unissued series of preferred stock and to fix the number of
shares of any series of preferred stock and the designation of any such series,
without any vote or action by the Company's shareholders. Thus, the Board can
authorize and issue shares of preferred stock with voting or conversion rights
that could adversely affect the voting or other rights of holders of the
Company's Common Stock. In addition, the issuance of preferred stock may have
the effect of delaying, deferring or preventing a change of control of the
Company, since the terms of the preferred stock that might be issued could
potentially prohibit the Company's consummation of any merger, reorganization,
sale of substantially all of its assets, liquidation or other extraordinary
corporate transaction without the approval of the holders of the outstanding
shares of the Common Stock. Other provisions of the Certificate and Bylaws will
(i) divide the Company's Board of Directors into three classes, each of which
will serve for different three-year periods, (ii) provide that the shareholders
may not take action by written consent, but only at duly called annual or
special meetings of shareholders, (iii) provide that special meetings of the
shareholders may be called only by the Chairman of the Board of Directors or a
majority of the entire Board of Directors and (iv) establish certain advance
notice procedures for nomination of candidates for election as directors and
for shareholder proposals to be considered at annual shareholders' meetings.
See "Description of Capital Stock--Anti-takeover Effects of Certain Provisions
of Delaware Law and the Company's Certificate of Incorporation and Bylaws."
18
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS; FUTURE EQUITY ISSUANCES
Sales of substantial amounts of Common Stock in the public market
following this offering, or the perception that such sales will occur, could
have a material adverse effect on the market price of the Company's Common
Stock. After the completion of this offering, shares of Common Stock will
be outstanding. Of such shares, only the shares sold pursuant to this
offering will be tradable in the public market without restriction. The
remaining 25,294,187 shares of Common Stock to be outstanding after the
offering are "restricted securities" within the meaning of Rule 144 ("Rule
144") under the Securities Act of 1933, as amended (the "Securities Act"), and
may not be publicly resold, except in compliance with the registration
requirements of the Securities Act or pursuant to an exemption from
registration, including that provided by Rule 144. Beginning 90 days after the
date of this Prospectus, of these remaining 25,294,187 shares will be
eligible for resale in the public market, subject to certain volume, timing and
other requirements of Rule 144 and to the lock-up agreements described below.
In addition, beginning 90 days after the date of this Prospectus, an additional
shares issuable upon exercise of options and warrants which will be
vested at such time will be eligible for resale in the public market, subject
to compliance with Rule 144 and Rule 701 under the Securities Act and to the
lock-up agreements described below. The remaining shares of currently
outstanding Common Stock and shares issuable upon exercise of options and
warrants which will vest after such 90 day period will become eligible for
resale pursuant to Rule 144 and Rule 701 at various times within the next year,
and some of such shares could be sold earlier if the holders exercise their
registration rights described below.
The Company and certain of its existing shareholders have agreed not to
offer, sell or contract to sell or otherwise dispose of any Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Robertson, Stephens & Company LLC, subject to certain exceptions. In
its sole discretion, and at any time without notice, Robertson, Stephens &
Company LLC may release all or any portion of the shares subject to such
lock-ups.
The holders of approximately shares of Common Stock have the right
in certain circumstances to require the Company to register their shares under
the Securities Act for resale to the public. If such holders, by exercising
their demand registration rights, cause a large number of shares to be
registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Company's Common Stock. If the
Company were required to include in a Company-initiated registration statement
shares held by such holders pursuant to the exercise of their piggyback
registration rights, such sales may have an adverse effect on the Company's
ability to raise needed capital. In addition, approximately 180 days after the
date of this Prospectus, the Company expects to file a registration statement
on Form S-8 registering a total of shares of Common Stock subject to
outstanding stock options and warrants or reserved for issuance under the
Company's stock option plans.
In connection with entering into strategic relationships, particularly
with athletes, the Company has issued and may continue to issue warrants to
purchase significant amounts of Common Stock. The issuance of significant
amounts of warrants in the future, particularly warrants with exercise prices
below the fair market value of the Common Stock at the time of issuance, could
have a material adverse effect on the Company's results of operations or
financial condition, or on the market price for the Company's Common Stock. See
"Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION
Investors participating in this offering will incur an immediate,
substantial dilution of $ in the net tangible book value per share of the
Common Stock from the initial public offering price. To the extent that the
Company issues additional shares of Common Stock pursuant to its agreement with
CBS, or other outstanding options or warrants to purchase Common Stock are
exercised, there will be further dilution. See "Dilution."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company pursuant to this offering are estimated to
be $ ($ if the Underwriters' over-allotment option is exercised in
full), based upon an assumed initial public offering price of $ per share,
and after deducting underwriting discounts and commissions and estimated
offering expenses.
The Company intends to use the net proceeds from this offering for working
capital and other general corporate purposes, including expansion of the
Company's marketing and advertising sales efforts, content development and
licensing, international expansion and capital expenditures. From time to time,
the Company expects to evaluate possible acquisitions of or investments in
businesses, products and technologies that are complementary to those of the
Company, for which a portion of the net proceeds of this offering may be used.
The Company presently has no commitments or understandings for any such
acquisitions, and is not presently engaged in any negotiations for any such
acquisitions, and no portion of the net proceeds has been allocated for any
specific acquisition. Pending such uses, the Company intends to invest the net
proceeds from this offering in investment-grade, interest-bearing securities.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings, if any, to fund the development
and growth of its business. In addition, the Company's equipment line of credit
contains covenants that restrict the Company from paying dividends in excess of
$750,000 without the lender's prior written consent. See Note 5 of Notes to
Financial Statements.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997 (i) on an actual basis, and (ii) on an as adjusted basis to
reflect the conversion into Common Stock of all of the Company's outstanding
preferred stock upon the completion of this offering, the sale of the
shares of Common Stock offered hereby at an assumed initial public offering
price of $ per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction with
the Company's Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------------ ------------
(Unaudited)
(In thousands)
<S> <C> <C>
Long-term obligations, net of current maturities ........................... $ 212 $
--------- ---------
Shareholders' equity (1):
Preferred stock, $0.01 par value; no shares authorized, issued or outstanding
actual; 1,000,000 shares authorized, none issued and outstanding pro
forma as adjusted ...................................................... -- --
Convertible preferred stock, $0.01 par value; issued in series; 3,000,000
Series A shares authorized, issued and outstanding actual; 6,162,776
Series B shares authorized, issued and outstanding actual; 5,333,333
Series C shares authorized, issued and outstanding actual; none
authorized, issued or outstanding pro forma as adjusted .................. 145 --
Common stock, $0.01 par value; 50,000,000 shares authorized, 10,798,078
shares issued and outstanding, actual; shares issued and
outstanding pro forma as adjusted ....................................... 108
Additional paid-in capital ................................................ 50,184
Accumulated deficit ...................................................... (29,705)
---------
Total shareholders' equity ................................................ 20,732
---------
Total capitalization ................................................... $ 20,944 $
========= =========
</TABLE>
- ----------------
(1) Excludes 2,188,688 shares of Common Stock issuable pursuant to stock
options outstanding as of June 30, 1997 (of which options to purchase
577,877 shares were exercisable) with a weighted average exercise price of
$1.24 per share and 4,444,153 shares of Common Stock issuable upon the
exercise of warrants outstanding as of June 30, 1997 (of which warrants to
purchase 3,594,153 shares were exercisable) with a weighted average
exercise price of $2.75 per share. See "Management-- Stock Plans" and
"Description of Capital Stock--Options and Warrants." Also excludes
9,669,317 shares of Common Stock issuable pursuant to the Company's
agreement with CBS (including 3,800,000 shares issuable upon the exercise of
warrants to be granted to CBS). See "Certain Transactions--CBS Agreement."
21
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1997,
after giving effect to the conversion of all outstanding shares of preferred
stock into Common Stock, was $ , or $ per share of Common Stock. Pro
forma net tangible book value per share is equal to the Company's total
tangible assets less total liabilities, divided by the total pro forma number
of shares of Common Stock outstanding. After giving effect to the sale of the
shares of Common Stock offered hereby, and the application of the
estimated net proceeds therefrom, the pro forma net tangible book value of the
Company as of June 30, 1997 would have been $ , or $ per share. This
represents an immediate increase in such pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution of $
per share to new investors purchasing shares in this offering. The following
table summarizes, on a pro forma basis as of June 30, 1997, this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ................................. $
Pro forma net tangible book value per share as of June 30, 1997 ............... $
Increase in net tangible book value per share attributable to new investors ...
Pro forma net tangible book value per share as of June 30, 1997 after offering
Dilution per share to new investors ............................................. $
======
</TABLE>
The following table summarizes on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share by
existing stockholders and by the purchasers of the shares of Common Stock
offered hereby at an assumed initial offering price of $ per share, and
before deducting underwriting discounts and commissions and estimated offering
expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION (1)
------------------------ ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing shareholders ...... % $ % $
New investors ...............
Total ..................... 100.0% $ 100.0%
====== ============ ======
</TABLE>
- ----------------
(1) See Note 5 of Notes to Financial Statements for a discussion of certain
non-cash consideration received by the Company in exchange for the
issuance of shares of Common Stock.
The above computations exclude (i) 2,188,688 shares of Common Stock
issuable pursuant to stock options outstanding as of June 30, 1997 (of which
options to purchase 577,877 shares were exercisable) with a weighted average
exercise price of $1.24 per share and (ii) 4,444,153 shares of Common Stock
issuable upon the exercise of warrants outstanding as of June 30, 1997 (of
which warrants to purchase 3,594,153 shares were exercisable) with a weighted
average exercise price of $2.75 per share. The above computations also exclude
9,669,317 shares of Common Stock issuable pursuant to the Company's agreement
with CBS (including 3,800,000 shares issuable upon the exercise of warrants to
be granted to CBS). To the extent that any of the foregoing options or warrants
are exercised, or additional shares are issued to CBS there will be further
dilution to new investors. In addition, in April 1997, the Company's Board of
Directors approved the 1997 Incentive Compensation Plan (the "Incentive Plan")
under which an additional 2,000,000 shares of Common Stock have been reserved
for issuance and the 1997 Employee Stock Purchase Plan, under which an
additional 500,000 shares of Common Stock have been reserved for issuance.
Furthermore, under the Incentive Plan an additional number of options may be
granted equal to the number of shares of Common Stock with respect to awards
previously granted under the Incentive Plan that terminate without being
exercised, expire, are forfeited or canceled, and the number of shares of
Common Stock that are surrendered in payment of any awards or any tax
withholding requirements. See "Certain Transactions--CBS Agreement,"
"Management--Stock Plans" and "Description of Capital Stock--Options and
Warrants."
22
<PAGE>
SELECTED FINANCIAL DATA
The selected balance sheet data set forth below as of December 31, 1995
and 1996, and the selected statement of operations data for the period from
February 23, 1994 (Inception) through December 31, 1994 and the years ended
December 31, 1995 and December 31, 1996 have been derived from the Company's
audited financial statements, which statements have been audited by Arthur
Andersen LLP, independent certified public accountants, and appear elsewhere in
this Prospectus. The selected balance sheet data as of June 30, 1997 and the
selected statements of operations data for the six months ended June 30, 1996
and 1997 have been derived from the unaudited financial statements of the
Company which, in the opinion of management, include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. The results of operations
for the six months ended June 30, 1997 are not necessarily indicative of the
results for the full year. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Company's Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 23, 1994
(INCEPTION) SIX MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, --------------------------- --------------------------
1994 1995 1996 1996 1997
------------------ ------------ ------------ ----------- ------------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue ................................. $ -- $ 52 $ 2,437 $ 535 $ 2,803
Cost of revenue ........................... -- 757 3,320 1,130 2,789
------ -------- --------- -------- ---------
Gross margin (deficit) .................. -- (705) (883) (595) 14
Operating expenses:
Product development ..................... 58 633 939 514 588
Sales and marketing ..................... 59 1,179 5,568 1,817 3,515
General and administrative ............... 309 2,662 4,870 1,882 3,101
Depreciation and amortization ............ 16 193 824 292 4,279
------ -------- --------- -------- ---------
Total operating expenses ............... 442 4,667 12,201 4,505 11,483
------ -------- --------- -------- ---------
Loss from operations ..................... (442) (5,372) (13,084) (5,100) (11,469)
Interest expense ........................ -- (50) (136) (75) (31)
Interest and other income, net ............ 38 92 365 105 384
------ -------- --------- -------- ---------
Net loss ................................. $ (404) $ (5,330) $ (12,855) $ (5,070) $ (11,116)
====== ======== ========= ======== =========
Pro forma net loss per share (1)(2) ...... $ $ $ $ $
====== ======== ========= ======== =========
Weighted average pro forma common
and common equivalent
shares outstanding (1)(2) ...............
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
----------- --------- ------------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .............................. $ 184 $13,994 $13,634
Working capital (deficit) .............................. (1,944) 11,779 17,052
Total assets .......................................... 2,496 17,850 24,910
Long-term obligations, net of current maturities ...... 684 409 212
Total shareholders' equity (deficit) .................. (452) 14,273 20,732
</TABLE>
- ----------------
(1) See Note 2 of Notes to Financial Statements for an explanation of the
determination of the weighted average common and common equivalent shares
used to compute net loss per share.
(2) Gives effect to the conversion of all outstanding shares of the Company's
preferred stock into 14,496,109 shares of Common Stock upon completion of
this offering.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE
IN THIS PROSPECTUS. THE FOLLOWING DISCUSSION ALSO SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
SportsLine USA is a leading Internet-based sports media company that
provides branded, interactive information and programming as well as
merchandise to sports enthusiasts worldwide. Traffic on the Company's Web sites
has increased significantly since the commercial launch of sportsline.com in
August 1995, to an average of 1,200,000 page views and 206,000 visits per day
during June 1997, increases of 63% and 117%, respectively, from December 31,
1996 to June 30, 1997, and the Company's Web sites had approximately 38,000
paying members as of June 30, 1997.
The Company's activities during the period from February 23, 1994
(inception) through December 31, 1994 and the year ended December 31, 1995,
primarily related to recruiting personnel, licensing and creating content,
developing and enhancing its software and hardware infrastructure, negotiating
relationships with sports superstars, personalities, organizations and affinity
groups, and raising capital. Although most of the content on the Company's Web
sites is free, users of the Company's Web sites can purchase memberships and
premium content and products. Prior to March 1996, substantially all of the
Company's revenue was derived from membership subscriptions and fees for
premium services. The Company first recognized advertising revenue in March
1996. Advertising revenue and fees from memberships and premium services
constituted approximately 64% and 36%, respectively, of the Company's total
revenue in 1996. In addition to revenue from advertising, memberships and
premium content, the Company derives revenue from transactions on the Company's
Web sites, including sales of limited edition memorabilia, licensed apparel and
other sports related products. In the future, the Company also expects to
syndicate its content in other media, such as radio, and development of Web
sites for third parties. Through June 30, 1997, transaction and site
development revenue had not been significant and the Company had not received
any syndication revenue.
Advertising revenue is recognized in the period in which the advertisement
is displayed, provided that no significant obligations remain and collection of
the resulting receivable is probable. Company obligations typically include
guarantees of a minimum number of "impressions," or times that advertisements
appear in page views downloaded by users. Revenue relating to monthly
memberships is recognized in the month the service is provided. Revenue
relating to annual memberships and seasonal sports contests is recognized
ratably over the life of the membership agreement or contest period.
Accordingly, amounts received for which services have not yet been provided are
recorded as deferred revenue on the Company's balance sheets.
RESULTS OF OPERATIONS
REVENUE
Total revenue for the six months ended June 30, 1997 was $2,803,000
compared to $535,000 for the six months ended June 30, 1996. Total revenue for
the year ended December 31, 1996 was $2,437,000 compared to $52,000 for the
year ended December 31, 1995. The Company had no revenue during the period from
February 23, 1994 (inception) to December 31, 1994. The increase in revenue in
each period was due principally to increased advertising sales and, to a lesser
extent, increased revenue from memberships and premium service fees. As of June
30, 1997, the Company had deferred revenue of $891,000 relating to cash
received for which services had not yet been provided.
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Advertising revenue for the six months ended June 30, 1997 and 1996 and
the years ended December 31, 1996 and 1995 accounted for approximately 59%,
64%, 64% and 0%, respectively, of total revenue. Advertising revenue from
barter transactions, in which the Company received advertising or other
services or goods in exchange for advertising on its Web sites, accounted for
approximately 2%, 71% and 32% of total advertising revenue for the six months
ended June 30, 1997 and 1996 and for the year ended December 31, 1996,
respectively. In future periods, management intends to maximize cash
advertising revenue, although the Company will continue to enter into barter
advertising relationships as appropriate.
COST OF REVENUE
Cost of revenue consists primarily of content and royalty fees, payroll
and related expenses for the Company's editorial and operations staff,
telecommunications and computer related expenses for the support and delivery
of the Company's services and prizes awarded to contestants in the Company's
various contests. Royalty payments are paid to certain content providers and
technology and marketing partners based on membership levels subject, in
certain instances, to specified minimum amounts.
Cost of revenue for the six months ended June 30, 1997 was $2,789,000
compared to $1,130,000 for the six months ended June 30, 1996. Cost of revenue
was $3,320,000 for the year ended December 31, 1996 compared to $757,000 for
the year ended December 31, 1995. There was no cost of revenue for the period
from February 23, 1994 (inception) through December 31, 1994, as no revenue was
recognized. The Company's operating expenses have increased significantly since
inception, which reflects the costs associated with building an infrastructure
to support the operation of its Web sites and commercializing its services. The
increase in cost of revenue for the six months ended June 30, 1997 compared to
the six months ended June 30, 1996 and for the year ended December 31, 1996
compared to the year ended December 31, 1995 was primarily the result of
content and royalty fees incurred for increased content, growth in the
Company's editorial and operations staff and telecommunications costs. The
Company anticipates that cost of revenue will grow as it increases staffing to
expand its services, increases its merchandising efforts, incurs higher content
and royalty fees and as the Company requires more bandwidth from its ISPs.
OPERATING EXPENSES
PRODUCT DEVELOPMENT. Product development expense consists primarily of
consulting and employee compensation and related expenses required to support
the development of existing and new service offerings and proprietary content.
The Company capitalizes certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion
of a working model. Costs incurred by the Company between completion of a
working model and the time when the product is ready for general release have
not been significant.
Product development expense for the six months ended June 30, 1997 was
$588,000 compared to $514,000 for the six months ended June 30, 1996. Product
development expense for the year ended December 31, 1996 was $939,000 compared
to $633,000 for the year ended December 31, 1995 and $58,000 for the period
from inception (February 23, 1994) to December 31, 1994. The increase in
product development expense in each period was primarily attributable to
increases in personnel and associated costs relating to developing the features
and functionality of the Company's Web sites. The Company believes that
significant investments in product development are required to remain
competitive. As a consequence, the Company intends to continue to invest
significant resources in product development.
SALES AND MARKETING. Sales and marketing expense consists of salaries and
related expenses, advertising, marketing, business development and public
relations expenses and member acquisition costs. Member acquisition costs
consist primarily of the direct costs of member solicitation, including
advertising on other Web sites, printing, production and shipping of member
kits, and the cost of
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obtaining qualified prospects from direct marketing programs and from third
parties. The Company expenses member acquisition costs as incurred.
Sales and marketing expense for the six months ended June 30, 1997 was
$3,515,000 compared to $1,817,000 for the six months ended June 30, 1996. Sales
and marketing expense was $5,568,000 for the year ended December 31, 1996
compared to $1,179,000 for the year ended December 31, 1995 and $59,000 for the
period from inception (February 23, 1994) to December 31, 1994. Barter
transactions accounted for approximately 1%, 13% and 9% of sales and marketing
expense for the six months ended June 30, 1997 and 1996 and the year ended
December 31, 1996, respectively. The increase in sales and marketing expense in
each period was a result of growth in the number of personnel and related
costs, member acquisition costs, public relations activities and participation
in conferences and trade shows. The Company intends to continue to invest in
member acquisition programs.
GENERAL AND ADMINISTRATIVE. General and administrative expense consists
of salary and related costs for executive, finance and accounting, technical
and customer support, human resources and administrative functions as well as
professional service fees. General and administrative expense for the six
months ended June 30, 1997 was $3,101,000 compared to $1,882,000 for the six
months ended June 30, 1996. General and administrative expense was $4,870,000
for the year ended December 31, 1996 compared to $2,662,000 for the year ended
December 31, 1995 and $309,000 for the period from February 23, 1994
(inception) to December 31, 1994. The increase in general and administrative
expense in each period was primarily attributable to salary and related
expenses for additional personnel, higher professional fees and recruitment
expenses. The Company increased general and administrative expense in each
period to develop and maintain the administrative infrastructure necessary to
support the growth of its business. The Company anticipates that it will incur
additional general and administrative expense as a result of becoming a public
company.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
consists of the depreciation of property and equipment, amortization of costs
associated with consulting agreements and, beginning in March 1997, the
amortization of deferred advertising and content costs relating to the CBS
agreement. Depreciation and amortization expense for the six months ended June
30, 1997 was $4,279,000 compared to $292,000 for the six months ended June 30,
1996. Depreciation and amortization expense was $824,000 for the year ended
December 31, 1996 compared to $193,000 for the year ended December 31, 1995 and
$16,000 for the period from inception (February 23, 1994) to December 31, 1994.
The increase in depreciation and amortization expense in each period was
primarily attributable to increases in property and equipment and, for the six
months ended June 30, 1997, to amortization related to the CBS agreement.
Under the Company's agreement with CBS, the Company will issue at the
beginning of each contract year shares of Common Stock and warrants to purchase
Common Stock in consideration of CBS's advertising and promotional efforts and
its license to the Company of the right to use certain CBS logos and
television-related sports content. At the beginning of each contract year, the
Company will record as deferred advertising and content costs the value of the
shares and warrants issued in such contract year, based upon the fair value of
the Common Stock in March 1997 when the agreement was executed. These amounts
will be amortized to depreciation and amortization expense over each related
contract year. See Note 5 of Notes to Financial Statements.
INTEREST EXPENSE. Interest expense consists primarily of interest paid on
the Company's existing equipment line of credit, on capital lease obligations
and on short-term loans that have been repaid. Interest expense was $31,000 for
the six months ended June 30, 1997 compared to $75,000 for the six months ended
June 30, 1996. Interest expense was $136,000 for the year ended December 31,
1996 compared to $50,000 for the year ended December 31, 1995. There was no
interest expense for the period from February 23, 1994 (inception) to December
31, 1994.
INTEREST AND OTHER INCOME, NET. Interest and other income, net primarily
represents interest earned on cash and cash equivalents. Interest and other
income, net for the six months ended June 30,
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1997 was $384,000 compared to $105,000 for the six months ended June 30, 1996.
Interest and other income, net was $365,000 for the year ended December 31,
1996 compared to $92,000 for the year ended December 31, 1995 and $38,000 for
the period from inception (February 23, 1994) to December 31, 1994. The
increase in interest and other income, net in each period was primarily
attributable to higher average investments in cash and cash equivalents. The
Company anticipates that interest income will increase in future periods as a
result of the investment of the net proceeds from this offering pending other
uses.
INCOME TAXES. No provision for federal and state income taxes has been
recorded as the Company incurred net operating losses through June 30, 1997. As
of December 31, 1996, the Company had approximately $18,000,000 of net
operating loss carryforwards for Federal income tax purposes, expiring from
2009 to 2011, available to offset future taxable income. Given the Company's
limited operating history, losses incurred to date and the difficulty in
accurately forecasting the Company's future results, management does 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 $0. See Note 7 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company's primary source of liquidity consisted
of $13,634,000 in cash and cash equivalents. The Company has financed its
operations primarily through private placements of common stock and convertible
preferred stock.
As of June 30, 1997, the Company owed $393,000 under an equipment line of
credit which is payable in 33 equal monthly installments beginning in July
1996. The borrowings under the equipment line carry interest at the prime rate
plus 1.5% (10.0% at June 30, 1997) and are secured by substantially all of the
Company's assets. In addition, the Company is required to comply with certain
restrictive covenants which include, among other items, maintenance of certain
financial ratios and a cash balance equal to the amount of the outstanding
balance of the line of credit.
In July 1997, the Company obtained a $2,500,000 revolving credit facility
that provides for the lease financing of computers and other equipment
purchases. No amounts were outstanding under this facility as of June 30, 1997.
As of June 30, 1997, deferred advertising and content costs totaled
$4,891,000, which primarily represented costs related to the CBS agreement to
be amortized to depreciation and amortization expense during the second half of
1997. Accrued liabilities totaled $2,081,000 as of June 30, 1997, an increase
of $749,000 from December 31, 1996, primarily due to increases in accruals for
advertising, software royalties and consulting fees.
Net cash used in operating activities was $6,745,000 and $4,856,000 for
the six months ended June 30, 1997 and 1996, respectively. Net cash used in
operating activities was $10,915,000, $4,390,000 and $389,000 for the years
ended December 31, 1996 and 1995 and the period from inception (February 23,
1994) to December 31, 1994, respectively. The principal uses of cash for all
periods were to fund the Company's net losses from operations, partially offset
by increases in deferred revenue, accounts payable and depreciation and
amortization and other noncash charges.
Net cash used in investing activities was $1,305,000 for the six months
ended June 30, 1997 compared to net cash provided by investing activities of
$10,000 for the six months ended June 30, 1996. Net cash used in investing
activities was $1,183,000, $1,446,000 and $42,000 for the years ended December
31, 1996 and 1995 and the period from inception (February 23, 1994) to December
31, 1994, respectively. The principal uses for all periods were purchases of
property and equipment, except for the Company's purchase in March 1996 of a
restricted certificate of deposit (which subsequently matured).
Net cash provided by financing activities was $7,691,000 and $10,130,000
for the six months ended June 30, 1997 and 1996, respectively. Net cash
provided by financing activities was $25,908,000,
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$4,353,000 and $2,098,000 for the years ended December 31, 1996 and 1995 and
the period from inception (February 23, 1994) to December 31, 1994,
respectively. Financing activities consisted principally of the issuance of
equity securities and draws on a term loan with a bank in December 1995 and
January 1996 (which was subsequently repaid in March 1996).
The Company intends to use the net proceeds from this offering for working
capital and other general corporate purposes, including expansion of the
Company's marketing and advertising sales efforts, content development and
licensing, international expansion and for capital expenditures. Although the
Company has no material commitments for capital expenditures, it anticipates
purchasing approximately $2 million of property and equipment in 1997,
primarily computer equipment and furniture and fixtures. From time to time, the
Company expects to evaluate possible acquisitions of or investments in
businesses, services and technologies that are complementary to those of the
Company, for which a portion of the net proceeds of this offering may be used.
The Company presently has no commitments or understandings for any such
acquisitions, and is not presently engaged in any discussions or negotiations
for any such acquisitions, and no portion of the net proceeds has been
allocated for any specific acquisition. Pending such uses, the Company intends
to invest the net proceeds from this offering in investment-grade,
interest-bearing securities.
The Company believes that the net proceeds from this offering and current
cash balances will be sufficient to fund its working capital and capital
expenditure requirements for at least the next 12 to 18 months. However, the
Company expects to continue to incur significant operating losses until at
least the end of 1998. To the extent the Company requires additional funds to
support its operations or the expansion of its business, the Company 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 the Company's
shareholders. There can be no assurance that additional financing, if required,
will be available to the Company in amounts or on terms acceptable to the
Company.
SEASONALITY
The Company expects that its revenue will be higher leading up to and
during major U.S. sports seasons and lower at other times of the year,
particularly during the summer months when the only major U.S. sports season in
progress is Major League Baseball. The Company believes that advertising sales
in traditional media, such as television, generally are lower in the first and
third calendar quarters of each year, and that advertising expenditures
fluctuate significantly with economic cycles. Depending on the extent to which
the Internet is accepted as an advertising medium, seasonality and cyclicality
in the level of Internet advertising expenditures could become more pronounced.
The foregoing factors could have a material adverse affect on the Company's
business, results of operations and financial condition.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
was issued. SFAS No. 123 allows either adoption of a fair value based method of
accounting for employee stock options and similar equity instruments or
continuation of the measurement of compensation cost relating to such plans
using the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES."
The Company has elected to continue to use the intrinsic value based method.
Accordingly, pro forma disclosures required to be presented by SFAS No. 123 for
companies continuing to utilize the intrinsic value based method are presented
in Note 6 of Notes to Financial Statements and have been determined as if the
Company had accounted for its stock-based compensation plans under the fair
value method.
In February 1997, SFAS No. 128, EARNINGS PER SHARE, was issued. SFAS No.
128 simplifies the methodology of computing earnings per share, and requires
the presentation of basic and diluted earnings per share. The Company's basic
and diluted earnings per share are the same, as the Company's common stock
equivalents are antidilutive. In addition, the Company's basic and diluted
earnings per share are the same as that computed under APB No. 15, EARNINGS PER
SHARE, as presented in the accompanying Statements of Operations. SFAS No. 128
must be adopted for periods ending after December 15, 1997 and be retroactively
reflected in the financial statements.
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BUSINESS
THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
SportsLine USA is a leading Internet-based sports media company that
provides branded, interactive information and programming as well as
merchandise to sports enthusiasts worldwide. The Company produces and
distributes original, interactive sports content, including editorials and
analyses, radio shows, contests, games, fantasy league products and fan clubs.
The Company also distributes a broad range of up-to-date news, scores, player
and team statistics and standings, photos, audio clips and video clips obtained
from leading sports news organizations and the Company's superstar athletes, as
well as instant odds and picks. Traffic on the Company's Web sites has
increased significantly since the commercial launch of sportsline.com in August
1995, to an average of 1,200,000 page views and 206,000 visits per day during
June 1997, increases of 63% and 117%, respectively, from December 31, 1996 to
June 30, 1997, and the Company's Web sites had approximately 38,000 paying
members as of June 30, 1997.
The Company has established a number of important strategic relationships
to increase awareness of the SportsLine brand, build traffic on its Web sites
and develop proprietary programming. In March 1997, the Company entered into a
strategic alliance with CBS pursuant to which the Company's flagship Web site
was renamed "cbs.sportsline.com." The CBS agreement provides for
cbs.sportsline.com to receive at least $57 million of advertising and on-air
promotion during the term of the agreement, primarily during CBS sports event
broadcasts such as the 1998 Winter Olympics, the NCAA Men's Basketball
Tournament, NCAA Football, PGA Tour events, U.S. Open tennis and the Daytona
500. The Company also receives television and radio promotion through strategic
media relationships with The Golf Channel and Sports Byline USA, the nation's
largest syndicated sports radio network, and on numerous sports talk radio
stations around the country. In July 1997, the Company entered into a strategic
programming and distribution agreement with AOL, pursuant to which
cbs.sportsline.com became the first "anchor tenant" on AOL's Sports Channel,
which allows AOL's more than 9 million subscribers to access the Company's Web
sites from within the AOL service. The AOL agreement also provides the Company
the opportunity to market memberships, premium services and merchandise to
AOL's subscribers and to integrate its sports content and programming into all
major sports areas of the AOL service. The Company also recently entered into
an agreement with Microsoft under which cbs.sportsline.com will be integrated
into Microsoft's "Active Desktop" as part of Microsoft's forthcoming release of
IE4 and Windows 98. cbs.sportsline.com is also featured as a default content
"channel" in the Channel Finder of Netscape's recently released Netcaster
software, which utilizes "push" delivery to give users the ability to subscribe
to dynamic Web content and to browse these channels and Web sites offline from
their desktop. In addition, the Company has established strategic relationships
with sports superstars, personalities, organizations and affinity groups.
INDUSTRY BACKGROUND
THE U.S. SPORTS MARKET
Participatory and spectator sports are among the leading pastimes of
Americans as demonstrated by the popularity of sports media and by the time and
money consumers spend on sports events, products and services. Based on
industry sources, the Company estimates that attendance at Major League
Baseball, NFL, NBA and NHL games during the 1995-1996 season was approximately
120 million, generating gate receipts of over $3 billion. Sports television
programming also consistently draws large audiences, with sports broadcasts
comprising eight of the top ten most widely viewed television programs in 1996
according to Nielsen Media Research. The popularity of sports is also
demonstrated by the success of sports publications, the top five of which had a
paid weekly circulation of 8.9 million and generated over $800 million in
advertising revenue in 1996. In addition, the U.S. retail
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market for licensed sports merchandise and apparel was approximately $14
billion in 1996, according to the Sporting Goods Manufacturers Association. Due
to the popularity of sports among males between the ages of 18 and 49,
advertisers consider sports events and media as attractive venues to reach this
audience. Based on industry sources, the Company estimates that approximately
$4.2 billion was spent on sports television advertising and approximately $5.4
billion was spent on sponsorships of sports events in 1996.
THE WEB AS A NEW MEDIUM FOR ADVERTISING AND COMMERCE
The rapidly increasing number of Web users and ubiquitous access to the
Internet, both in the United States and internationally, have resulted in the
emergence of the Web as a new mass medium. International Data Corporation
("IDC") estimates that the number of individual users worldwide with access to
the Web at the end of 1996 was 28 million, growing to 175 million by the end of
2001.
The Web is an attractive medium for advertising because of its
interactivity, flexibility, targetability and measurability. The interactive
nature of the Web enables advertisers to establish dialogues and meaningful
relationships with potential customers. The flexible nature of a digital medium
like the Web enables advertisers to change their messages frequently in
response to real world events and consumer feedback. The Web also enables
advertisers to reach broad audiences and to target advertisements to users with
similar demographic characteristics, specific regional populations, affinity
groups or selected individuals. The Web is a measurable medium because
impression levels and demographic information concerning users can be tracked
and reported to advertisers. Jupiter Communications estimates that the dollar
value of online advertising will increase from $314 million in 1996 to $7.1
billion in 2001.
The Web is emerging as a medium for global commerce. A growing number of
consumers have begun to transact business over the Web, such as paying bills,
booking airline tickets, trading securities and purchasing consumer goods.
Moreover, online transactions can be faster, less expensive and more convenient
than transactions conducted via human interaction. Internet retailers can offer
convenience and value to their customers and simultaneously display in-depth
information concerning products or services selected by users according to
their preferences using a combination of text, video and sound. IDC estimates
that the total value of goods and services purchased on the Web will increase
from $2.6 billion in 1996 to $220 billion in 2001.
THE SPORTSLINE OPPORTUNITY
The Company seeks to capitalize on the market opportunities created by the
worldwide popularity of sports, the emergence of the Web as a communications
and commerce medium and the appealing demographics of sports fans on the Web.
By offering comprehensive and compelling sports programming that is continually
updated on a real-time basis, and by utilizing the Web's graphical and
interactive capabilities to add entertainment value to its content, the Company
is targeting sports enthusiasts worldwide to develop the SportsLine brand. The
Company believes that it can leverage its brand recognition and its other media
properties, such as its sports radio programming, in the pursuit of multiple
revenue opportunities, including advertising, memberships, merchandising,
content and programming syndication and Web site development.
STRATEGY
The Company's objective is to become the leading Internet sports media
company and to create a global sports brand. Key elements of the Company's
strategy include the following:
FOCUS EXCLUSIVELY ON SPORTS
SportsLine USA focuses exclusively on providing sports information,
programming and sports-related merchandise 24 hours a day, seven days a week.
The Company distinguishes itself by offering broader and more in-depth sports
coverage on its Web sites than is available from any other single
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source of media, including television, radio or print publications. The Company
differentiates its Web sites by (i) providing comprehensive and innovative
sports programming, including news and scores, editorials, sports radio shows,
contests, games and fantasy league products; (ii) utilizing its editorial and
technical resources to package proprietary and third-party content in a
compelling and entertaining format; (iii) offering exclusive content related to
its sports superstar relationships and real-time odds and extensive matchup
analyses through its vegasinsider.com Web site; (iv) producing original video
programming surrounding major sports events, such as live interviews and
"cybercasts" over the Internet; (v) providing local sports coverage through its
relationships with more than 30 specialty publications and expanded coverage
through its relationship with CBS affiliate and owned and operated stations;
and (vi) providing a monitored, 24 hours a day, seven day a week sports chat
community. The Company seeks to capitalize on its technical resources to
maximize user satisfaction by (i) optimizing the speed of delivery of its
content and (ii) utilizing interactive multimedia software tools such as Active
X, Java, RealMedia (streaming audio and video), Shockwave and QuickTime Virtual
Reality to add entertainment value to its programming.
LEVERAGE STRATEGIC RELATIONSHIPS TO ENHANCE BRAND AND BUILD TRAFFIC
The Company has established strategic relationships to increase consumer
awareness of the SportsLine brand and build traffic to its Web sites. The
Company believes that its relationship with CBS, in particular the branding of
its flagship Web site as "cbs.sportsline.com" and the promotion it will receive
on CBS television sports broadcasts, will facilitate the establishment of
SportsLine as a broadly recognized consumer brand. The Company also believes
that its strategic agreements with AOL and Microsoft and its ongoing
relationship with Netscape will further enhance its brand, generate traffic to
the Company's Web sites and provide additional opportunities to market
memberships, premium services and merchandise to millions of Web users. In
addition, the Company has established strategic relationships with sports
superstars, personalities, organizations and affinity groups, and operators of
other Web sites to increase traffic to the Company's Web sites, to attract new
advertisers and members and to create additional revenue opportunities.
CAPITALIZE ON MULTIPLE REVENUE OPPORTUNITIES
The Company is pursuing multiple revenue opportunities for future growth.
The Company believes that advertising, membership and premium service fees,
merchandising, content syndication and third party Web site development
represent key revenue opportunities. The Company believes that the demographics
of its audience are consistent with those of the sports industry generally and
are attractive to advertisers seeking to reach these consumers. Although most
of the content on the Company's Web site is free, the Company charges
membership fees for access to exclusive editorials, matchup analysis and other
exclusive content such as proprietary contests, fantasy league packages,
instant odds and picks. The Company also expects to increase its revenue from
merchandising, including sales of limited edition memorabilia, licensed apparel
and other sports products, as well as by developing Web sites and fan clubs for
sports superstars, personalities, organizations and affinity groups.
DEVELOP MULTIPLE DISTRIBUTION CHANNELS
The Company intends to extend the SportsLine brand and leverage its sports
content by syndicating its programming and distributing its proprietary content
through a variety of media, including radio, third party and CBS affiliate Web
sites, online services, news wire services, publications and e-mail. The
Company currently produces the only all-sports radio programming broadcast
exclusively over the Internet. The Company recently entered into an agreement
to syndicate certain of its radio programming nationally to traditional
over-the-air sports talk radio stations. The Company also intends to capitalize
on the experience of its management and its relationships with sports
superstars, personalities and journalists to develop sports-oriented television
programming.
PURSUE INTERNATIONAL GROWTH OPPORTUNITIES AND EXPAND GLOBAL REACH
Given the global nature of sports, the Company is pursuing opportunities
to leverage the SportsLine brand internationally. The Company intends to
establish foreign news bureaus to create
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global sports coverage and to establish strategic relationships that will
enable it to more effectively obtain and deliver local sports content. The
Company does not currently have any overseas operations or arrangements, but is
pursuing opportunities to build Web sites targeted to the Australian, European
and Pacific Rim markets.
SPORTS INFORMATION, PROGRAMMING AND DISTRIBUTION
The Company offers a broad range of sports-related information and
programming, which it delivers through its network of Web sites and other
distribution channels.
INFORMATION AND PROGRAMMING
<TABLE>
<S> <C>
NEWS AND EDITORIALS The Company's news organization provides up-to-date general
sports news and information for all major professional and
college sports 24 hours a day, seven days a week, including
previews, game summaries, audio and video clips and color
photographs, obtained from strategic partners and a variety of
leading sports news organizations such as The Associated
Press, CBS, Reuters and SportsTicker. The Company also
publishes exclusive editorials and analyses from its in-house
staff of 30 writers and editors and more than 45 freelance
sports journalists.
SCORES, STATISTICS AND ODDS The Company delivers continuously updated, real-time scores,
schedules, standings, player and team statistics and odds for all
major professional and college sports from data providers
including The Associated Press, Computer Sports World, Data
Broadcasting Corporation, Elias Sports Bureau and
SportsTicker.
FANTASY LEAGUES AND CONTESTS Fantasy league enthusiasts can participate in SportsLine
leagues or form their own leagues with customized rules,
scoring and reporting. The Company administers player
transactions (for example, drafts, trades, starting lineup
selection and disabled list and minor league moves) and
provides summaries of scoring, standings and roster
transactions. Proprietary contests feature cash prizes, limited
edition sports memorabilia and other awards based on the
results of weekly, season-long or special event related games
of skill. Regular sweepstakes and "giveaways" feature cash
prizes, sports memorabilia, event tickets and other
merchandise.
LOCAL AND PERSONALIZED CONTENT The Company packages its information and programming to
enable users to follow local or regional team and event
coverage, including weekly stories from college sports
publications and team coverage from Pro Sports Exchange.
Members can personalize the information and programming
they receive through the Company's "Personal SportsPage"
and "Personal SportsMail," which are delivered over the Web
or by e-mail.
</TABLE>
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<TABLE>
<S> <C>
COMMUNITY CONTENT The Company hosts monitored interactive chat sessions with
sports superstars and personalities, and experts on subjects
such as sports memorabilia and fantasy leagues. The Company
also hosts bulletin boards and newsgroups devoted to sports-
related topics.
LIVE RADIO! The Company's radio studio produces over 50 hours of
original, live programming each week, including interviews
with superstars and notable sports personalities and regular
commentary from leading sports analysts. The Company also
"cybercasts" syndicated radio shows from Sports Byline USA,
Sports Overnight America and various experts on sports-
related topics.
VIDEO The Company produces original video programming
surrounding major sports events and live video interviews and
"cybercasts" such as the Company's exclusive live Internet
coverage of the Special Olympics All Star Cafe Celebrity
Auction. The Company's Super Bowl XXXI coverage included
live video interviews and daily video clips covering the event
and sports celebrities.
</TABLE>
WEB SITES
CBS.SPORTSLINE.COM, the Company's flagship Web site, features
comprehensive, in-depth coverage of all major professional and college sports
on a domestic and international basis, including the following:
<TABLE>
<S> <C>
Baseball Football
Major League Baseball National Football League
Minor League Baseball Canadian Football League
College College
Hockey Basketball
National Hockey League National Basketball Association
International Hockey League Women's National Basketball Association
American Hockey League Continental Basketball Association
College American Basketball League
Auto Racing College
Boxing Olympic Sports
Cricket Rugby
Cycling Skiing
Golf Soccer
Health and Fitness Tennis
Horse Racing Volleyball
</TABLE>
cbs.sportsline.com won numerous awards during 1996, including the Internet
Services Association's "Outstanding Innovation" award for Baseball LIVE!; a
"Gold Medal" for Outstanding Olympic Coverage from THE WALL STREET JOURNAL; a
"Members' Choice" designation from AOL; and NETGUIDE'S "Platinum Award" as one
of the best sites on the Web. During the first six months of 1997,
cbs.sportsline.com won, among other awards, NetGuide's "Platinum Award" for
overall site excellence and "Editor's Choice" from UK Plus, and was one of PC
Magazine's top 25 sites on the Web.
cbs.sportsline.com's comprehensive approach is exemplified by its coverage
of Major League Baseball. In addition to up-to-date news, scores, standings,
rosters, transaction reports and exclusive editorial commentary,
cbs.sportsline.com features Baseball LIVE!, an online "stadium" that utilizes
Shockwave technology to enable users to view a graphical depiction of real-time
play-by-play action of
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Major League Baseball games in progress. Additional baseball coverage includes
player and team statistics that are sortable by position, team and standing;
chat rooms and baseball newsgroup links and contests. Fantasy league
enthusiasts also can purchase SportsLine's fantasy league products, which
include Fantasy Baseball and Commissioner. Fantasy Baseball enables
participants to manage their own fantasy- or rotisserie-style baseball league
in season-long and playoff competitions. Participants form leagues of up to 20
teams and utilize cbs.sportsline.com to administer all player transactions (for
example, drafts, trades, starting lineup selection, disabled list and minor
league moves) and obtain weekly summaries of scoring, standings and roster
transactions. cbs.sportsline.com also offers Fantasy Baseball participants the
ability to communicate in specially reserved chat rooms. Commissioner provides
fantasy and rotisserie league participants a fully configurable interface to
manage their own leagues, including customizing rules, scoring and reporting to
their own preferences.
VEGASINSIDER.COM, launched as a separate Web site in March 1997, provides
sports gaming information and features electronic odds on all major sports
events from the Las Vegas casinos, including the Stardust, the Flamingo Hilton,
the MGM Grand and Bally's, plus lines from nationally recognized oddsmakers
"Roxy" Roxborough and Russ Culver. Handicapping information includes
commentary, matchup analysis and picks from some of the nation's leading sports
handicappers. The site's news reporting is focused on a gaming perspective and
provides detailed statistical and matchup analysis tools, including
"against-the-spread" and "straight-up" records, team and player statistics and
injury and weather reports. Live scoreboards provide breaking news and scores,
updates, recaps and boxscores. Most of the content on vegasinsider.com is
available only to paying members.
WEB SITES FOR SPORTS SUPERSTARS AND PERSONALITIES. The Company has
created and maintains Web sites for 15 sports superstars and personalities,
including Joe Namath, Shaquille O'Neal (shaq.com), Wayne Gretzky (gretzky.com),
Jerry Rice, Cal Ripken, Jr. (2131.com), Pete Sampras (sampras.com), Gabrielle
Reece (gabbyreece.com), Arnold Palmer (arnoldpalmer.com), Emerson Fittipaldi
(emmo.com), Mike Schmidt, Bill Walton, John Daly (gripitandripit.com) and
Keyshawn Johnson (keyshawn.com). The Company also has entered into exclusive
agreements to create Web sites for Michael Jordan, Tiger Woods and Joe Montana,
all of which are expected to be launched during 1997. The Company has packaged
these Web sites in a unique and entertaining site that includes all of
SportsLine's athlete spokespersons. The superstar athlete site will include
daily features and insights from athletes, the opportunity to belong to fan
clubs, as well as radio interviews and chat sessions from active and retired
athletes from around the world of sports.
OTHER WEB SITES. The Company has created and maintains Web sites for
sports organizations and major sports events, including the San Francisco Forty
Niners NFL franchise (sf49ers.com), The Golf Channel (thegolfchannel.com),
Bollettieri Tennis and Sports Academy (bollettieri.sportsline.com), the FedEx
Orange Bowl (orangebowl.org), the Ironman Triathlon (ironman.sportsline.com),
the Women's Professional Volleyball Association (wpva.com), the United States
Ski Team (usskiteam.com) and Golf Holidays (golfholidays.com).
The Company is responsible for the technical development, production and
maintenance of the Web sites it creates for athletes and sports organizations,
as well as customer service, technical support and billing associated with the
sale of premium features or merchandise. The Company generally is entitled to
receive a percentage of the sponsorship, advertising and other revenue
generated from third party Web sites it develops, although to date revenue from
this source has been insignificant. The Company intends to capitalize on its
Web site production capabilities and generate incremental revenue by building
Web sites for other sports superstars, personalities, organizations and
affinity groups that seek to establish a Web presence.
OTHER DISTRIBUTION CHANNELS
The inclusion of cbs.sportsline.com in the AOL service and the integration
of cbs.sportsline.com into Microsoft's IE4 and Netscape's Netcaster Web
browsers make the Company's sports content and programming readily accessible
to the millions of Web users that access the Internet via these platforms.
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The Company also distributes its sports content and programming through
relationships with other commercial online services (Prodigy), third party Web
sites (Delta Airlines, Excite and Talk City), high speed modems and
television-based products (@Home, Media One and Netchannel), and other
Internet-based products (C|NET's Snap!, Pointcast, Air Media Live!, WaveTop and
Audible Words). The Company believes that its original sports radio shows have
broad appeal and has recently entered into an agreement to syndicate certain of
its radio programming, both on the Internet and nationally to over-the-air
sports talk radio stations. The Company also intends to develop distribution
and revenue opportunities in other media, including news wire services,
publications and e-mail.
ADVERTISING AND SALES
The Company believes that the demographics of its audience are similar to
the traditional sports advertisers' target market. Based on Company sponsored
market research, users of the Company's Web sites are predominantly male, 92%
are between the ages of 18 to 54, 48% have college degrees and 30% have an
annual income greater than $75,000.
The Company currently derives, and expects to continue to derive, a
substantial portion of its revenue from advertising on its Web sites. The
Company sells "banner" advertisements that let interested readers link directly
to the advertisers' own Web sites or to promotional sites created by the
Company. The Company also offers sponsorship opportunities that enable
advertisers to associate their corporate messages with the Company's coverage
of athletes and marquee events (such as the World Series, the Super Bowl, the
Olympics, the NBA Playoffs and the Stanley Cup Playoffs), special features of
the Company's Web sites (including ScoreCenters or Baseball LIVE!) and special
promotions, contests and events. The Company targets traditional sports
advertisers, such as consumer product and service companies, sporting goods
manufacturers and automobile companies, as advertisers on its Web sites.
Advertising revenue has been derived principally from short-term
advertising contracts on a per impression basis or for a fixed fee based on a
minimum number of impressions. The Company's advertising rates generally range
from $20.00 to $50.00 per thousand impressions. To enable advertisers to verify
the number of impressions received by their advertisements and monitor their
advertisements' effectiveness, the Company provides its advertisers with third
party audit reports showing data on impressions received by their
advertisements.
The Company's in-house sales staff develops and implements its advertising
strategies, including identifying strategic accounts and developing
presentations and promotional materials. The Company has sales personnel
located in Fort Lauderdale, New York, Chicago, Detroit and San Francisco. The
Company also capitalizes on its cross-marketing relationships with sports
superstars, personalities, organizations and affinity groups by seeking
sponsorships and advertisements from their sponsors. Pursuant to the CBS
agreement, the Company and CBS's television network advertising sales personnel
will coordinate advertising sales efforts for cbs.sportsline.com.
During 1996 and the six months ended June 30, 1997, more than 100
organizations from various industries advertised on the Company's Web sites,
including the following representative advertisers, each of which placed more
than $10,000 of advertising during this period:
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<PAGE>
<TABLE>
<S> <C>
AUTOMOTIVE PUBLISHING AND ENTERTAINMENT
- ---------- ----------------------------
Acura Columbia House
General Motors DirecTV
Honda Electronic Arts
Oldsmobile Men's Health & Fitness
Toyota Paramount Pictures
Volvo Sega
Time Warner
CONSUMER
- -------- TECHNOLOGY
American Greetings ----------
Bausch & Lomb AOL
Clearasil Digital Equipment Corporation
Coca-Cola IBM
JC Penney Intel
Kodak Microsoft
Pepsi PointCast
Perry Ellis Real Audio
Smirnoff Sun Microsystems
Texaco Toshiba
U.S. Robotics
FINANCIAL
- --------- TELECOMMUNICATIONS
AIG ------------------
Block Financial AT&T
Chase Manhattan Bank Bell South
E*Trade Sprint
VISA US WEST
</TABLE>
No advertiser accounted for more than 8% of the Company's revenue during
1996 or for the six months ended June 30, 1997.
MEMBERSHIPS AND PREMIUM OFFERINGS
Although most of the content on the Company's Web sites is free, users can
purchase memberships and premium content and products. The Company also
believes that it will be able to charge fees for access to "pay-per-view"
content such as exclusive interviews, chat sessions or special coverage of
major sports events. In addition, the Company expects to sell online fan clubs
in connection with some of its planned superstar athlete Web sites and has the
exclusive right to create the "offline" fan club for Tiger Woods.
The following table sets forth certain information, as of June 30, 1997,
concerning the Company's membership and premium service offerings:
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<PAGE>
<TABLE>
<CAPTION>
MEMBERSHIPS DESCRIPTION PRICE RANGE
- ------------------- ----------------------------------------------------------------------------- -----------------
<S> <C> <C>
TEAM SPORTSLINE PERSONAL SPORTSPAGE. Member-configured Web pages to follow selected
teams and sports.
PERSONAL SPORTSMAIL. Information on members' favorite teams and sports
delivered daily to their personal e-mail addresses.
ELECTRONIC ODDS. Fifteen minute delayed odds from premier Las Vegas
casinos.
NATIONAL AND REGIONAL NEWS. Breaking news, photos and audio clips from
the Associated Press and exclusive stories from the Company's in-house
editorial staff. $4.95 monthly
$39.95 annually
CONTESTS. Sports specific contests with travel, memorabilia and cash prizes.
SPECIAL EDITORIAL CONTENT. Sports birthdays, Playboy's Classic Sports
Interviews and access to a sports almanac.
SPORTS RADIO. Access to archived radio broadcasts.
CHAT ROOMS. Private chat rooms available only to members.
DISCOUNTS. Members receive discounts on merchandise, travel,
entertainment and fantasy league products and services.
VEGAS INSIDER ELECTRONIC ODDS. Fifteen minute delayed odds from premier Las Vegas
casinos.
DETAILED MATCH-UP ANALYSIS. Game logs, "against-the-spread" and "straight-
up" records, team and player statistics, injury and weather reports and $19.95 monthly
detailed write-ups from Computer Sports World. $129.95 annually
HANDICAPPING EXPERTS. Picks, match-up analysis and editorial commentary.
LIVE SCOREBOARDS. Breaking scores, odds, updates, recaps, box scores and
breaking news.
PREMIUM SERVICES
- ----------------
FANTASY LEAGUES CHALLENGE GAME. Multi-player leagues featuring overall, conference, league
AND FANTASY TOOLS and weekly prizes.
$19.95 - $39.95
FANTASY SOFTWARE/TOOLS. Team and league management, including sortable
stats, Fantasy Scoring Center, Stats Projector and Trends Analysis.
ODDS AND PICKS ELECTRONIC ODDS. Instant odds from premier Las Vegas casinos. $79.95 monthly
$599.95 annually
PICK PACKS. Expert picks for college and professional games from well-known 14.95 to 24.95
handicappers. per pick pack
PUBLICATIONS ONLINE SUBSCRIPTIONS. Ten professional and more than 25 college sports
publications. $5.95 - $59.95
</TABLE>
The Company offers potential members a 30-day free trial period. As is
typical in the online services industry, a portion of the users who access the
Company's service on a trial basis do not become members, and each month a
portion of the Company's members terminate their memberships. The Company
believes that its conversion and retention rates are consistent with industry
averages for online and similar services.
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MERCHANDISE
The Company recently began offering a variety of branded sports
merchandise, books, videos and unique memorabilia on its Web sites, including
(i) merchandise from recognized sporting goods manufacturers, such as K-Swiss
and Wilson (ii) licensed apparel from Russell Athletics and Pro-Line (iii)
league, event and team merchandise branded by organizations such as the NFL,
MLB, NCAA, Women's Professional Volleyball Association and the FedEx Orange
Bowl, (iv) unique sports superstar memorabilia, including items branded by
Michael Jordan, Joe Namath, Emerson Fittipaldi, Gabrielle Reece, Cal Ripken and
Wayne Gretzky, (v) CBS SportsLine branded merchandise from Champion and Nicole
Miller, (vi) sports books, (vii) collectibles, trading cards and autographed
memorabilia from Upper Deck, Pinnacle, Scoreboard and Mounted Memories and
(viii) sports related art. The Company continues to establish relationships
with vendors and licensors to enable it to offer, through third-party
distributors, a branded selection of sports-related merchandise, including
books and other sports publications, licensed apparel and other sports
products, videos, specialty products and limited edition memorabilia and
collectors items. To date, merchandise revenue has not been significant.
STRATEGIC RELATIONSHIPS
The Company has established strategic relationships to provide marketing
and cross promotional opportunities, to increase consumer awareness of the
SportsLine brand, to build traffic on its Web sites and to obtain exclusive
sports content for its Web sites.
CBS. In March 1997, the Company entered into a five-year agreement with
CBS pursuant to which CBS acquired a minority ownership interest in the Company
and the Company's flagship Web site was renamed "cbs.sportsline.com". The
agreement provides for cbs.sportsline.com to receive, among other things, at
least $57 million of network television advertising and on-air promotion during
the term of the agreement, primarily during CBS television sports broadcasts
such as the 1998 Winter Olympics, the NCAA Men's Basketball Tournament, NCAA
Football, PGA Tour events, U.S. Open tennis and the Daytona 500. In addition,
the Company has the right to use certain CBS logos and television-related
sports content on cbs.sportsline.com and in connection with the operation and
promotion of that Web site. CBS and the Company will seek to maximize revenue
through a joint advertising sales effort and by creating merchandising
opportunities. The agreement also provides the Company access to certain CBS
television-related sports content and the potential to create distribution and
revenue opportunities with more than 200 CBS affiliates throughout the United
States. In addition, under the terms of the agreement, the Company and CBS will
share advertising revenue on pages of cbs.sportsline.com that relate to certain
CBS broadcast sports events or that contain CBS content. See "Certain
Transactions--CBS Agreement."
AOL. cbs.sportsline.com was the first Web site to become an "anchor
tenant" on AOL's Sports Channel. Under its one-year agreement with AOL, the
Company has secured until July 1998 a permanent position on the Main Sports
Screen of the AOL Service as well as a programming presence on every other
major sports screen within the AOL Service. In addition, the Company will have
the opportunity to sell its merchandise and memorabilia to AOL's subscribers
through online marketing and promotional campaigns. The Company is entitled to
receive "bounties" for new AOL subscribers acquired through disk distribution
campaigns conducted by the Company in association with AOL.
MICROSOFT. The Company recently entered into a strategic marketing and
content distribution agreement with Microsoft under which Microsoft will
promote the Company's service in conjunction with the commercial release of IE4
and Windows 98 as a "Platinum Channel Partner." The Company will be one of 25
content providers to be permanently bundled into the "Active Desktop," thereby
becoming an integrated component of every copy of IE4 and Windows 98
distributed by Microsoft within the United States over the term of the
agreement.
SPORTS SUPERSTARS AND PERSONALITIES. The Company has established
strategic relationships with sports superstars and personalities, including
Michael Jordan, Tiger Woods, Joe Namath, Shaquille
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O'Neal, Wayne Gretzky, Jerry Rice, Joe Montana, Cal Ripken, Jr., Pete Sampras,
Arnold Palmer, Gabrielle Reece, Mike Schmidt, Emerson Fittipaldi, John Daly,
Keyshawn Johnson and Bill Walton, and advisory agreements with Mark McCormack
(Chairman of International Management Group) and Edward DeBartolo, Jr. and
Carmen Policy (the owner and President, respectively, of the San Francisco
Forty Niners). Each of these individuals has agreed to serve as a spokesperson
for the Company, to permit the Company to use his or her name, likeness and
photographs on promotional materials and to be available to the Company to
provide input on business and marketing strategies.
SPORTS ORGANIZATIONS AND AFFINITY GROUPS. cbs.sportsline.com has been
designated the "Official Online Service of the National Football League
Players" by Players, Inc., the for-profit licensing subsidiary of the National
Football League Players Association, and has also entered into strategic
relationships with the San Francisco Forty Niners, the United States Ski Team,
the Ironman Triathlon and the Women's Professional Volleyball Association. The
Company engages in cross promotional activities with these organizations and
uses these relationships to increase its access to the organizations'
individual athlete members, some of whom have participated in exclusive chat
sessions on the Company's Web sites. The Company also maintains cross
promotional relationships with other sports organizations and affinity groups
for which it has created Web sites, including Bollettieri Tennis and Sports
Academies, the FedEx Orange Bowl and Sports Careers, a career consulting and
placement service.
IMG. In June 1995, the Company entered into a consulting agreement with
International Merchandising Corporation ("IMG") which provided for IMG to
provide certain services to the Company on an exclusive basis, including acting
as the Company's representative and marketing agent in negotiations for the
acquisition of rights to programs and events, access to IMG clients as content
providers as well as implementing marketing plans for obtaining subscribers and
sponsors. In June 1996, the Company and IMG entered into an amended agreement
under which IMG also agreed to act as the Company's agent in negotiations with
television broadcasters, athletes and strategic corporate partners. In April
1997, the Company and IMG agreed to expand, on a global basis, the services IMG
provides to the Company.
OTHER MEDIA RELATIONSHIPS. In addition to promotion on CBS television
sports broadcasts, SportsLine receives television and radio promotion through
its strategic media relationships with The Golf Channel and Sports Byline USA,
the nation's largest syndicated sports radio network, including on-air
commercials and live endorsements by Ron Barr, Sports Byline USA's Emmy Award
winning host. The Company has developed similar cross promotional relationships
with leading sports talk radio stations in several major metropolitan markets
throughout the United States. The Company also receives promotional space
within the print version of each of the publications it distributes through its
Web sites.
INTERNET AND ONLINE RELATIONSHIPS. Through a variety of strategic
relationships, the Company receives broad exposure by distributing its
proprietary sports content and programming through commercial online services
(AOL and Prodigy), browsers and products (Microsoft's "Active Desktop",
Netscape's "NetTop Channel Finder", Pointcast, Audible Words, WaveTop, Air
Media Live!, C|NET's Snap!), third party Web sites, (Delta Airlines, Excite and
TalkCity), high speed modems and television-based products (@Home, Media One
and Netchannel), and other Internet-based products (Pointcast, Air Media Live!,
Wavetop and Audible Words).
MARKETING
The Company employs a variety of methods to promote the SportsLine brand
and attract traffic and new members to its Web sites. In addition to on-air
promotion on CBS television sports broadcasts, The Golf Channel and Sports
Byline USA, the Company advertises on other Web sites, in targeted publications
and on sports talk radio stations, distributes promotional materials at
selected sports events and engages in an ongoing public relations campaign. The
Company is involved in a variety of promotions where links to its Web sites or
coupons offering free trial memberships are bundled into software
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<PAGE>
products distributed online or through other retail channels. The Company also
has conducted limited direct mail campaigns targeting online or sports-oriented
consumers. Whenever possible, the Company utilizes cross promotional
arrangements to secure advertising and other promotional considerations.
The Company's agreement with CBS provides for cbs.sportsline.com to
receive, among other things, at least $57 million of network television
advertising and on-air promotion during the term of the agreement, primarily
during CBS television sports broadcasts such as the 1998 Winter Olympics, the
NCAA Men's Basketball Tournament, NCAA Football, PGA Tour events, U.S. Open
tennis and the Daytona 500. The Company also receives on-air promotion on The
Golf Channel's cable television programming, on Sports Byline USA's nationally
syndicated radio broadcasts and on sports talk and other radio stations in
several major metropolitan markets.
To date, the most effective source of advertising for the Company has been
Web advertising. The Company has advertised on a number of leading Web sites,
including Excite, InfoSeek, Magellan, Microsoft Network, Netscape, the San Jose
Mercury News, USA Today, WebCrawler and Yahoo! The Company also actively
pursues links to its Web sites from other popular Web sites, and the Company's
Web sites are listed in the directories of most major search engine sites,
including Excite, InfoSeek, Lycos and Yahoo!
The Company's print marketing has consisted primarily of advertisements in
targeted sports publications, including BASEBALL AMERICA, FANTASY BASEBALL,
LINDY'S professional and college football publications, PRO FOOTBALL WEEKLY,
THE SPORTING NEWS, STREET & SMITH and USA TODAY-BASEBALL WEEKLY, and online
publications, including NETGUIDE, HOME PC, ONLINE ACCESS and MULTIMEDIA ONLINE.
The Company's print advertisements also appear regularly in THE INSIDER-DALLAS
COWBOYS EDITION and more than 25 college sports publications. Most of the
Company's print advertisements are the result of barter or "per inquiry"
agreements where no initial cash payments to the publication are required.
The Company's agreements with sports organizations and affinity groups
typically provide for the Company to receive exposure in any print, television
and marketing vehicles utilized by the organizations or affinity groups to
promote themselves or their products or services and for the distribution of
the Company's promotional materials at events or industry shows in which they
participate.
MEMBER SERVICE AND SUPPORT
The Company believes that member service and support are important to its
ability to attract and retain members. The Company's member support staff
provides toll free telephone support, responds to customer requests concerning
technical aspects of the Company's Web sites or certain third party software
and conducts inbound and outbound telemarketing on an 18 hour a day, seven day
a week basis. The Company does not charge for service and support.
COMPETITION
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of Web sites on the Internet competing for consumers'
attention and spending has proliferated with no substantial barriers to entry,
and the Company expects that competition will continue to intensify. The
Company competes, directly and indirectly, for advertisers, viewers, members,
content providers, merchandise sales and rights to sports events with the
following categories of companies: (i) Web sites targeted to sports enthusiasts
generally (such as ESPN SportsZone and CNN and Sports Illustrated's CNN/SI) or
to enthusiasts of particular sports (such as Web sites maintained by Major
League Baseball, the NFL, the NBA and the NHL); (ii) publishers and
distributors of traditional off-line media (such as television, radio and
print), including those targeted to sports enthusiasts, many of which have
established or may establish Web sites; (iii) general purpose consumer online
services such as America Online, CompuServe and Microsoft Network, each of
which provides access to sports-related content and services; (iv) vendors of
sports information, merchandise, products and services distributed through
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other means, including retail stores, mail, facsimile and private bulletin
board services; and (v) Web search and retrieval services, such as Excite,
InfoSeek, Lycos and Yahoo!, and other high-traffic Web sites, such as those
operated by C|NET and Netscape. The Company anticipates that the number of its
direct and indirect competitors will increase in the future. Management
believes that the Company's most significant competition is ESPN SportsZone, a
Web site which offers a variety of sports content.
The Company believes that the principal competitive factors in attracting
and retaining users and members are the depth, breadth and timeliness of
content, the ability to offer compelling and entertaining content and brand
recognition. Other important factors in attracting and retaining users include
ease of use, service quality and cost. The Company believes that the principal
competitive factor in attracting and retaining content providers and
merchandisers is the Company's ability to offer sufficient incremental revenue
from licensing fees, bounties and online sales of product or services. The
Company believes that the principal competitive factors in attracting
advertisers include the number of users and members of the Company's Web sites,
the demographics of the Company's user and membership bases, price and the
creative implementation of advertisement placements. There can be no assurance
that the Company will be able to compete favorably with respect to these
factors.
Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, significantly greater name recognition and substantially larger user
or membership bases than the Company and, therefore, have a significantly
greater ability to attract advertisers and users. In addition, many of these
competitors may be able to respond more quickly than the Company to new or
emerging technologies and changes in Internet user requirements and to devote
greater resources than the Company to the development, promotion and sale of
their services. There can be no assurance that the Company's current or
potential competitors will not develop products and services comparable or
superior to those developed by the Company or adapt more quickly than the
Company to new technologies, evolving industry trends or changing Internet user
preferences. Increased competition could result in price reductions, reduced
margins or loss of market share, any of which would materially and adversely
affect the Company's business, results of operations and financial condition.
In addition, as the Company expands internationally, it may face new
competition. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, or that competitive
pressures faced by the Company would not have a material adverse effect on its
business, results of operations and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is subject, both directly and indirectly, to various laws and
governmental regulations relating to its business. There are currently few laws
or regulations directly applicable to access to or commerce on commercial
online services or the Internet. However, due to the increasing popularity and
use of commercial online services and the Internet, it is possible that a
number of laws and regulations may be adopted with respect to commercial online
services and the Internet. Such laws and regulations may cover issues such as
user privacy, pricing and characteristics and quality of products and services.
On June 26, 1997, the United States Supreme Court held unconstitutional certain
provisions of the Communications Decency Act of 1996, which, among other
things, imposed criminal penalties for transmission of or allowing access to
certain obscene communications over the Internet and other computer services,
intended to protect minors. The adoption of similar laws or regulations in the
future may decrease the growth of commercial online services and the Internet,
which could in turn decrease the demand for the Company's services and products
and increase the Company's costs of doing business or otherwise have an adverse
effect on the Company's business, operating results and financial condition.
Moreover, the applicability to commercial online services and the Internet of
existing laws governing issues such as property ownership, libel and personal
privacy is uncertain and could expose the Company to substantial liability, for
which the Company might not be indemnified by content providers.
The Company's contests and sweepstakes may be subject to state and federal
laws governing lotteries and gambling. The Company seeks to design its contest
and sweepstakes rules to fall within exemptions from such laws and restricts
participation to individuals over 18 years of age who reside in
41
<PAGE>
jurisdictions within the United States and Canada in which the contests and
sweepstakes are lawful. There can be no assurance that the Company's contests
and sweepstakes will be exempt from such laws or that the applicability of such
laws to the Company would not have a material adverse effect on the Company's
business, results of operations and financial condition.
INTELLECTUAL PROPERTY
The Company's performance and ability to compete are dependent to a
significant degree on its internally developed content and technology. The
Company relies on a combination of copyright and trademark laws, trade secret
protection, confidentiality and non-disclosure agreements with its employees
and with third parties and contractual provisions to establish and protect its
proprietary rights. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate, that the Company
will be able to secure trademark registrations for all of its marks in the
United States and/or foreign countries, or that third parties will not infringe
upon or misappropriate the Company's copyrights, trademarks, service marks and
similar proprietary rights. In addition, effective copyright and trademark
protection may be unenforceable or limited in certain foreign countries, and
the global nature of the Internet makes it impossible to control the ultimate
destination of the Company's services. In the future, litigation may be
necessary to enforce and protect the Company's trade secrets, copyrights and
other intellectual property rights.
On March 25, 1997, Weatherline, a company that provides pre-recorded
weather and sports information by telephone, filed a complaint against the
Company in the United States District Court for the Eastern District of
Missouri. Weatherline owns a United States trademark registration for the mark
"Sportsline" for use in promoting the goods and services of others by making
sports information available to customers of participating businesses through
the telephone, and claims to have used the mark for this purpose since 1968.
The complaint alleges that the Company's use of the mark "SportsLine USA" and
other marks utilizing the term "SportsLine" infringes upon and otherwise
violates Weatherline's rights under its registered trademark and damages
Weatherline's reputation. The complaint seeks a preliminary and permanent
injunction against the Company from using marks containing the term
"Sportsline" or any other similar name or mark which would be likely to cause
confusion with Weatherline's mark. The complaint also seeks actual and punitive
damages and attorneys' fees. The Company believes that its use of the
"SportsLine" mark and "SportsLine" derivative marks does not infringe upon or
otherwise violate Weatherline's trademark rights. The Company has filed an
answer in which it denied all material allegations of the complaint and
asserted several affirmative defenses. The action is still in the discovery
stage, and both parties have agreed to attempt to settle the action through
court-ordered mediation. In the event the Company is unable to obtain a
favorable settlement, the Company intends to vigorously defend itself against
the action. The legal costs that may be incurred by the Company in defending
itself against this action could be substantial, and the litigation could be
protracted and result in diversion of management and other resources of the
Company. In a separate matter, a request for an extension of time to oppose the
Company's application to register the current version of the SportsLine USA
logo has been filed by Weatherline with the USPTO. There can be no assurance
that the Company will prevail in the lawsuit or any related opposition
proceeding at the USPTO, and an adverse decision in this lawsuit could result
in the Company being prohibited from further use and registration of the
"SportsLine" mark and "SportsLine" derivative marks and being ordered to pay
substantial damages and attorneys' fees to Weatherline, either of which could
have a material adverse effect on the Company's business, results of operations
and financial condition.
There can be no assurance that third parties will not bring copyright or
trademark infringement claims against the Company in addition to the lawsuit
filed by Weatherline referred to above, or claim that the Company's use of
certain technologies violates a patent. If it is determined that the Company
has infringed upon a third party's proprietary rights, there can be no
assurance that any necessary licenses or rights could be obtained on terms
satisfactory to the Company, if at all. The inability to obtain any required
license on satisfactory terms could have a material adverse effect on the
Company's business, results of operations and financial condition. The Company
may also be subject to litigation to
42
<PAGE>
defend against claims of infringement of the rights of others or to determine
the scope and validity of the intellectual property rights of others. If
competitors of the Company prepare and file applications in the United States
that claim trademarks used or registered by the Company, the Company may oppose
those applications and have to participate in proceedings before the USPTO to
determine priority of rights to the trademark, which could result in
substantial costs to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome could require the Company to license disputed
rights from third parties or to cease using such trademarks. Any such
litigation would be costly and divert management's attention, either of which
could have a material adverse effect on the Company's business, results of
operations and financial condition. Adverse determinations in such litigation
could result in the loss of certain of the Company's proprietary rights,
subject the Company to significant liabilities, require the Company to seek
licenses from third parties, or prevent the Company from selling its services,
any one of which could have a material adverse effect on the Company's
business, results of operations and financial condition. In addition, inasmuch
as the Company licenses a substantial portion of its content from third
parties, its exposure to copyright infringement actions may increase; because
the Company must rely upon such third parties for information as to the origin
and ownership of such licensed content. The Company generally obtains
representations as to the origins and ownership of such licensed content and
generally obtains indemnification to cover any breach of any such
representations; however, there can be no assurance that such representations
will be accurate or that such indemnification will provide adequate
compensation for any breach of such representations.
In 1996, the Company was issued a United States trademark registration for
its former SportsLine USA logo. The Company has applied to register in the
United States its current SportsLine USA logo and a number of other marks,
several of which include the term "SportsLine." The Company has filed
applications to register "SportsLine" marks in Australia and the United
Kingdom. There can be no assurance that the Company will be able to secure
adequate protection for these trademarks in the United States or in foreign
countries. Many foreign countries have a "first-to-file" trademark registration
system; and thus the Company may be prevented from registering its marks in
certain countries if third parties have previously filed applications to
register or have registered the same or similar marks. It is possible that
competitors of the Company or others will adopt product or service names
similar to the Company's, thereby impeding the Company's ability to build brand
identity and possibly leading to customer confusion. The inability of the
Company to protect its "SportsLine" mark and other marks adequately could have
a material adverse effect on the Company's business, results of operations and
financial condition.
The Company grants users of cbs.sportsline.com a license to use the
Company's service under an agreement that prohibits the unauthorized
reproduction or distribution of the Company's licensed and proprietary content.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's service or to obtain and
use information that the Company or its content providers regard as
proprietary. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate or that third parties will not
infringe or misappropriate the Company's copyrights, trademarks, service marks
and similar proprietary rights.
EMPLOYEES
The Company had 174 full-time employees as of June 30, 1997, of which 71
were in editorial and operations, 41 were in technical and product development,
44 were in sales and marketing, and 18 were in finance and administration. The
Company's future success depends in large part upon its ability to attract and
retain highly qualified employees. Competition for such personnel is intense,
and there can be no assurance that the Company will be able to retain its
senior management or other key employees or that it will be able to attract and
retain additional qualified personnel in the future. The Company's employees
are not represented by any collective bargaining organization, and the Company
considers its relations with its employees to be good.
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<PAGE>
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
The Company makes its Web sites available through multiple servers,
primarily Sun Microsystems models Ultra 2 (18), Ultra 4000 (2) and Sparc 1000E
(4), as well as two Silicon Graphics and eight IBM-compatible PC servers. The
Company's servers run on Sun Solaris, Microsoft Windows and Microsoft NT
operating systems. The Company uses the Netscape family of Commercial
Applications Software for its Web servers, publishing systems, merchandise
systems and secure credit card capture and billing. The Company has worked
closely with Netscape in the implementation of the Company's Web sites.
Capabilities in place include bulletin boards, mail, chat (including regular
text based chat as well as Virtual Reality worlds with integrated chat), news
groups, merchandising, streaming audio and video, and interactive Java and
Shockwave applications.
The Company maintains all of its computer systems at its Fort Lauderdale,
Florida corporate headquarters. The Company's operations are dependent upon its
ability to protect its systems against damage from fire, hurricanes, power
loss, telecommunications failure, break-ins, computer viruses and other events
beyond the Company's control. The Company maintains access to the Internet
through two third-party providers, each of which maintains a DS3 connection
running at 45 megabits per second connected to two routers in the Company's
facility. Redundant fiber optic cables from the Company's building connect with
each local Internet provider's fiber network. The Company's Internet
connections are fully redundant, so that if a failure in the network or
equipment of one service provider occurs, traffic is automatically routed
through to the other provider. All of the Company's computer equipment is
powered by an uninterruptible power supply ("UPS"), which is backed up by a
diesel generator designed to provide power to the UPS within seconds of a power
outage. In addition, all of the Company's production systems are copied to
backup tapes each night and stored at a third party, off-site storage facility.
All of the Company's computer equipment is insured at replacement cost and the
Company has developed a comprehensive, out-of-state disaster recovery plan to
respond to system failures. The Company has an arrangement with Comdisco
Disaster Recovery Services ("CDRS") which provides that in the event the
Company's facility cannot provide service for any reason, the Company's backup
tapes would be shipped to Comdisco's New Jersey facility where they will be
loaded to replicate and restore the Company's service. Moreover, the Company
has leased space in CDRS's Business Recovery Center in Atlanta, Georgia. In the
event of a system failure, the Company's engineering and content production
staff would have access to hardware and software in Atlanta similar to that
used at the Company's facility. The equipment in Atlanta is connected to the
production systems in New Jersey via Comdisco's private high speed network.
Notwithstanding the precautions taken by the Company, any disruption in the
Company's Internet access, failure of the Company's third party providers to
handle higher volumes of users or damage or failure that causes system
disruptions or other significant interruptions in the Company's operations
could have a material adverse effect on the Company's business, results of
operations and financial condition.
FACILITIES
The Company's corporate headquarters are located in Fort Lauderdale,
Florida. The Company leases approximately 20,000 square feet in two adjacent
buildings under two leases, which expire in June 2000 and September 2001,
respectively, with an option to extend the latter lease for a five-year term.
The Company currently is seeking additional facilities for its operations, and
believes that it will be able to obtain additional space on commercially
reasonable terms.
LEGAL PROCEEDINGS
On March 25, 1997, a lawsuit alleging various trademark infringement
claims was filed against the Company. See "--Intellectual Property."
From time to time, the Company may be involved in other litigation
relating to claims arising out of its operations in the normal course of
business. The Company is not currently a party to any other legal proceedings,
the adverse outcome of which, individually or in the aggregate, would have a
material adverse effect on the Company's financial position or results of
operations.
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
AGE POSITION
NAME ----- --------------------------------------------
<S> <C> <C>
Michael Levy ............... 50 Chairman of the Board, President and
Chief Executive Officer
Kenneth W. Sanders ...... 40 Chief Financial Officer
Mark J. Mariani ......... 40 Executive Vice President, Sales
G. Kenneth Dotson ......... 36 Vice President, Marketing
Thomas C. Eastwood ...... 42 Chief Technology Officer
Andrew S. Sturner ......... 32 Vice President, Business Development
Ross Levinsohn ............ 34 Vice President, Programming and Enterprises
Thomas Wargo ............ 42 Vice President, Vegas Insider
Thomas Jessiman ......... 37 Vice President, International
Dan Leichtenschlag ......... 36 Vice President, Engineering
Thomas Cullen ............ 38 Director
Stephen Fleming ......... 35 Director
Gerry Hogan ............... 51 Director
Richard B. Horrow ......... 42 Director
Joseph Lacob ............ 41 Director
Sean McManus ............ 42 Director
Andrew Nibley ............ 46 Director
Liesl Pike ............... 31 Director
Derek Reisfield ......... 34 Director
James C. Walsh ............ 56 Director
Michael P. Schulhof ...... 54 Director Nominee
</TABLE>
MICHAEL LEVY has served as the President, Chief Executive Officer and
Chairman of the Board of the Company since its inception in February 1994. From
February 1978 through March 1993, Mr. Levy served as President, Chief Executive
Officer and as a director of Lexicon Corporation, a high technology company
specializing in data communications and signal processing technology. From
January 1988 to June 1993, Mr. Levy also served as Chairman of the Board and
Chief Executive Officer of Sports-Tech International, Inc., a company engaged
in the development, acquisition, integration and sale of computer software,
equipment and computer-aided video systems used by professional, collegiate and
high school sports programs. Between June 1993 and February 1994, Mr. Levy was
a private investor.
KENNETH W. SANDERS has served as the Chief Financial Officer of the
Company since September 2, 1997. From January 1996 to August 1997, Mr. Sanders
served as Senior Vice President, Chief Financial Officer of Paging Network,
Inc., the world's largest paging company. From May 1993 to December 1995, Mr.
Sanders served as Executive Vice President, Chief Financial Officer and a
director of Cellstar Corporation, an integrated wholesaler and retailer of
cellular phones and related products. Between July 1979 and April 1993, Mr.
Sanders was with KPMG Peat Marwick, most recently as an Audit Partner from July
1990 to April 1993.
MARK J. MARIANI has served as the Company's Executive Vice President,
Sales since April 1996. From August 1991 to March 1996, Mr. Mariani served as
Executive Vice President of Sports Sales for
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<PAGE>
Turner Broadcasting Sales, Inc. From June 1990 to August 1991, Mr. Mariani
served as Senior Vice President and National Sales Manager for CNN in New York,
and from May 1986 to June 1990, Mr. Mariani served as Vice President for CNN
Sales Midwest. Prior to joining Turner Broadcasting, Mr. Mariani served as an
Account Executive for WBBM, an owned and operated CBS television station in
Chicago, Illinois.
G. KENNETH DOTSON has served as the Company's Vice President, Marketing
since its inception in February 1994. From March 1992 to May 1993, Mr. Dotson
served as Regional Marketing Manager for the Smart Corporation, a software and
information management services company. From February 1991 to March 1992, Mr.
Dotson served as a strategic marketing planning consultant for Personal Blood
Storage of America, an FDA licensed blood products laboratory and storage
center. Between May 1993 and February 1994, Mr. Dotson was a consultant.
THOMAS C. EASTWOOD has served as the Company's Chief Technology Officer
since December 1994. From January 1992 to December 1994, Mr. Eastwood served as
Advanced Concepts Development Manager in the Online Services Division of Apple
Computer Company. From January 1981 to January 1992, Mr. Eastwood served in
various management capacities in the Information Services Division of General
Electric Corporation.
ANDREW S. STURNER has served as the Company's Vice President, Business
Development since June 1995. From May 1994 to June 1995, Mr. Sturner served as
Vice President of Business Development for MovieFone, Inc., an interactive
telephone service company. From March 1993 to May 1994, Mr. Sturner served as
President of Interactive Services, an interactive audiotext development company
which he co-founded in 1992. From August 1990 to March 1993, Mr. Sturner was a
bankruptcy associate at the law firm of Stroock & Stroock & Lavan.
ROSS LEVINSOHN has served as the Company's Vice President, Programming and
Enterprises since May 1996. From August 1990 to May 1996, Mr. Levinsohn served
as Director of Production and Marketing Enterprises for Home Box Office
("HBO"), and from September 1990 to September 1992, Mr. Levinsohn served as
HBO's Manager of Sports Marketing and Worldwide Public Relations.
THOMAS WARGO has served as the Company's Vice President, Vegas Insider
since July 1997. Mr. Wargo served as the Company's Vice President, Program
Management from September 1995 to June 1997. Mr. Wargo served as the Company's
Director of Program Management from March 1995 to August 1995. From April 1993
to May 1994, Mr. Wargo served as Director of Process Automation for Computer
Products, Inc. an industrial automation company. From November 1989 to March
1993, Mr. Wargo served as a Senior Products Manager for Computer Products.
Between May 1994 and March 1995, Mr. Wargo was a consultant.
THOMAS JESSIMAN has served as the Company's Vice President, International
since March 1997. From November 1995 to March 1997, Mr. Jessiman served as the
Director of Business Development for US WEST Media Group's Interactive Services
Division and from September 1994 to November 1995, Mr. Jessiman served as
Director of Business Development in the US WEST Multimedia Group. From January
1992 to September 1994, Mr. Jessiman served as Manager in IBM's Multimedia
Group.
DAN LEICHTENSCHLAG has served as the Company's Vice President, Engineering
since July 1997 and served as the Company's Director of Operations from May
1995 to June 1997. From January 1987 to April 1995, Mr. Leichtenschlag held
various technical and management capacities in the Information Services
Division of General Electric Corporation including Genie Systems Development,
General Electric's on-line service, and UNIX software development department.
THOMAS CULLEN, appointed a director of the Company in April 1997, has
served as President of US WEST Media Group's Interactive Services Division
since April 1997. Prior thereto, Mr. Cullen held various positions with US WEST
since 1981, including Vice President, Business Development for Interactive
Services Group from April 1992 to April 1997. Mr. Cullen serves as a member of
the Board of Directors of Better Business Online.
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<PAGE>
STEPHEN FLEMING, appointed a director of the Company in March 1996, has
served as a General Partner of Alliance Technology Ventures, L.P. since January
1995. From January 1993 to January 1995, Mr. Fleming served as Associate Vice
President of Global Marketing for the Broadband Networks Group of Northern
Telecom. From June 1991 to January 1993, Mr. Fleming served as Director of
Headquarters Staff for the Strategic Marketing Division of Northern Telecom and
from August 1989 to June 1991, Mr. Fleming served as Eastern Region Director of
the Technology Marketing Division of Northern Telecom.
GERRY HOGAN, appointed a director of the Company in November 1996, served
as President and Chief Executive Officer of the Home Shopping Network from
February 1993 to August 1995. Prior thereto, Mr. Hogan served as vice chairman
of Whittle Communications, L.P. from October 1990 to February 1993. From
October 1971 to September 1987, Mr. Hogan held various positions at Turner
Entertainment Networks and most recently served as President. Mr. Hogan serves
as a member of the Board of Directors of the Hard Rock Hotel & Casinos and
London Fog Industries, Inc., and as a member of the Board of Trustees of Eckerd
College.
RICHARD B. HORROW, appointed a director of the Company in September 1994,
is an attorney and sports development consultant and has served as President of
Horrow Sports Ventures, Inc., a sports consulting firm, since its inception in
May 1988. Since July 1994, Mr. Horrow has been the host of the weekly
television show "The Sports Business Report," which is distributed nationally
through Prime Network/Sports Channel/New Sport affiliates, and has also hosted
the weekly radio show "The Sports Professor," aired nationally on Prime Radio.
Mr. Horrow also currently serves as a consultant for various sports-related
matters to The City of Oklahoma City, the National Football League, the Ladies
Professional Golf Association, the Baltimore Orioles and the National
Association of Professional Baseball Leagues. From March 1991 to March 1992,
Mr. Horrow served as the Executive Director of Golden Bear Sports Management, a
sports management firm.
JOSEPH LACOB, appointed a director of the Company in May 1995, has served
as a general partner of Kleiner Perkins Caufield & Byers, an investment firm,
since May 1987. Mr. Lacob also serves as the Chairman of the Board of CellPro,
Inc., a cell therapy device company, and Microcide Pharmaceuticals, Inc. a
anti-microbial drug manufacturer.
SEAN MCMANUS, appointed a director of the Company in March 1997, has
served as President of CBS Sports since December 1996. From October 1987 to
December 1996, Mr. McManus was Senior Vice President U.S. Television Sales and
Programming at Trans World International, the television division of
International Management Group. From August 1981 to October 1987, Mr. McManus
was Vice President Planning and Development at NBC Sports. From September 1979
to August 1981, Mr. McManus served as Associate Producer and Producer at NBC
Sports and from August 1977 to September 1979 he was a Production Assistant to
the Associate Producer at ABC Sports.
ANDREW NIBLEY, appointed a director of the Company in March 1996, has
served as a director and as the Editor and Executive Vice President of Reuters
NewMedia, Inc. since January 1994. From January 1989 to January 1994, Mr.
Nibley was the Editor, America for Reuters America, Inc. He was also named the
Senior Vice President, News and Television of Reuters America, Inc. in July
1993.
LIESL PIKE, appointed a director of the Company in September 1996, has
served as Vice President of TCI Interactive, a venture investment group for TCI
Internet Services, Inc. and Vice President of TCI Music, Inc., a division of
TCI that focuses on the delivery of audio services through cable distribution
since March 1995. From June 1993 to February 1995, Ms. Pike served as Director
of Business Development for US WEST Multimedia Communications Group. From
September 1991 to June 1993, Ms. Pike attended Harvard Business School and
graduated with a Master of Business Administration. From June 1987 to June
1991, Ms. Pike was an Account Executive for MCI.
DEREK REISFIELD, appointed a director of the Company in March 1997, has
served as Director of Strategic Management of Westinghouse Electric Corporation
since April 1996. Prior thereto,
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<PAGE>
Mr. Reisfield held various positions at Mitchell Madison Group, a management
consulting firm, and most recently as a Partner of the firm's Media and
Communications Practice, the Consumer Marketing Practice and Mitchell Madison's
Venture Capital Group from June 1995 to April 1996. From August 1987 to June
1995, Mr. Reisfield held various positions, most recently as a Senior Manager
at McKinsey & Company, a management consulting firm.
JAMES C. WALSH, appointed a director of the Company in August 1994, is an
attorney who has been engaged in the private practice of law since 1968. Mr.
Walsh has also served as the President of Namanco Productions, Inc., a sports
marketing and management firm, since 1969. Namanco Productions, Inc. is the
agent and manager of NFL Hall of Fame quarterback Joe Namath.
MICHAEL P. SCHULHOF has been nominated and has agreed to become a director
of the Company upon the completion of this offering. Currently, Mr. Schulhof is
a private investor. From June 1979 to January 1997, Mr. Schulhof held various
positions at Sony Corporation of America, Inc. and most recently served as
President and Chief Executive Officer from June 1993 to January 1996. Mr.
Schulhof is a trustee of the Museum of Television and Radio, Brandeis
University, Lincoln Center for the Performing Arts, Inc., New York University
Medical Center and the Brookings Institute, serves on the Board of Directors of
the Center on Addiction and Substance Abuse at Columbia University, is a member
of the Council on Foreign Relations and a member of the Investment and Services
Policy Advisory Committee to the U.S. Trade Representative.
Messrs. Fleming, Lacob, Nibley and Cullen and Ms. Pike were elected to the
Board of Directors pursuant to a voting agreement among the Company and the
holders of its outstanding Common Stock and preferred stock, which will
terminate upon completion of this offering. Messrs. McManus and Reisfield were
elected to the Board of Directors pursuant to an agreement between the Company
and CBS, certain provisions of which, including CBS's right to appoint
directors to the Company's Board of Directors, will terminate upon completion
of this offering.
Upon completion of this offering, the Board of Directors will be divided
into three classes, and each director will serve for a staggered three-year
term, or until successors of such class have been elected and qualified.
Messrs. Fleming, Nibley and Walsh and Ms. Pike will initially serve as Class I
directors until the annual meeting of shareholders held in 1998, or until their
respective successors have been elected and qualified. Messrs. Cullen, Lacob,
Horrow and Reisfield will initially serve as Class II directors until the
annual meeting of shareholders held in 1999, or until their respective
successors have been elected and qualified. Messrs. Hogan, Levy, McManus and
Schulhof will initially serve as Class III directors until the annual meeting
of shareholders held in 2000, or until their respective successors have been
elected and qualified. At each annual meeting of shareholders, a class of
directors will be elected for a three-year term to succeed the directors or
director of the same class whose terms are then expiring. To the extent there
is an increase in the number of directors, additional directorships resulting
therefrom will be distributed among the three classes so that, as nearly as
possible, each class will consist of an equal number of directors.
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until the next annual meeting of shareholders and
until their successors have been duly elected and qualified. There are no
family relationships among any of the executive officers or directors of the
Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors intends to establish, immediately after
the completion of this offering, an Audit Committee which will be composed of
three non-employee directors. The Audit Committee will be responsible for
reviewing audit functions, including accounting and financial reporting
practices of the Company, the adequacy of the Company's system of internal
accounting control, the quality and integrity of the Company's financial
statements and relations with independent auditors. The Company also plans to
establish, immediately after the completion of this offering, a
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<PAGE>
Compensation Committee which will be responsible for establishing the
compensation of the Company's directors, officers and employees, including
salaries, bonuses, commission, and benefit plans, and administering the
Company's stock plans and other forms of or matters relating to compensation.
DIRECTOR COMPENSATION
The Company will reimburse its directors for out-of-pocket expenses
incurred in connection with their rendering of services as directors. The
Company currently does not intend to pay cash fees to its directors for
attendance at meetings. Non-employee directors will be eligible to receive
options under the Company's 1997 Incentive Compensation Plan. See "--Stock
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee, the Board of
Directors made all determinations with respect to executive officer
compensation.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the year
ended December 31, 1996 by the Company's Chief Executive Officer and its other
four most highly compensated executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION (1) COMPENSATION AWARDS
------------------- --------------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- ------------------------------------------------ -------- ------- -------------------- ------------------
<S> <C> <C> <C> <C>
Michael Levy,
President and Chief Executive Officer ...... $178,250 $50,000 -- $ 22,922 (2)
Mark J. Mariani,
Executive Vice President, Sales ............ 104,038 10,000 200,000 8,205 (3)
G. Kenneth Dotson,
Vice President, Marketing .................. 133,125 10,000 -- --
Thomas C. Eastwood,
Chief Technology Officer .................. 120,000 20,000 25,000 --
Andrew S. Sturner,
Vice President, Business Development ...... 120,083 10,000 -- --
</TABLE>
- ----------------
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such column. The aggregate
amount of perquisites and other personal benefits provided to each Named
Executive Officer is less than 10% of the total annual salary and bonus of
such officer.
(2) Represents premiums paid for life and disability insurance policies for the
benefit of Mr. Levy.
(3) Represents reimbursement of moving expenses.
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<PAGE>
The following table sets forth certain information concerning grants of
stock options made during 1996 to each Named Executive Officer.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1996
INDIVIDUAL GRANTS POTENTIAL REALIZEABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM (2)
OPTIONS TO EMPLOYEES EXERCISE PRICE ----------------------
NAME GRANTED (1) IN FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
- -------------------------- ------------- ---------------- --------------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael Levy ............ -- -- $ -- -- $ -- $ --
Mark J. Mariani ......... 200,000 23.0 0.25 4/22/2006 31,445 79,687
G. Kenneth Dotson ...... -- -- -- -- -- --
Thomas C. Eastwood . 25,000 2.9 2.00 5/14/2006 31,445 79,687
Andrew S. Sturner ...... -- -- -- -- -- --
</TABLE>
- ----------------
(1) All such options were granted under the Company's 1995 Stock Option Plan
and become exercisable in installments over a period of four years. Under
the 1995 Stock Option Plan, these options will become immediately
exercisable in the event of certain change of control transactions
involving the Company. See "--Stock Plans."
(2) In accordance with the rules of the Commission, the potential realizable
values for such options shown in the table are based on assumed rates of
stock price appreciation of 5% and 10% compounded annually from the date
the respective options were granted to their expiration date. These
assumed rates of appreciation do not represent the Company's estimate or
projection of the appreciation of shares of Common Stock of the Company.
The following table sets forth information concerning exercisable and
unexercisable stock options held as of December 31, 1996 by each of the Named
Executive Officers. No options were exercised by the Named Executive Officers
in 1996.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 (1) DECEMBER 31, 1996 (2)
------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Michael Levy ............ -- -- $ -- $ --
Mark J. Mariani ......... -- 200,000 -- 350,000
G. Kenneth Dotson ...... 80,729 44,271 141,276 77,474
Thomas C. Eastwood ...... 31,250 93,750 54,687 120,313
Andrew S. Sturner ......... 43,750 76,250 76,563 98,438
</TABLE>
- ----------------
(1) Exercisable in accordance with the provisions described in Note (1) to the
table entitled "Option Grants in Fiscal Year 1996."
(2) The fair market value of the Company's Common Stock at December 31, 1996 is
estimated to have been approximately $2.00 per share.
EMPLOYMENT AGREEMENTS
The Company has entered into a three-year employment agreement with
Kenneth W. Sanders, pursuant to which he will serve as Chief Financial Officer.
Mr. Sanders will receive an annual base salary of $210,000 and such bonuses as
may be awarded from time to time by the Board or any compensation committee
thereof. Upon commencement of his employment, the Company granted Mr. Sanders
options to purchase 200,000 shares of Common Stock at an exercise price of
$4.00 per share. If the agreement is terminated by the Company other than by
reason of death, Disability (as defined) or Cause (as defined), or by Mr.
Sanders for Good Reason (generally defined as a material breach by the Company
of the agreement), the Company will continue to pay Mr. Sanders for a period of
six months his base salary plus, an additional amount not to exceed $105,000
depending on the value
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during such six-month period of the stock options granted to him. The agreement
prohibits Mr. Sanders from competing with the Company during his employment and
for a period of two years after termination of his employment.
STOCK PLANS
1995 STOCK OPTION PLAN. The Company's 1995 Stock Option Plan (the "1995
Plan") was adopted by the Board of Directors in August 1995 and approved by the
Company's stockholders in March 1996. The 1995 Plan provides for the grant of
"incentive stock options," within the meaning of the Internal Revenue Code, to
employees and officers of the Company, and non-qualified stock options to
employees, consultants, directors and officers of the Company. Up to 2,300,000
shares of Common Stock are authorized for issuance under the 1995 Plan. As of
June 30, 1997, options to purchase a total of 2,188,688 shares of Common Stock
at a weighted average exercise price of $1.24 were outstanding under the 1995
Plan (of which options to purchase 577,877 shares were then exercisable).
The 1995 Plan is administered by the Board of Directors, which has the
authority to select the optionees and determine the terms of the options
granted, including (i) the number of shares subject to each option, (ii) option
exercise terms, (iii) the exercise price of the option (which in the case of an
incentive stock option cannot be less that the fair market value of the Common
Stock as of the date of grant), (iv) the duration of the option, and (v) the
time, manner and form of payment upon exercise of an option. An option is not
transferable by the optionholder except by will or by the laws of descent and
distribution. Generally, no incentive stock option may be exercised more than
three months following termination of employment, unless the termination is due
to death or disability, in which case the option is exercisable for a maximum
of twelve months after such termination or unless the termination is due to the
employee's misconduct, in which case the option shall terminate immediately.
1997 INCENTIVE COMPENSATION PLAN. The Company has adopted, effective upon
completion of this offering, the Incentive Plan which is designed to assist the
Company in attracting, motivating, retaining and rewarding high-quality
executives and other employees, officers, directors and independent contractors
(collectively, the "Participants") by enabling the Participants to acquire or
increase a proprietary interest in the Company, as well as providing the
Participants with annual and long term performance incentives to expend their
maximum efforts in the creation of shareholder value. Pursuant to the Incentive
Plan, the Company may grant Participants stock options, stock appreciation
rights, restricted stock, deferred stock, other stock-related awards and
performance or annual incentive awards that may be settled in cash, stock or
other property (collectively, "Awards"). A committee comprised of at least two
non-employee directors (the "Committee"), or in the absence thereof the Board
of Directors, administers and interprets the Incentive Plan and is authorized
to grant Awards to all eligible Participants.
The total number of shares of Common Stock that may be subject to the
granting of Awards under the Incentive Plan shall be equal to: (i) 2,000,000
shares, plus (ii) the number of shares with respect to Awards previously
granted under the Incentive Plan that terminate without being exercised,
expire, are forfeited or canceled, and the number of shares of Common Stock
that are surrendered in payment of any Awards or any tax withholding
requirements. No Awards have been granted under the Incentive Plan.
The following is a description of the types of Awards that may be granted
under the Incentive Plan:
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. The Committee is authorized
to grant stock options, including incentive and non-qualified stock
options, and stock appreciation rights ("SARs") entitling the Participant
to receive the amount by which the fair market value of a share of Common
Stock on the date of exercise exceeds the grant price of the SAR. The
exercise price per share subject to an option and the grant price of a SAR
are determined by the Committee, but must not be less than the fair market
value of a share of Common Stock on the date of grant. Each option is
exercisable after the period or periods specified in the related option
agreement, but no
51
<PAGE>
option may be exercised after the expiration of ten years from the date of
grant. Options granted to an individual who owns (or is deemed to own) at
least 10% of the total combined voting power of all classes of stock of the
Company must have an exercise price of at least 110% of the fair market
value of the Common Stock on the date of grant and a term of no more than
five years. Options may be exercised by payment of the exercise price in
cash, shares of Common Stock, outstanding Awards or other property having a
fair market value equal to the exercise price, as the Committee may
determine from time to time.
RESTRICTED AND DEFERRED STOCK. The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares
of Common Stock which may not be sold or disposed of, and which may be
forfeited in the event of certain terminations of employment, prior to the
end of a restricted period specified by the Committee. A Participant
granted restricted stock generally has all the rights of a shareholder of
the Company, unless otherwise determined by the Committee. An Award of
deferred stock confers upon the Participant the right to receive shares of
Common Stock at the end of a specified deferral period, subject to possible
forfeiture of the Award in the event of certain terminations of employment
prior to the end of a specified restricted period. Prior to settlement, an
Award of deferred stock carries no voting or dividend rights. The
restricted or deferral period for restricted stock or deferred stock Awards
may not be less than three years unless the Award is subject to performance
conditions, in which case the period will not be less than one year.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS--The Committee is
authorized to grant shares of Common Stock as a bonus, free of
restrictions, or to grant shares of Common Stock or other Awards in lieu of
cash under the Incentive Plan, subject to such terms as the Committee may
specify.
OTHER STOCK-BASED AWARDS--The Committee is authorized to grant Awards
that are denominated or payable in, valued by reference to, or otherwise
based on or related to shares of Common Stock. Such Awards might include
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock, purchase rights for shares of
Common Stock, Awards with value and payment contingent upon performance by
the Company or any other factors designated by the Committee, and Awards
valued by reference to the book value of shares of Common Stock or the
value of securities of or the performance of specified subsidiaries or
business units. The Committee determines the terms and conditions of such
Awards.
The right of a Participant to exercise or receive a grant or settlement of
an Award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the Committee.
In addition, the Incentive Plan authorizes specific annual incentive Awards,
which represent a conditional right to receive cash, shares of Common Stock or
other Awards upon achievement of certain pre-established performance goals and
subjective individual goals during a specified fiscal year.
Awards may be settled in the form of cash, shares of Common Stock, other
Awards or other property in the discretion of the Committee. The Committee may
condition any payment relating to an Award on the withholding of taxes and may
provide that a portion of any shares of Common Stock or other property to be
distributed will be withheld (or previously acquired shares of Common Stock or
other property surrendered by the Participant) to satisfy withholding and other
tax obligations. Awards granted under the Incentive Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
Participant's death, except that the Committee may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions.
The Incentive Plan also provides that each non-employee director who is
not affiliated with or a designee of a beneficial owner of more than 5% of the
Common Stock will automatically receive (i) for those directors elected or
appointed after the completion of the offering, an option to purchase 12,000
52
<PAGE>
shares of Common Stock on the date of his or her election or appointment and
(ii) for all directors, on the date of the Company's annual meeting of
shareholders, an option to purchase 3,000 shares of Common Stock. Such options
have a term of 10 years and become exercisable at the rate of 25% per year
commencing on the first anniversary of the date of grant; provided, however,
that the options shall be fully exercisable in the event that, while serving as
a director, the non-employee director dies, suffers a "disability," or
"retires" (within the meaning of such terms as defined in the Incentive Plan).
The per share exercise price of options granted to non-employee directors will
be equal to the fair market value of a share of Common Stock on the date such
option is granted. Unless otherwise extended in the sole discretion of the
Compensation Committee, the unexercised portion of any formula option grant
will become null and void (i) three months after the date on which the
non-employee director ceases to be a director for any reason other than the
non-employee director's willful misconduct or negligence, disability, death or
retirement, (ii) immediately in the event of the non-employee director's
willful misconduct or negligence, (iii) at the expiration of its original term
if the non-employee ceases to be a director by reason or his or her retirement,
or (iv) one year after the non-employee director ceases to be a director by
reason of his or her disability or death.
EMPLOYEE STOCK PURCHASE PLAN. The Company has reserved for issuance
500,000 shares of Common Stock under the Company's 1997 Employee Stock Purchase
Plan (the "Purchase Plan"), which will become effective upon completion of the
offering. All eligible employees (as defined therein), other than holders of
stock or options to purchase 5% or more of the Company's Common Stock, employed
by the Company from time to time may elect to participate in the Purchase Plan.
Under the Purchase Plan, participants are granted a purchase right to acquire
shares of Common Stock at semi-annual intervals, during 12-month offering
periods, the first of which will commence on the date of this offering and end
on June 30, 1998. The purchase price for the shares under the Purchase Plan
will be paid by the employee through periodic payroll deductions and/or lump
sum payments not to exceed 25% of the participant's total annual compensation.
The purchase price per share will be equal to 85% of the lower of (i) the fair
market value of the Common Stock at the beginning of the offering period
(which, in the case of the first offering period, would equal the initial
public offering price of the Common Stock) or, if greater, the fair market
value of the Common Stock on the date the participant enrolls in the Purchase
Plan, or (ii) the fair market value per share of the Common Stock on the
purchase date. In no event may a participant purchase more than $25,000 of
Common Stock pursuant to the Purchase Plan in any calendar year.
401(K) PLAN
The Company maintains a 401(k) retirement savings plan (the "401(k)
Plan"). All employees of the Company, meeting certain minimum eligibility
requirements, are eligible to participate in the 401(k) Plan. The 401(k) Plan
provides that each participant may contribute up to 15% of his or her pre-tax
gross compensation (but not greater than a statutorily prescribed annual
limit). The percentage elected by certain highly compensated participants may
be required to be lower. The 401(k) Plan permits, but does not require,
additional contributions to the 401(k) Plan by the Company. All amounts
contributed by employee participants in conformance with plan requirements and
earnings on such contributions are fully vested at all times.
53
<PAGE>
CERTAIN TRANSACTIONS
CBS AGREEMENT
On March 5, 1997, the Company entered into a five-year agreement with CBS,
pursuant to which, among other things, the Company's flagship Internet site was
renamed "cbs.sportsline.com." The term of the CBS agreement expires on December
31, 2001. The CBS agreement provides for cbs.sportsline.com to receive certain
minimum amounts of advertising and on-air promotion, including at least $7
million of advertising and promotion during the remainder of 1997, at least $11
million during 1998 and 1999 and at least $14 million during 2000 and 2001. The
Company has the right to use certain CBS logos and television-related sports
content on cbs.sportsline.com and in connection with the operation and
promotion of that Web site.
In consideration of CBS's advertising and promotional efforts and its
license to the Company of the right to use certain CBS logos and
television-related sports content, CBS will receive 7,750,000 shares of Common
Stock over the term of the CBS agreement (1,880,683, 1,839,506, 1,397,470,
1,418,948 and 1,213,393 shares in 1997, 1998, 1999, 2000 and 2001,
respectively). CBS will also have the right to receive 60% of the Company's
advertising revenue on cbs.sportsline.com pages related to certain "signature
events" (such as the NCAA Men's Basketball Tournament, the 1998 Winter
Olympics, U.S. Open tennis, PGA Tour events and the Daytona 500) and 50% of the
Company's advertising revenue on cbs.sportsline.com pages containing other CBS
television-related sports content. The CBS agreement also provides that the
Company shall issue to CBS on the first business day of each contract year
warrants to purchase 950,000 shares of Common Stock at per share exercise
prices ranging from $4.00 in 1997 to $12.00 in 2001. Such warrants are
exercisable at any time during the contract year in which they are granted.
US WEST AGREEMENT
In connection with its September 1996 investment in Series C Preferred
Stock, US WEST Interactive Services, Inc. ("US WEST") and the Company entered
into a two-year agreement that provides for the Company and US WEST to (i)
establish hypertext links and certain cross promotional pages between the
Company's Web sites and US WEST's "Dive In" local Internet sites, (ii) jointly
develop original local sports content for the "Dive In" service and (iii)
engage in certain joint promotional activities. The Company also agreed to
offer US WEST the right of first refusal to provide any "yellow page" offering
that the Company considers launching during the term of the agreement. The
agreement also provides for the Company to pay US WEST royalties based on the
number of customers referred from US WEST's Web sites who purchase memberships
on the Company's Web sites. The Company also issued US WEST warrants to
purchase 2,400,000 shares of Common Stock at an exercise price of $3.30 per
share. Such warrants were exercised in March 1997.
REUTERS NEWMEDIA AGREEMENT
In March 1996, the Company and Reuters NewMedia, Inc. ("Reuters NewMedia")
entered into an agreement pursuant to which the Company agreed to provide
Reuters NewMedia a 60-day exclusive negotiation period with respect to (i) the
provision of non-U.S. sports news and information for any Internet, wireless or
other proprietary online service marketed to foreign countries or regions that
the Company considers launching, (ii) the branding of such service and (iii) an
investment in such service. The Company also agreed to provide Reuters NewMedia
a reasonable opportunity to match the terms for such an agreement offered by
another party if such terms are equivalent or less favorable to the Company
than those offered by Reuters NewMedia. The Company also agreed (i) subject to
technological feasibility, to negotiate an agreement to develop a customized
version of cbs.sportsline.com available only to Reuters NewMedia subscribers
through a Reuters NewMedia product, (ii) to grant Reuters NewMedia the
exclusive right to redistribute the Company's news and information content
within a Reuters NewMedia product as part of a sports news service, subject to
negotiation of royalties and the agreement of the Company's third party content
providers and (iii) to
54
<PAGE>
provide Reuters NewMedia an opportunity to license to the Company content
specifically related to sports outside the United States, if such content is
already owned, licensed or produced by Reuters NewMedia, and to license such
content from Reuters NewMedia if its proposal is equivalent to or better than
proposals received from third parties.
KLEINER PERKINS CAUFIELD & BYERS GUARANTY
In December 1995, Kleiner Perkins Caufield & Byers VII ("KPCB VII")
guaranteed a $1,500,000 loan the Company received from Silicon Valley Bank. In
return for executing the guaranty, the Company issued KPCB VII warrants to
purchase 75,000 shares of Common Stock, which are exercisable until December
13, 2000 at a price of $1.00 per share.
HORROW CONSULTING AGREEMENT
In September 1994, the Company and Horrow Sports Ventures, an entity owned
by Richard Horrow, a director of the Company, entered into a consulting
agreement that, among other things, provides for Horrow Sports Ventures and Mr.
Horrow to assist the Company in obtaining access to representatives of
professional sports leagues, college sports associations and television
networks and developing strategic, promotional and marketing plans. In
consideration of the services rendered pursuant to the agreement, Mr. Horrow
received warrants to purchase 25,000 shares of Common Stock at an exercise
price of $2.00 per share in August 1994 and received warrants to purchase an
additional 25,000 shares of Common Stock at an exercise price of $2.00 per
share in January 1997. Horrow Sports Ventures currently receives a consulting
fee of $5,000 per month.
SCHULHOF CONSULTING AGREEMENT
In June 1996, the Company and Michael P. Schulhof entered into a two year
consulting agreement that provides for Mr. Schulhof to consult with and advise
the Company from time to time with respect to corporate, business and marketing
strategy. In consideration of the services to be rendered pursuant to the
agreement, Mr. Schulhof received warrants to purchase 100,000 shares of Common
Stock at an exercise price of $2.00 per share.
PLANNED LICENSING AGREEMENT
In August 1994, the Company and Planned Licensing, Inc., a wholly owned
subsidiary of Namanco Productions, Inc. ("Planned Licensing"), entered into a
five-year agreement pursuant to which Planned Licensing agreed to cause Joe
Namath to provide certain services for the Company, including endorsements of
the Company's products. James C. Walsh, a director of the Company, is the
president and sole stockholder of Namanco Productions, Inc. The Company has the
right to renew the agreement for three additional five-year terms. Under the
agreement, the Company is obligated to pay Planned Licensing royalties equal to
$0.15 per month for each individual who becomes a member during the term of the
agreement and remains a member for three months, plus, during each renewal
term, an additional $0.05 per month per member if the total royalties during
the last calendar year prior to the renewal term were less than $500,000. The
royalties paid to Planned Licensing for the period from inception (February 23,
1994) to December 31, 1994, the years ended December 31, 1995 and 1996 and the
six months ended June 30, 1997 were $0, $932, $18,645 and $25,908,
respectively.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Company's outstanding Common Stock as of June 30, 1997, and as
adjusted to reflect the sale of the Common Stock offered hereby, by (i) each
person or entity known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock, (ii) each director, director
nominee and Named Executive Officer of the Company and (iii) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY
PRIOR TO THE OFFERING OWNED
(2) AFTER THE OFFERING (2)
------------------------ ----------------------
NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------- ------------ --------- ----------- --------
<S> <C> <C> <C> <C>
US WEST Interactive Services, Inc. ......... 4,989,630 19.7% 4,989,630
Kleiner Perkins Caufield & Byers (3) ...... 4,880,556 18.7 4,880,556
Michael Levy .............................. 3,800,000 15.0 3,800,000
CBS Inc. (4) .............................. 2,830,683 10.8 2,830,683
Estate of Burk Zanft (5) .................. 2,500,000 9.7 2,500,000
Reuters NewMedia, Inc. ..................... 2,114,182 8.4 2,114,182
TCI Online Sports Holdings, Inc. (6) ...... 1,666,667 6.6 1,666,667
Mark J. Mariani (7) ........................ 58,333 * 58,333
G. Kenneth Dotson (8) ..................... 188,542 * 188,542
Thomas C. Eastwood (9) ..................... 44,271 * 44,271
Andrew S. Sturner (10) ..................... 50,000 * 50,000
Thomas Cullen (11) ........................ 4,989,630 19.7 4,989,630
Stephen Fleming (12) ..................... 1,203,401 4.8 1,203,401
Gerry Hogan (13) ........................... -- * --
Richard B. Horrow (14) ..................... 25,000 * 25,000
Joseph Lacob (15) ........................... 4,880,556 18.7 4,880,556
Andrew Nibley (16) ........................ 2,114,182 8.4 2,114,182
Sean McManus .............................. -- * --
Liesl Pike ................................. -- * --
Derek Reisfield ........................... -- * --
James C. Walsh (17) ........................ 500,000 2.0 500,000
Michael P. Schulhof (18) .................. -- * --
All directors and executive officers
as a group (21 persons) (19) ............ 17,910,634 67.1 17,910,634
</TABLE>
- ----------------
* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o SportsLine USA, Inc., 6340 N.W. 5th Way, Fort
Lauderdale, Florida 33309. Except as otherwise indicated, such beneficial
owners have sole voting and investment power with respect to all shares of
Common Stock owned by them, except to the extent such power may be shared
with a spouse.
(2) The number of shares of Common Stock deemed outstanding prior to this
offering includes (i) 10,798,078 shares of Common Stock outstanding as of
June 30, 1997, (ii) an aggregate of 14,496,109 shares of Common Stock
issuable upon conversion of all outstanding shares of preferred stock and
(iii) shares issuable pursuant to options and warrants held by the
respective person or group which may be exercised within 60 days after
June 30, 1997 ("presently exercisable stock options" and "presently
exercisable warrants," respectively), as set forth below. Pursuant to the
rules of the Securities and Exchange Commission, presently exercisable
stock options and presently exercisable warrants are deemed to be
outstanding and to be beneficially owned by the person or group holding
such options or warrants for the purpose of computing the percentage
ownership of such person or group, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person or
group.
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<PAGE>
(3) Reflects (i) 3,612,834 shares held of record and 734,250 shares subject to
presently exercisable warrants held by Kleiner Perkins Caufield & Byers
VII, (ii) 341,333 shares held of record and 72,000 shares subject to
presently exercisable warrants held by KPCB VII Founders Fund and (iii)
101,389 shares held of record and 18,750 shares subject to presently
exercisable warrants held by KPCB Information Sciences Zaibatsu Fund II.
The address of Kleiner Perkins Caufield & Byers is 2750 Sand Hill Road,
Menlo Park, California 94025.
(4) Reflects (i) 1,880,683 shares held of record and (ii) 950,000 shares
subject to presently exercisable warrants. Does not include any additional
shares of Common Stock and warrants to purchase Common Stock to be issued
to CBS after March 31, 1997 pursuant to the CBS agreement. See "Certain
Transactions--CBS Agreement." The address of CBS is 51 West 52nd Street,
New York, New York 10019.
(5) Reflects (i) 2,000,000 shares held of record and (ii) 500,000 shares
subject to presently exercisable warrants. The address of the Estate of
Burk Zanft is 745 Downing Street, Teaneck, New Jersey 07666.
(6) The address of TCI Online Sports Holdings, Inc. is 5619 DTC Parkway,
Englewood, Colorado 80111.
(7) Includes 58,333 shares subject to presently exercisable stock options.
Excludes 181,667 shares issuable upon exercise of stock options held by
Mr. Mariani not exercisable within 60 days.
(8) Reflects (i) 100,000 shares held of record and (ii) 88,542 shares subject
to presently exercisable stock options. Excludes 51,458 shares issuable
upon exercise of stock options held by Mr. Dotson not exercisable within
60 days.
(9) Includes 44,271 shares subject to presently exercisable stock options.
Excludes 80,729 shares issuable upon exercise of stock options held by Mr.
Eastwood that are not exercisable within 60 days.
(10) Includes 50,000 shares subject to presently exercisable stock options.
Excludes 90,000 shares issuable upon exercise of stock options held by Mr.
Sturner that are not exercisable within 60 days.
(11) Reflects shares held of record by US WEST of which Mr. Cullen is
President. Mr. Cullen disclaims beneficial ownership of such shares except
to the extent of his pecuniary interest therein. The address of US WEST
and Mr. Cullen is 9000 East Nichols, Englewood, Colorado 80122.
(12) Reflects shares held of record by Alliance Technology Ventures, L.P. and
ATV/MFJ Parallel Fund, L.P. of which Mr. Fleming is a general partner of
both of these entities. Mr. Fleming disclaims beneficial ownership of such
shares, except to the extent of his pecuniary interest therein.
(13) Excludes 100,000 shares issuable upon exercise of warrants held by Mr.
Hogan that are not exercisable within 60 days.
(14) Includes 25,000 shares subject to presently exercisable warrants .
Excludes 25,000 shares issuable upon exercise of warrants held by Mr.
Horrow that are not exercisable within 60 days.
(15) Reflects shares held of record and shares subject to presently exercisable
warrants held by various funds associated with Kleiner Perkins Caufield &
Byers of which Mr. Lacob is a general partner. Mr. Lacob disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. See note (3) above. The address of Mr. Lacob is 2750
Sand Hill Road, Menlo Park, California 94025.
(16) Reflects shares held of record by Reuters NewMedia of which Mr. Nibley is
a director, the Editor and Executive Vice President. Mr. Nibley disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. The address of Reuters NewMedia and Mr. Nibley is 1700
Broadway, New York, New York 10019.
(17) Reflects (i) 250,000 shares held of record and (ii) 250,000 shares subject
to presently exercisable warrants.
(18) Excludes 100,000 shares issuable upon exercise of warrants held by Mr.
Schulhof that are not exercisable within 60 days.
(19) Includes the information in the notes above, as applicable. Reflects (i)
16,525,790 shares held of record, (ii) 297,865 shares subject to presently
exercisable stock options and (iii) 1,100,000 shares subject to presently
exercisable warrants. Excludes (i) 932,135 shares issuable upon exercise
of stock options and (ii) 225,000 shares issuable upon exercise of
warrants not exercisable within 60 days.
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DESCRIPTION OF CAPITAL STOCK
Effective upon the completion of this offering, the authorized capital
stock of the Company will consist of 50,000,000 shares of Common Stock, $0.01
par value per share, and 1,000,000 shares of preferred stock, $0.01 par value
per share.
COMMON STOCK
As of June 30, 1997, there were 25,294,187 shares of Common Stock
outstanding and held of record by 28 stockholders, after giving effect to the
conversion of all outstanding shares of preferred stock upon the closing of
this offering. Based upon the number of shares outstanding as of that date and
giving effect to the issuance of the shares of Common Stock offered
hereby, there will be shares of Common Stock outstanding upon the
completion of this offering.
Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights
of outstanding preferred stock. Upon the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive ratably the
net assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of the Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this offering will be, when issued and paid for,
fully paid and nonassessable. The rights, preferences and privileges of holders
of Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock which the Company may
designate and issue in the future. Upon the completion of this offering, there
will be no shares of preferred stock outstanding.
PREFERRED STOCK
As of the date of this Prospectus, there are outstanding 3,000,000 shares
of Series A Preferred Stock, 6,162,776 shares of Series B Preferred Stock and
5,333,333 shares of Series C Preferred Stock. All outstanding shares of
preferred stock will be converted into an aggregate of 14,496,109 shares of
Common Stock upon the completion of this offering and such shares of preferred
stock will no longer be authorized, issued or outstanding.
Upon the completion of this offering, the Board of Directors will be
authorized, without further shareholder approval, to issue from time to time up
to an aggregate of 1,000,000 shares of preferred stock in one or more series
and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. See "--Anti-takeover
Effects of Certain Provisions of Delaware Law and the Company's Certificate of
Incorporation and Bylaws." The Company has no present plans to issue any shares
of preferred stock.
OPTIONS AND WARRANTS
As of June 30, 1997, options to purchase a total of 2,188,688 shares
("Option Shares") of Common Stock were outstanding; approximately 985,000 of
the Option Shares are subject to lock-up agreements. Beginning 90 days after
the date of this Prospectus, approximately 1,203,688 Option Shares which are
not subject to lock-up agreements will be eligible for sale in reliance on Rule
701. The total number of shares of Common Stock that may be subject to the
granting of Awards under the Incentive Plan shall be equal to: (i) 2,000,000
shares, plus (ii) the number of shares with respect to Awards previously
58
<PAGE>
granted under the Incentive Plan that terminate without being exercised,
expire, are forfeited or canceled, and the number of shares of Common Stock
that are surrendered in payment of any Awards or any tax withholding
requirements. No Awards have been granted under the Incentive Plan. See
"Management--Stock Plans" and "Shares Eligible for Future Sale."
As of June 30, 1997, warrants to purchase a total of 4,444,153 shares
("Warrant Shares") of Common Stock were outstanding; approximately 3,425,000 of
the Warrant Shares are subject to lock-up agreements. Approximately 1,017,153
Warrant Shares which are not subject to lock-up agreements will be eligible for
immediate sale in reliance on Rule 144 or Rule 701, beginning 90 days after the
date of this Prospectus. See "Shares Eligible for Future Sale."
REGISTRATION RIGHTS
Upon the completion of this offering, certain securityholders of the
Company (the "Rightsholders") will be entitled to require the Company to
register under the Securities Act up to a total of shares (the
"Registrable Shares") of outstanding Common Stock and Common Stock issuable
upon the exercise of outstanding warrants, pursuant to the terms of an Amended
and Restated Investors' Rights Agreement (the "Investors' Rights Agreement").
The Investors' Rights Agreement provides that in the event the Company proposes
to register any of its securities under the Securities Act at any time or
times, the Rightsholders, subject to certain exceptions, shall be entitled to
include Registrable Shares in such registration. However, the managing
underwriter of any such offering may exclude for marketing reasons some of such
Registrable Shares from such registration. In addition, certain Rightsholders
have additional rights, subject to certain conditions and limitations, to
require the Company to prepare and file a registration statement under the
Securities Act with respect to their Registrable Shares. The Company is
generally required to bear the expenses of all such registrations, except
underwriting discounts and commissions. The Company has also granted CBS
registration rights for all shares issuable to CBS pursuant to the CBS
agreement (or upon the exercise of warrants granted pursuant to the CBS
agreement) on terms and conditions similar to the registration rights held by
the Rightsholders under the Investors' Rights Agreement.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). Subject to certain exceptions, Section
203 prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the Board of Directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of the corporation's voting stock. This
statute could prohibit or delay the accomplishment of mergers or other takeover
or change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.
In addition, certain provisions of the Certificate and Bylaws, which will
be in effect upon completion of this offering and are summarized in the
following paragraphs, may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a shareholder
might consider in its best interest, including those attempts that might result
in a premium over the market price for the shares held by shareholders.
CLASSIFIED BOARD OF DIRECTORS. The Company's Board of Directors will be
divided into three classes of directors serving staggered three-year terms. As
a result, approximately one-third of the Board of Directors will be elected
each year. These provisions, when coupled with the provision of the Certificate
authorizing only the Board of Directors to fill vacant directorships or
increase the size of the Board, may deter a shareholder from removing incumbent
directors and simultaneously gaining control of the Board of Directors by
filling the vacancies created by such removal with its own nominees.
59
<PAGE>
SHAREHOLDER ACTION; SPECIAL MEETING OF SHAREHOLDERS. The Certificate
provides that shareholders may not take action by written consent, but only at
duly called annual or special meetings of shareholders. The Certificate further
provides that special meetings of shareholders of the Company may be called
only by the Chairman of the Board of Directors or a majority of the Board of
Directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws provide that shareholders seeking to bring business
before an annual meeting of shareholders, or to nominate candidates for
election as directors at an annual meeting of shareholders, must provide timely
notice thereof in writing. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company, not less than 120 days nor more than 150 days prior to the first
anniversary of the date of the Company's notice of annual meeting provided with
respect to the previous year's annual meeting; provided, that if no annual
meeting was held in the previous year or the date of the annual meeting has
been changed to be more than 30 calendar days earlier than or 60 calendar days
after such anniversary, notice by the stockholder, to be timely, must be so
received not more than 90 days nor later than the later of (i) 60 days prior to
the annual meeting or (ii) the close of business on the 10th day following the
date on which notice of the date of the meeting is given to stockholders or
made public, whichever first occurs. The Bylaws also specify certain
requirements for a shareholder's notice to be in proper written form. These
provisions may preclude shareholders from bringing matters before the
shareholders at an annual meeting or from making nominations for directors at
an annual meeting.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
Common Stock and preferred stock are available for future issuance without
shareholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved Common Stock and preferred stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of the Company's management.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage
The Certificate requires the affirmative vote of the holders of at least
80% of the combined voting power of the outstanding shares of capital stock of
the Company entitled to vote for the election of directors to amend or repeal
any of the foregoing Certificate provisions. Such 80% shareholder vote is also
required to amend or repeal any of the foregoing Bylaws provisions, although
such Bylaws provisions may also be amended or repealed by a majority vote of
the entire Board of Directors. Such 80% shareholder vote would be in addition
to any separate class vote that might in the future be required pursuant to the
terms of any preferred stock that might be outstanding at the time any such
amendments are submitted to stockholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Certificate contains certain provisions permitted under the DGCL
relating to the liability of directors. These provisions eliminate a director's
liability for monetary damages for a breach of fiduciary duty, except in
certain circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Certificate also contains
provisions indemnifying the directors and officers of the Company to the
fullest extent permitted by the DGCL. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is SunTrust Bank,
Atlanta.
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have shares of
Common Stock outstanding (assuming no exercise of outstanding options or
warrants). Of these shares, the shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by an "affiliate" of the
Company, as that term is defined in Rule 144 ("Rule 144") under the Securities
Act (an "Affiliate"), may generally be sold only in compliance with Rule 144 as
described below.
The remaining 25,294,187 shares of Common Stock will be "restricted
securities" as that term is defined under Rule 144 (the "Restricted Shares").
Most of the Restricted Shares will be subject to lock-up agreements as
described below. Upon expiration of these agreements 180 days after the date of
this Prospectus, approximately of the Restricted Shares will be
available for sale in the public market, subject to the provisions of Rule 144
under the Securities Act. The balance of the Restricted Shares will become
eligible for sale in the public market at various times thereafter, commencing
in 1998. The holders of approximately of the Restricted Shares
are entitled to registration rights. Sales of Restricted Shares in the public
market, or the availability of such shares for sale, could adversely affect the
market price of the Common Stock. See "Description of Capital Stock--
Registration Rights."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially
owned Restricted Shares for at least one year is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock (approximately
shares immediately after this offering) or (ii) the average weekly
trading volume in the Common Stock in the Nasdaq National Market during the
four calendar weeks preceding the date on which notice of such sale is filed
with the Securities and Exchange Commission. Such sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. In addition, a
person who is not an Affiliate and has not been an Affiliate for at least three
months prior to the sale and who has beneficially owned Restricted Shares for
at least two years may resell such shares without regard to the requirements
described above. The Company is unable to estimate accurately the number of
Restricted Shares that ultimately will be sold under Rule 144 because the
number of shares will depend in part on the market price for the Common Stock,
the personal circumstances of the sellers and other factors. See "Risk
Factors--Shares Eligible for Future Sale" and "Risk Factors--No Prior Public
Market; Possible Volatility of Stock Price."
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 or adviser to
the Company who purchased 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.
Beginning 90 days after the date of this Prospectus, approximately
Option Shares and approximately Warrant Shares which are not subject to
lock-up agreements will be eligible for sale in reliance on Rule 701. See
"Description of Capital Stock--Options and Warrants."
The Company intends to file a registration statement under the Securities
Act on Form S-8 to register all shares of Common Stock subject to outstanding
stock options and Common Stock issuable pursuant to the Company's stock plans,
promptly upon expiration of the 180-day lock-up period described below.
Following the filing of the Form S-8, shares issued under the Company's stock
plans will be eligible for sale in the public markets upon vesting and exercise
of options or awards, subject to the Rule 144 volume restrictions applicable to
affiliates.
61
<PAGE>
All executive officers and directors of the Company and certain of the
Company's shareholders, who upon the completion of this offering will hold in
the aggregate shares of Common Stock and options and warrants to purchase
shares of Common Stock, have agreed that they will not, without the prior
written consent of Robertson, Stephens & Company LLC, directly or indirectly,
offer to sell, sell, contract to sell or otherwise dispose of any shares of
Common Stock beneficially owned by them for a period of 180 days after the date
of this Prospectus, subject to certain exceptions. Robertson, Stephens &
Company LLC may, in its sole discretion and at any time, without notice,
release all or any portion of the securities subject to lock-up agreements.
Prior to this offering, there has been no public market for the Common
Stock of the Company, and no prediction can be made as to the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices
for the Common Stock and could impair the Company's future ability to obtain
capital through an offering of equity securities.
62
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC, Cowen & Company and Montgomery Securities
(the "Representatives"), have severally agreed with the Company, subject to the
terms and conditions of the Underwriting Agreement, to purchase the number of
shares of Common Stock set forth opposite their respective names below. The
Underwriters are committed to purchase and pay for all shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITER ----------
<S> <C>
Robertson, Stephens & Company LLC ......
Cowen & Company ........................
Montgomery Securities ..................
Total ..............................
==========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession of not in excess of $ per share, of
which $ may be reallowed to other dealers. After the initial public
offering, the public offering price, concession and reallowance to dealers may
be reduced by the Representatives. No such reduction shall change the amount of
proceeds to be received by the Company as set forth on the cover page of this
Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the same price per share as the Company
will receive for the shares that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of Common Stock
to be purchased by it shown in the above table represents as a percentage of
the shares offered hereby. If purchased, such additional shares will
be sold by the Underwriters on the same terms as those on which the
shares are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Underwriting Agreement.
Pursuant to the terms of lock-up agreements, the holders of
shares of the Company's Common Stock (including shares of preferred
stock that are convertible into shares of Common Stock) have agreed, for a
period of up to 180 days after the date of this Prospectus, that, subject to
certain exceptions, they will not contract to sell or otherwise dispose of any
shares of Common Stock, any options or warrants to purchase shares of Common
Stock or any securities convertible into, or exchangeable for, shares of Common
Stock, owned directly by such holders or with respect to which they have the
power of disposition, without the prior written consent of Robertson, Stephens
& Company LLC. Robertson, Stephens & Company LLC may, in its sole discretion,
and at any time without notice, release all or any portion of the securities
subject to lock-up agreements.
63
<PAGE>
Approximately shares of Common Stock subject to the lock-up
agreements will be eligible for sale in the public market upon the expiration
of the lock-up agreements, subject to Rule 144.
In addition, the Company has agreed that until 180 days after the date of
this Prospectus, the Company will not, without prior written consent of
Robertson, Stephens & Company LLC, subject to certain exceptions, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock, any
options or warrants to purchase any share of Common Stock or any securities
convertible into, exercisable for or exchangeable for shares of Common Stock
other than the Company's sale of shares in this offering, the issuance of
shares of Common Stock upon the exercise of outstanding options and warrants
and the conversion of shares of preferred stock and the grant of options to
purchase shares of Common Stock under existing employee stock option or stock
purchase plans. See "Shares Eligible For Future Sale."
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock offered hereby was determined through negotiations among the
Company and the Representatives. Among the factors considered in such
negotiations were prevailing market conditions, certain financial information
of the Company, market valuations of other companies that the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
The Representatives have advised the Company that, pursuant to Regulation
M under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level
above that which might otherwise prevail in the open market. A "stabilizing
bid" is a bid for or the purchase of the Common Stock on behalf of the
Underwriters for the purpose of fixing or maintaining the price of the Common
Stock. A "syndicate covering transaction" is the bid for or the purchase of the
Common Stock on behalf of the Underwriters to reduce a short position incurred
by the Underwriters in connection with the offering. A "penalty bid" is an
arrangement permitting the Representatives to reclaim the selling concession
otherwise accruing to an Underwriter or syndicate member in connection with the
offering if the Common Stock originally sold by such Underwriter or syndicate
member is purchased by the Representatives in a syndicate covering transaction
and has therefore not been effectively placed by such Underwriter or syndicate
member. The Representatives have advised the Company that such transactions may
be effected on the Nasdaq National Market or otherwise and, if commenced, may
be discontinued at any time.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., Miami, Florida. Certain legal matters in connection with this offering
will be passed upon for the Underwriters by Brobeck, Phleger & Harrison LLP,
New York, New York.
EXPERTS
The Financial Statements of the Company included in this Prospectus and
Registration Statement to the extent and for the periods indicated in their
report, have been audited by Arthur Andersen LLP, independent certified public
accountants, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
64
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended, with respect to the shares of Common Stock offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain information contained in the Registration Statement. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding
the contents of any agreement or other document filed as an exhibit to the
Registration Statement are not necessarily complete, and in each instance,
reference is made to the copy of such agreement filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement, including the exhibits
and schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from such office upon payment of the prescribed fees. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission. Information concerning
the Company is also available for inspection at the offices of the Nasdaq
National Market, Reports Section, 1735 K Street, N.W., Washington, D.C. 20006
65
<PAGE>
SPORTSLINE USA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants ........................... F-2
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited) F-3
Statements of Operations for the period from Inception (February 23, 1994)
through December 31, 1994, the years ended December 31, 1995 and 1996 and
the six months ended June 30, 1996 and 1997 (unaudited) .................. F-4
Statements of Changes in Shareholders' Equity (Deficit) for the period
from Inception (February 23, 1994) to December 31, 1994,
the years ended December 31, 1995 and 1996 and
the six months ended June 30, 1997 (unaudited) ........................... F-5
Statements of Cash Flows for the period from Inception (February 23, 1994)
to December 31, 1994, the years ended December 31, 1995 and 1996 and
the six months ended June 30, 1996 and 1997 (unaudited) .................. F-6
Notes to Financial Statements ............................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
SportsLine USA, Inc.:
We have audited the accompanying balance sheets of SportsLine USA, Inc. (a
Delaware corporation) as of December 31, 1995 and 1996, and the related
statements of operations, changes in shareholders' equity (deficit) and cash
flows for the period from inception (February 23, 1994) to December 31, 1994
and for the years ended December 31, 1995 and 1996. These financial statements
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 generally accepted auditing
standards. 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 SportsLine USA, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for the period from inception (February 23, 1994) to December 31, 1994
and for the years ended December 31, 1995 and 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 31, 1997.
F-2
<PAGE>
SPORTSLINE USA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
JUNE 30,
1995 1996 1997
--------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 183,948 $ 13,993,785 $ 13,634,466
Deferred advertising and content costs (Note 5) ............ -- -- 4,890,864
Accounts receivable ....................................... 3,087 561,390 831,315
Prepaid expenses and other current assets .................. 132,639 391,386 1,660,924
------------ ------------- -------------
Total current assets .................................... 319,674 14,946,561 21,017,569
RESTRICTED CERTIFICATES OF DEPOSIT ........................ 578,067 138,601 138,601
PROPERTY AND EQUIPMENT .................................... 1,300,199 2,241,630 2,644,566
OTHER ASSETS ................................................ 298,146 522,950 1,109,532
------------ ------------- -------------
$ 2,496,086 $ 17,849,742 $ 24,910,268
============ ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable .......................................... $ 663,559 $ 631,712 $ 602,998
Accrued liabilities ....................................... 289,924 1,332,140 2,081,330
Term loan ................................................ 973,000 -- --
Current portion of long-term borrowings .................. 118,242 224,522 224,522
Current portion of capital lease obligations ............... 172,156 200,945 166,035
Deferred revenue .......................................... 47,050 778,286 891,120
------------ ------------- -------------
Total current liabilities ................................. 2,263,931 3,167,605 3,966,005
LONG-TERM BORROWINGS, net of current maturities ............ 354,726 280,652 168,391
CAPITAL LEASE OBLIGATIONS, net of current maturities ......... 329,382 128,080 43,501
------------ ------------- -------------
Total liabilities ....................................... 2,948,039 3,576,337 4,177,897
------------ ------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 5, 8 and 9)
SHAREHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock, $0.01 par value,
3,000,000 shares authorized, issued and outstanding
as of December 31, 1995 and 1996 and June 30, 1997 ...... 30,000 30,000 30,000
Series B convertible preferred stock, $0.01 par value,
6,162,776 shares authorized, issued and outstanding
as of December 31, 1996 and June 30, 1997 ............... -- 61,628 61,628
Series C convertible preferred stock, $0.01 par value,
5,333,333 shares authorized, issued and outstanding
as of December 31, 1996 and June 30, 1997 ............... -- 53,333 53,333
Common stock, $0.01 par value, 50,000,000 shares
authorized, 6,500,000, 6,504,687 and 10,798,078
issued and outstanding as of December 31, 1995
and 1996 and June 30, 1997, respectively ............... 65,000 65,047 107,981
Additional paid-in capital ................................. 5,186,761 32,652,485 50,184,431
Accumulated deficit ....................................... (5,733,714) (18,589,088) (29,705,002)
------------ ------------- -------------
Total shareholders' equity (deficit) ..................... (451,953) 14,273,405 20,732,371
------------ ------------- -------------
$ 2,496,086 $ 17,849,742 $ 24,910,268
============ ============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-3
<PAGE>
SPORTSLINE USA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED SIX MONTHS ENDED
(FEBRUARY 23, DECEMBER 31, JUNE 30,
1994) TO ---------------------------------- ---------------------------------
DECEMBER 31,
1994 1995 1996 1996 1997
-------------- ---------------- ---------------- --------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE ........................... $ -- $ 52,097 $ 2,436,690 $ 534,835 $ 2,802,510
COST OF REVENUE .................. -- 756,874 3,319,291 1,129,953 2,788,655
---------- ------------ ------------- ------------ -------------
GROSS MARGIN (DEFICIT) ............ -- (704,777) (882,601) (595,118) 13,855
OPERATING EXPENSES:
Product development ............ 57,809 632,659 939,463 514,420 588,388
Sales and marketing ............ 59,306 1,179,106 5,568,550 1,816,438 3,515,302
General and administrative ...... 308,472 2,662,269 4,870,118 1,881,455 3,101,185
Depreciation and amortization . 15,958 192,869 823,653 292,243 4,278,849
---------- ------------ ------------- ------------ -------------
Total operating expenses ...... 441,545 4,666,903 12,201,784 4,504,556 11,483,724
---------- ------------ ------------- ------------ -------------
LOSS FROM OPERATIONS ............ (441,545) (5,371,680) (13,084,385) (5,099,674) (11,469,869)
INTEREST EXPENSE .................. -- (50,074) (136,309) (74,955) (30,785)
INTEREST AND OTHER
INCOME, net ..................... 37,734 91,851 365,320 104,823 384,740
---------- ------------ ------------- ------------ -------------
NET LOSS ........................... $ (403,811) $ (5,329,903) $ (12,855,374) $ (5,069,806) $ (11,115,914)
========== ============ ============= ============ =============
NET LOSS PER SHARE ............... $ $ $ $ $
========== ============ ============= ============ =============
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING .....................
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
SPORTSLINE USA, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK
--------------------- --------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from issuance of common
stock, February 23, 1994 ............ -- $ -- -- $ -- -- $ --
Property and equipment contributed
as capital ........................... -- -- -- -- -- --
Net proceeds from issuance of
common stock and common
stock warrants ..................... -- -- -- -- -- --
Issuance of common stock pursuant
to consulting agreements and
services (primarily non-cash) ...... -- -- -- -- -- --
Non-cash issuance of common
stock warrants pursuant to
consulting agreements ............... -- -- -- -- -- --
Net loss .............................. -- -- -- -- -- --
---------- -------- ---------- -------- ---------- --------
Balance, December 31, 1994 ............ -- -- -- -- -- --
Net proceeds from issuance of
Series A convertible preferred
stock .............................. 3,000,000 30,000 -- -- -- --
Net proceeds from issuance of
common stock warrants ............... -- -- -- -- -- --
Non-cash issuance of common
stock warrants pursuant to
consulting agreements ............... -- -- -- -- -- --
Net loss .............................. -- -- -- -- -- --
---------- -------- ---------- -------- ---------- --------
Balance, December 31, 1995 ............ 3,000,000 30,000 -- -- -- --
Net proceeds from issuance of
Series B convertible
preferred stock ..................... -- -- 6,162,776 61,628 -- --
Net proceeds from issuance of
Series C convertible
preferred stock ..................... -- -- -- -- 5,333,333 53,333
Issuance of common stock pursuant
to exercise of options ............... -- -- -- -- -- --
Non-cash issuance of common
stock warrants pursuant to
consulting agreements ............... -- -- -- -- -- --
Net loss .............................. -- -- -- -- -- --
---------- -------- ---------- -------- ---------- --------
Balance, December 31, 1996 ............ 3,000,000 30,000 6,162,776 61,628 5,333,333 53,333
Non-cash issuance of common stock
and common stock warrants
pursuant to CBS agreement
(unaudited) ........................ -- -- -- -- -- --
Non-cash issuance of common
stock warrants pursuant to
consulting agreements
(unaudited) ........................ -- -- -- -- -- --
Proceeds from exercise of common
stock warrants (unaudited) ......... -- -- -- -- -- --
Issuance of common stock
pursuant to exercise of options
(unaudited) ........................ -- -- -- -- -- --
Net loss (unaudited) .................. -- -- -- -- -- --
---------- -------- ---------- -------- ---------- --------
Balance, June 30, 1997 (unaudited) . 3,000,000 $30,000 6,162,776 $61,628 5,333,333 $53,333
========== ======== ========== ======== ========== ========
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ ---------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Proceeds from issuance of common
stock, February 23, 1994 ............ 3,800,000 $ 38,000 $ 135,884 $ -- $ 173,884
Property and equipment contributed
as capital ........................... -- -- 26,116 -- 26,116
Net proceeds from issuance of
common stock and common
stock warrants ..................... 2,000,000 20,000 1,893,900 -- 1,913,900
Issuance of common stock pursuant
to consulting agreements and
services (primarily non-cash) ...... 700,000 7,000 138,000 -- 145,000
Non-cash issuance of common
stock warrants pursuant to
consulting agreements ............... -- -- 55,000 -- 55,000
Net loss .............................. -- -- -- (403,811) (403,811)
----------- --------- ------------ ------------- --------------
Balance, December 31, 1994 ............ 6,500,000 65,000 2,248,900 (403,811) 1,910,089
Net proceeds from issuance of
Series A convertible preferred
stock .............................. -- -- 2,883,361 -- 2,913,361
Net proceeds from issuance of
common stock warrants ............... -- -- 37,500 -- 37,500
Non-cash issuance of common
stock warrants pursuant to
consulting agreements ............... -- -- 17,000 -- 17,000
Net loss .............................. -- -- -- (5,329,903) (5,329,903)
----------- --------- ------------ ------------- --------------
Balance, December 31, 1995 ............ 6,500,000 65,000 5,186,761 (5,733,714) (451,953)
Net proceeds from issuance of
Series B convertible
preferred stock ..................... -- -- 11,031,369 -- 11,092,997
Net proceeds from issuance of
Series C convertible
preferred stock ..................... -- -- 15,873,367 -- 15,926,700
Issuance of common stock pursuant
to exercise of options ............... 4,687 47 1,125 -- 1,172
Non-cash issuance of common
stock warrants pursuant to
consulting agreements ............... -- -- 559,863 -- 559,863
Net loss .............................. -- -- -- (12,855,374) (12,855,374)
----------- --------- ------------ ------------- --------------
Balance, December 31, 1996 ............ 6,504,687 65,047 32,652,485 (18,589,088) 14,273,405
Non-cash issuance of common stock
and common stock warrants
pursuant to CBS agreement
(unaudited) ........................ 1,880,683 18,807 8,081,754 -- 8,100,561
Non-cash issuance of common
stock warrants pursuant to
consulting agreements
(unaudited) ........................ -- -- 1,551,142 -- 1,551,142
Proceeds from exercise of common
stock warrants (unaudited) ......... 2,400,000 24,000 7,896,000 -- 7,920,000
Issuance of common stock
pursuant to exercise of options
(unaudited) ........................ 12,708 127 3,050 -- 3,177
Net loss (unaudited) .................. -- -- -- (11,115,914) (11,115,914)
----------- --------- ------------ ------------- --------------
Balance, June 30, 1997 (unaudited) . 10,798,078 $107,981 $50,184,431 $(29,705,002) $ 20,732,371
=========== ========= ============ ============= ==============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
SPORTSLINE USA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD
FROM
INCEPTION YEAR ENDED SIX MONTHS ENDED
(FEBRUARY 23, DECEMBER 31, JUNE 30,
1994) TO ---------------------------------- ----------------------------------
DECEMBER 31,
1994 1995 1996 1996 1997
-------------- ---------------- ----------------- ---------------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss .............................. $ (403,811) $ (5,329,903) $ (12,855,374) $ (5,069,806) $ (11,115,914)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization ......... 15,598 192,869 823,653 292,243 4,278,849
Provision for doubtful accounts ...... -- -- 22,045 -- 22,900
Changes in operating assets
and liabilities:
Accounts receivable .................. -- (3,087) (580,348) (65,806) (292,825)
Prepaid expenses and other
current assets .................. (52,850) (197,888) (66,404) (197,151) (722,259)
Accounts payable ..................... 43,189 620,370 (31,847) (170,976) 272,806
Accrued liabilities .................. 8,862 281,062 1,042,216 226,492 698,310
Deferred revenue ..................... -- 47,050 731,236 129,504 112,834
---------- ------------ ------------- ------------ -------------
Net cash used in operating
activities ........................ (389,012) (4,389,527) (10,914,823) (4,855,500) (6,745,299)
---------- ------------ ------------- ------------ -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and equipment ... (42,302) (868,150) (1,622,368) (465,541) (1,305,447)
Net redemption (purchase) of restricted
certificates of deposit ............... -- (578,067) 439,466 475,820 --
---------- ------------ ------------- ------------ -------------
Net cash provided by (used in)
investing activities ............ (42,302) (1,446,217) (1,182,902) 10,279 (1,305,447)
---------- ------------ ------------- ------------ -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds (repayment) of term loan ...... -- 973,000 (973,000) (973,000) --
Proceeds from long-term borrowings ...... -- 472,968 144,468 144,468 --
Repayment of long-term borrowings ...... -- -- (112,262) -- (112,261)
Repayment of capital lease obligations -- (43,607) (172,513) (85,029) (119,489)
Proceeds from issuance of common
stock and common stock warrants ...... 2,097,784 37,500 1,172 -- 7,923,177
Proceeds from issuance of convertible
preferred stock ..................... -- 2,913,361 27,019,697 11,043,594 --
---------- ------------ ------------- ------------ -------------
Net cash provided by financing
activities ........................ 2,097,784 4,353,222 25,907,562 10,130,033 7,691,427
---------- ------------ ------------- ------------ -------------
Net increase (decrease) in cash
and cash equivalents ............ 1,666,470 (1,482,522) 13,809,837 5,284,812 (359,319)
CASH AND CASH EQUIVALENTS,
beginning of period ..................... -- 1,666,470 183,948 183,948 13,993,785
---------- ------------ ------------- ------------ -------------
CASH AND CASH EQUIVALENTS,
end of period ........................... $1,666,470 $ 183,948 $ 13,993,785 $ 5,468,760 $ 13,634,466
========== ============ ============= ============ =============
</TABLE>
(CONTINUED)
F-6
<PAGE>
SPORTSLINE USA, INC.
STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
PERIOD
FROM
INCEPTION YEAR ENDED SIX MONTHS ENDED
(FEBRUARY 23, DECEMBER 31, JUNE 30,
1994) TO --------------------- ---------------------
DECEMBER 31,
1994 1995 1996 1996 1997
-------------- ---------- ---------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for services rendered $ 135,000 $ -- $ -- $ -- $7,471,852
========= ========= ========= ======== ===========
Issuance of common stock warrants pursuant
to consulting agreements ..................... $ 55,000 $ 17,000 $559,863 $ 5,000 $2,179,851
========= ========= ========= ======== ===========
Equipment acquired under capital leases ......... $ -- $545,145 $ -- $ -- $ --
========= ========= ========= ======== ===========
Property and equipment contributed as capital ... $ 26,116 $ -- $ -- $ -- $ --
========= ========= ========= ======== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest ........................ $ -- $ 50,074 $121,027 $74,955 $ 30,785
========= ========= ========= ======== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-7
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(1) NATURE OF OPERATIONS:
SPORTSLINE USA, INC. (THE "COMPANY") WAS INCORPORATED ON FEBRUARY 23, 1994
("INCEPTION") AND was a development stage company until the Company began
recognizing revenue from its operations in September 1995. The Company is an
Internet-based sports media company that provides branded, interactive
information and programming as well as merchandise to sports enthusiasts
worldwide. cbs.sportsline.com, the Company's flagship site on the World Wide
Web (the "Web") delivers real-time, in-depth and compelling sports content and
programming that capitalizes on the Web's unique graphical and interactive
capabilities.
The Company distributes a broad range of up-to-date news, scores, player
and team statistics and standings, photos and audio and video clips obtained
from leading sports news organizations and the Company's superstar athletes;
offers instant odds and picks; produces and distributes entertaining,
interactive and original programming such as editorials and analyses from its
in-house staff and freelance journalists; produces and offers contests, games,
and fantasy league products and fan clubs; and sells sports-related merchandise
and memorabilia. The Company also owns and operates a state-of-the-art radio
studio from which it produces the only all-sports radio programming broadcast
exclusively over the Internet.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid temporary cash investments with an
original maturity of three months or less to be cash equivalents.
LICENSE AND CONSULTING AGREEMENTS
The cost of license and consulting agreements is being amortized using the
straight-line method over the term of the related agreements (from one to five
years) beginning in August 1995, when cbs.sportsline.com (known at that time as
sportsline.com) first became commercially available. Such costs totaled
approximately $222,000, $782,000 and $2,524,000 as of December 31, 1995 and
1996 and June 30, 1997, respectively. Accumulated amortization on such amounts
was approximately $40,000, $200,000 and $767,000 at December 31, 1995 and 1996
and June 30, 1997, respectively. The current portion of such amounts is
reflected in prepaid expenses and other current assets and the long-term
portion in other assets in the accompanying balance sheets. Amortization
expense under these agreements amounted to approximately $40,000, $160,000,
$72,000 and $567,000 for the years ended December 31, 1995 and 1996 and for the
six months ended June 30, 1996 and 1997, respectively, and is included in
depreciation and amortization expense in the accompanying statements of
operations.
PROPERTY AND EQUIPMENT
Property and equipment is carried at historical cost and is being
depreciated and amortized using the straight-line method over the shorter of
the estimated useful lives of the assets or the lease period. Maintenance and
repairs are charged to expense when incurred; betterments are capitalized. Upon
the sale or retirement of assets, the cost and accumulated depreciation are
removed from the account and any gain or loss is recognized.
F-8
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
REVENUE RECOGNITION
Through December 31, 1995, the Company's revenue was derived solely from
membership revenue. The Company began recognizing advertising revenue in March
1996. Revenue recognition policies for both membership and advertising revenue
are set forth below.
MEMBERSHIP REVENUE
The Company offers monthly and yearly memberships to its Web sites.
Potential members are offered a 30-day free trial membership. If such trial
membership is not cancelled within the first 30 days, the member is charged and
revenue is recognized. For additional fees, members are also eligible to
participate in sports contests to win cash prizes and merchandise and join
celebrity fan clubs.
Revenue relating to monthly memberships is recognized in the month the
service is provided, except for trial memberships as noted above. Revenue
relating to yearly memberships and sports contests is recognized ratably over
the life of the membership agreement or contest period. Accordingly, amounts
received for which services have not yet been provided are reflected as
deferred revenue in the accompanying balance sheets.
ADVERTISING REVENUE
Advertising revenue is derived from the sale of advertising on the
Company's Web sites. Advertising revenue is recognized in the period the
advertisement is displayed, provided that no significant Company obligations
remain and collection of the resulting receivable is probable. Company
obligations typically include guarantees of a minimum number of "impressions,"
or times that any advertisement is viewed by users of the Company's Web sites.
In 1996, the Company recognized advertising revenue as a result of barter
transactions primarily with certain other Internet-related companies. Such
revenue is recognized based on the fair value of the consideration received,
which consists of advertising displayed on the other companies' Web sites.
Barter revenue and the corresponding expense is recognized in the period the
advertising is displayed.
F-9
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
REVENUE BY TYPE
Revenue by type for the years ended December 31, 1995 and 1996 and the six
months ended June 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------ -----------------------
1995 1996 1996 1997
--------- ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Membership - basic .................. $28,720 $ 526,026 $139,217 $ 700,577
Membership - premium services ...... 23,377 356,724 52,777 356,738
Advertising - cash ............... -- 1,048,118 100,031 1,616,112
Advertising - barter ............... -- 502,473 241,685 28,832
Other .............................. -- 3,349 1,125 100,251
------- ---------- -------- ----------
$52,097 $2,436,690 $534,835 $2,802,510
======= ========== ======== ==========
</TABLE>
COST OF REVENUE
Cost of revenue consists primarily of content and royalty fees, payroll
and related expenses for the editorial and operations staff, telecommunications
and computer related expenses for the support and delivery of the Company's
services. Royalty payments are paid to certain content providers and technology
and marketing partners based on membership levels subject, in certain
instances, to specified minimum amounts.
PRODUCT DEVELOPMENT COSTS
Statement of Financial Accounting Standards ("SFAS") No. 86, ACCOUNTING
FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED,
requires capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion
of a working model. Costs incurred by the Company between completion of a
working model and the point at which the product is ready for general release
have not been significant.
SALES AND MARKETING
Sales and marketing expense includes member acquisition costs relating to
the direct costs of member solicitation, including advertising on Web sites,
printing, production and shipping of member kits and the costs of obtaining
qualified prospects by various targeted direct marketing programs (i.e., direct
marketing response cards and mailing lists) and from third parties. No indirect
costs are included in member acquisition costs. In accordance with Statement of
Position 93-7, REPORTING ON ADVERTISING COSTS, the Company may in the future
capitalize such direct-response advertising costs if historical evidence is
available to indicate that the advertising results in a future benefit. The
Company will determine an appropriate amortization period for such costs if
capitalization begins. Until that time, all such costs are expensed as
incurred. All other advertising and marketing costs are charged to expense at
the time the advertising takes place.
F-10
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
PER SHARE AMOUNTS
Net loss per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Pursuant
to the requirements of the Securities and Exchange Commission, such
computations shall include all common and common equivalent shares issued
within 12 months immediately preceding April 16, 1997, the date of the initial
filing of the Company's registration statement relating to its initial public
offering ("IPO") if priced below the estimated public offering price per share,
as if they were outstanding for all periods presented using the treasury stock
method, even if antidilutive. The Company's Amendment No. 1 to Registration
Statement on Form S-1 relating to the IPO of the Company's common stock does
not yet contain an estimated offering price or range of pricing. Accordingly,
the Company has been unable to quantify the effect on weighted average common
and common equivalent shares outstanding and net loss per share of any common
and common equivalent shares that may have been issued in the preceding 12
months at less than the IPO price. Weighted average common and common
equivalent shares outstanding and net loss per share will be included herein
when an IPO price has been determined.
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 and
disclosure of contingent 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, primarily consisting of cash and cash
equivalents, accounts receivable, restricted certificates of deposit, accounts
payable and borrowings, approximate fair value due to their short-term nature
and/or market rates of interest.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
and accounts receivable. The Company's cash management and investment policies
restrict investments to low risk, highly-liquid securities and the Company
performs periodic evaluations of the credit standing of the financial
institutions with which it deals. Accounts receivable from customers outside
the United States were not material to the Company's financial position or
results of operations. The Company performs ongoing credit evaluations and
generally requires no collateral. The Company maintains reserves for potential
credit losses and such losses have not been significant and have been within
management's expectations. The allowance for doubtful accounts amounted to $0,
$22,045 and $44,945 at December 31, 1995 and 1996 and June 30, 1997,
respectively. As of December 31, 1995 and 1996 and June 30, 1997, management
believes that the Company had no significant concentrations of risk.
F-11
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, was issued. SFAS No. 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the carrying
amount of the assets. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
1996. The effect of adoption was not material.
In October 1995, SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
was issued. SFAS No. 123 allows either adoption of a fair value based method of
accounting for employee stock options and similar equity instruments or
continuation of the measurement of compensation cost relating to such plans
using the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The
Company has elected to continue to use the intrinsic value based method.
Accordingly, pro forma disclosures required to be presented by SFAS No. 123 for
companies continuing to utilize the intrinsic value based method are presented
in Note 6.
In February 1997, SFAS No. 128, EARNINGS PER SHARE, was issued. SFAS No.
128 simplifies the methodology of computing earnings per share and requires the
presentation of basic and diluted earnings per share. The Company's basic and
diluted earnings per share are the same, as the Company's common stock
equivalents are antidilutive. In addition, the Company's basic and diluted
earnings per share are the same as that computed under APB No. 15, EARNINGS PER
SHARE, as presented in the accompanying Statements of Operations. SFAS No. 128
must be adopted for periods ending after December 15, 1997 and be retroactively
reflected in the financial statements.
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the unaudited condensed interim financial
statements contain all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position of the Company
as of June 30, 1997, and the results of its operations and cash flows for the
six months ended June 30, 1996 and 1997.
F-12
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(3) PROPERTY AND EQUIPMENT, NET:
PROPERTY AND EQUIPMENT, NET CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED ---------------------------
USEFUL LIVES JUNE 30,
(YEARS) 1995 1996 1997
-------------- ------------ ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Computer equipment ............ 2-3 $1,294,417 $2,561,692 $ 3,558,328
Furniture, fixtures and leasehold
improvements .................. 3-7 186,572 538,717 545,456
---------- ---------- ------------
1,480,989 3,100,409 4,103,784
Less--accumulated depreciation and
amortization .................. (180,790) (858,779) (1,459,218)
---------- ---------- ------------
$1,300,199 $2,241,630 $ 2,644,566
========== ========== ============
</TABLE>
Included in property and equipment is equipment acquired under capital
leases amounting to approximately $545,000 as of December 31, 1995 and 1996,
less accumulated amortization amounting to $75,000 and $261,000, respectively.
Depreciation and amortization expense on property and equipment amounted to
approximately $6,000, $174,000 and $680,000 for the period from inception
(February 23, 1994) to December 31, 1994, and for the years ended December 31,
1995 and 1996, respectively.
(4) BORROWINGS:
IN OCTOBER 1995, THE COMPANY ENTERED INTO A $1,500,000 EQUIPMENT LINE OF
CREDIT WITH A BANK (THE "Equipment Line"). The Equipment Line carries interest
at the prime rate plus 1.5% (10% at December 31, 1996) and is payable monthly,
interest only through June 1996, and thereafter in 33 equal monthly principal
plus interest payments. In addition, the Company is required to comply with
certain restrictive covenants which include, among other things, maintenance of
certain financial ratios and a cash balance equal to the amount of the
outstanding balance of the line of credit. The Company is in compliance with
such requirements. The Equipment Line is collateralized by substantially all of
the Company's assets. Amounts outstanding under this loan mature as follows at
December 31, 1996:
<TABLE>
<CAPTION>
MATURITY AMOUNT
- ------------- ----------
<S> <C>
1997 ...... $ 224,522
1998 ...... 224,522
1999 ...... 56,130
---------
$ 505,174
=========
</TABLE>
In December 1995, the Company entered into a $1,500,000 Term Loan with a
bank, bearing interest payable monthly at the prime rate plus 1% (9.5% as of
December 31, 1995). As of December 31, 1995, $973,000 was outstanding under the
Term Loan, which was repaid in March 1996. The Term Loan required the Company
to hold a restricted certificate of deposit in the amount of $472,968 at
December 31, 1995.
In July 1997, the Company entered into a $2,500,000 equipment line of
credit with a leasing company. The equipment line carries interest at the prime
rate plus one quarter percent. Borrowings will be payable over a maximum of 36
months.
F-13
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(5) SHAREHOLDERS' EQUITY (DEFICIT):
THE COMPANY WAS ORIGINALLY CAPITALIZED WITH CASH OF $173,884 AND PROPERTY
AND EQUIPMENT VALUED at $26,116 from its founding shareholder. In August 1994,
the Company's certificate of incorporation was amended to authorize the
issuance of up to 25,000,000 shares of common stock $0.01 par value per share
and 1,000,000 shares of preferred stock $0.01 par value per share. In May 1995,
the Company's certificate of incorporation was amended and restated to increase
the authorized preferred stock to 3,000,000 shares and designate such
authorized stock as Series A convertible preferred stock. In March 1996, the
Company's certificate of incorporation was amended to increase the authorized
preferred stock to 9,162,776 shares, and to designate 6,162,776 shares as
Series B convertible preferred stock. In September 1996, the Company's
certificate of incorporation was amended to increase the authorized common
stock to 50,000,000 shares and to increase the authorized preferred stock to
14,496,109 shares and to designate 5,333,333 shares as Series C convertible
preferred stock.
In 1994, the Company issued 700,000 shares of common stock pursuant to
consulting agreements and raised net proceeds of $1,913,900 from the issuance
of 2,000,000 shares of common stock and warrants to purchase 500,000 shares of
common stock at $2.00 to an individual investor. Such warrants were immediately
exercisable and expire in August 1999.
In May 1995, the Company entered into a stock subscription agreement with
a venture capital firm that raised net proceeds of $2,950,861 and resulted in
the issuance of 3,000,000 shares of Series A convertible preferred stock and
warrants to purchase 750,000 shares of common stock with an exercise price of
$2.00 per share. Such warrants were immediately exercisable and expire in May
2000.
In March 1996, the Company entered into a stock subscription agreement
with two venture capital firms and other investors that raised net proceeds of
$11,092,997 and resulted in the issuance of 6,162,776 shares of Series B
convertible preferred stock. In connection with this offering, an investor was
issued warrants to acquire 2,528,194 common shares at an exercise price of
$2.00 per share, which expired unexercised in September 1996.
In October 1996, the Company entered into a stock subscription agreement
with two venture capital firms and other investors that raised net proceeds of
$15,926,700 and resulted in the issuance of 5,333,333 shares of Series C
convertible preferred stock.
The convertible preferred stock carries liquidation rights equal to the
original issue price plus any declared but unpaid dividends. In the event of
any liquidation of the Company, the priority of distribution of available funds
to shareholders is as follows: Series C convertible preferred to the indicated
preference; then Series B convertible preferred to the indicated preference;
then Series A convertible preferred to the indicated preference, with the
remainder to the common shareholders. The convertible preferred stock bears
noncumulative dividends at the rate of $0.08 per annum for Series A, $0.18 per
annum for Series B and $0.30 per annum for Series C. No preferred dividends
have been declared or paid.
All convertible preferred stock carries the same voting rights as common
stock and are convertible at any time at the request of the holder into the
same number of shares of common stock, subject to certain antidilution
provisions. Also, upon the closing of a firm commitment of an underwritten
public
F-14
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(5) SHAREHOLDERS' EQUITY (DEFICIT):--(CONTINUED)
offering pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended, with an aggregate public offering price
equal to or exceeding $10,000,000 and a public offering price per share equal
to or exceeding $5.00 per share, as adjusted, both before underwriters'
discounts and commissions, the convertible preferred stock will automatically
convert into the same number of shares of common stock.
In December 1995, an investor guaranteed the $1,500,000 Term Loan (see
Note 4) to the Company by a bank. In return for the guarantee, the Company
issued warrants to the investor to purchase 75,000 shares of common stock at a
price of $1.00 per share, which were immediately exercisable and expire in
December 2000.
In September 1996, the Company entered into an agreement with an investor
to issue warrants to acquire up to 2,400,000 shares of common stock at an
exercise price of $3.30 per share, contingent upon the investor meeting certain
conditions. These conditions included providing assistance with new
technologies and business expansion opportunities. The Company did not value
such warrants at December 31, 1996 as it was unable to estimate if and when the
contingencies would be met. On January 30, 1997, the Company's Board of
Directors concluded that the warrants were exercisable and placed a value on
them of $227,000 using the Black-Scholes option pricing model with a volatility
of 40%, risk-free interest rate of 5.1% and an estimated life of two months.
The Company expects to benefit from the new technologies relating to the
warrant issuance over a two year period and, accordingly, is charging the cost
to expense over a two-year period. In March 1997, the investor exercised the
warrants resulting in net proceeds to the Company of $7,920,000 and the
issuance of 2,400,000 shares of common stock.
In March 1997, the Company entered into a five-year agreement with CBS
Inc. ("CBS"). In consideration of the advertising and promotional efforts of
CBS and its license to the Company of the right to use certain CBS logos and
television-related sports content, CBS will receive 7,750,000 shares of common
stock over the term of the agreement (1,880,683, 1,839,506, 1,397,470,
1,418,948 and 1,213,393 shares in 1997, 1998, 1999, 2000 and 2001,
respectively). CBS will also have the right to receive 60% of the Company's
advertising revenue on cbs.sportsline.com pages related to certain "signature
events" (such as the NCAA Men's Basketball Tournament, the 1998 Winter
Olympics, U.S. Open tennis, PGA Tour events and the Daytona 500) and 50% of the
Company's advertising revenue on other cbs.sportsline.com pages containing CBS
television-related sports content. The CBS agreement also provides that the
Company shall issue to CBS on the first business day of each contract year
warrants to purchase 950,000 shares of common stock at per share exercise
prices ranging from $4.00 in 1997 to $12.00 in 2001. Such warrants are
exercisable at any time during the contract year in which they are granted. As
such common shares and warrants to purchase common stock and the content and
advertising pursuant to the CBS agreement are firmly committed under the CBS
agreement, and are not contingent upon any future events, such shares and
warrants issued and to be issued are valued based on the fair value of the
Company's common stock upon execution of the CBS agreement. The value recorded
upon execution of the CBS agreement for shares and warrants issued in March
1997 and for each subsequent contract year, will be recorded on the balance
sheet as deferred advertising and content costs and amortized to depreciation
and amortization expense over each related contract year. Amounts amortized to
expense in the six months ended June 30, 1997 totaled $3,261,000.
F-15
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(5) SHAREHOLDERS' EQUITY (DEFICIT):--(CONTINUED)
The Company has reserved sufficient shares of its common stock to cover
conversion of the convertible preferred stock, issuance of common stock under
the CBS agreement, exercise of common stock warrants and the stock option,
incentive compensation and employee stock purchase plans discussed in Notes 6
and 9.
The Equipment Line discussed in Note 4 contains covenants that restrict
the Company from paying dividends in excess of $750,000 without the lender's
prior written consent.
On April 14, 1997, the Company's Board of Directors authorized the filing
of a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock in connection with an
initial public offering ("IPO"). If the offering satisfies the conditions
described above, each share of the Series A, B and C Convertible Preferred
Stock outstanding at the completion of the offering will automatically convert
into one share of common stock upon completion of the IPO.
On April 14, 1997, the Board of Directors authorized the filing of an
Amended and Restated Certificate of Incorporation upon the completion of the
IPO. Pursuant to the terms of the Amended and Restated Certificate of
Incorporation, the Board of Directors will be authorized to issue up to an
aggregate of 1,000,000 shares of preferred stock in one or more series and to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof,
including the dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of such series. The Company has no present plans to issue any
shares of preferred stock.
(6) WARRANTS, STOCK OPTIONS AND BENEFIT PLANS:
COMMON STOCK WARRANTS ISSUED IN 1995 AND 1996 TO NON-EMPLOYEES FOR
SERVICES RENDERED PRIMARILY under consulting agreements were valued on the date
of grant using the Black-Scholes option pricing model. The following is a
summary of warrants granted, canceled and outstanding and the assumptions
utilized involving the grants in 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------------------------------ -----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
Warrants outstanding,
beginning of year ...... 1,075,000 $ 2.00 2,025,000 $ 2.05
Granted .................. 950,000 2.12 625,000 2.18
Canceled ............... -- -- (32,500) 2.00
--------- ---------
Warrants outstanding,
end of year ............ 2,025,000 2.05 2,617,500 2.09
========= =========
</TABLE>
The range of exercise prices of warrants outstanding at December 31, 1996
was $1.00 - $5.00. The weighted average fair value of warrants granted during
1995 and 1996 was $0.09 and $0.90, respectively.
F-16
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(6) WARRANTS, STOCK OPTIONS AND BENEFIT PLANS:--(CONTINUED)
There were 2,417,500 warrants exercisable at December 31, 1996. Warrants to
acquire 2,400,000 common shares subject to certain contingencies referred to in
Note 5 have not been included in the above information.
During the six months ended June 30, 1997, an additional 1,826,653
warrants were granted, including 950,000 warrants granted under the CBS
agreement and excluding the 2,400,000 warrants issued to the investor discussed
in Note 5. Such warrants have exercise prices ranging from $2.00 to $5.00.
Warrants outstanding at June 30, 1997 totaled 4,444,153, of which 3,594,153
were exercisable.
Assumptions utilized to value warrants are as follows:
<TABLE>
<CAPTION>
RISK-FREE
VOLATILITY DIVIDEND YIELD INTEREST RATES ESTIMATED LIVES
------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1995 grants ...... 40% 0% 5.6% - 7.0% 4-6 years
1996 grants ...... 40% 0% 5.3% - 6.6% 4-7 years
1997 grants ...... 40% 0% 5.5% - 6.5% 1-9 years
</TABLE>
Common stock warrants issued for services rendered under consulting
agreements prior to January 1, 1995 were valued by management based on their
evaluation of the services rendered and management's estimated fair value of
the securities issued, which would not be materially different than results
obtained by applying the methodology utilized in valuing the warrants in 1995
and 1996.
In 1995, the Company adopted the SportsLine USA, Inc. 1995 Stock Option
Plan (the "1995 Plan") under which the Company is authorized to issue a total
of 2,300,000 incentive stock options and nonqualified stock options to purchase
common stock to be granted to employees, nonemployee members of the Board of
Directors and certain consultants or independent advisors who provide services
to the Company. Under the 1995 Plan, options to purchase common stock may be
granted at prices less than, equal to or in excess of the market value of the
Company's common stock, as determined by the Board of Directors. Options become
exercisable for 25% of the option shares upon the optionee's completion of one
year of service, as defined, with the balance vesting in successive equal
monthly installments upon the optionee's completion of each of the next 36
months of service. The maximum term of the options is 10 years.
F-17
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(6) WARRANTS, STOCK OPTIONS AND BENEFIT PLANS:--(CONTINUED)
A summary of the Company's stock option plan as of December 31, 1995 and
1996, and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1995 1996
------------------------------ --------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ------------------ ------------ -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year ...... -- $ -- 848,000 $ 0.25
Granted .............................. 848,000 0.25 870,750 0.83
Exercised ........................... -- -- (4,687) 0.25
Forfeited ........................... -- -- (63,313) 0.25
------- ---------
Outstanding at end of year ............ 848,000 0.25 1,650,750 0.55
======= =========
Options exercisable at end of year 83,000 0.25 287,949 0.25
======= =========
</TABLE>
The weighted average fair value of options granted during 1995 and 1996
was $0.10 and $0.44, respectively.
During the six months ended June 30, 1997, an additional 611,792 options
were granted with an exercise price ranging from $2.00 to $4.00. As of June 30,
1997, options to purchase a total of 2,188,688 shares of common stock were
outstanding, of which 577,877 were then exercisable.
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- ----------------------------------
WEIGHTED
NUMBER AVERAGE NUMBER
OUTSTANDING AT REMAINING WEIGHTED EXERCISABLE AT WEIGHTED
RANGE OF DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE
EXERCISE PRICES 1996 LIFE EXERCISE PRICE 1996 EXERCISE PRICE
- ------------------ ---------------- ------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.25 1,367,000 8.74 $ 0.25 287,949 $ 0.25
2.00 283,750 9.70 2.00 -- --
--------- -------
0.25 to 2.00 1,650,750 8.90 0.55 287,949 0.25
========= =======
</TABLE>
F-18
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(6) WARRANTS, STOCK OPTIONS AND BENEFIT PLANS:--(CONTINUED)
Pro forma information is required by SFAS No. 123 and has been determined
as if the Company had accounted for its stock-based compensation plans under
the fair value method. The fair value of each option grant was estimated at the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in 1995 and 1996, respectively:
risk-free interest rates of 5.4% to 6.5% and 6.0% to 6.6%, dividend yield of 0%
for both years, expected volatility of 40% for both years and expected life of
4.39 years for both years. The Company's pro forma information follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1996
---------------- -----------------
<S> <C> <C>
Net loss - As reported $ (5,329,903) $ (12,855,374)
Pro forma (5,340,470) (13,017,564)
Net loss per share - As reported (see Note 2)
Pro forma (see Note 2)
</TABLE>
In January 1996, the Company adopted the SportsLine USA, Inc. Retirement
Plan that qualifies under Section 401(k) of the Internal Revenue Code. Under
this plan, participating employees, as defined, may defer a portion of their
pretax earnings, up to the Internal Revenue Service annual contribution limits.
There is currently no matching of employee contributions by the Company.
On April 14, 1997, the Company adopted the 1997 Incentive Compensation
Plan (the "Incentive Plan"). Pursuant to the Incentive Plan, the total number
of shares of common stock that may be subject to the granting of awards shall
be equal to: (i) 2,000,000 shares, plus (ii) the number of shares with respect
to awards previously granted under the Incentive Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of shares of
common stock that are surrendered in payment of any awards or any tax
withholding requirements. The Incentive Plan will become effective upon
completion of the IPO. The Incentive Plan provides for grants of stock options,
stock appreciation rights, restricted stock, deferred stock, other
stock-related awards and performance or annual incentive awards at not less
than the fair market value of the underlying common stock that may be settled
in cash, stock or other property.
On April 14, 1997, the Company also adopted the Employee Stock Purchase
Plan (the "Stock Purchase Plan") under which 500,000 shares of common stock are
reserved. The Stock Purchase Plan will become effective upon completion of the
IPO. The Stock Purchase Plan provides eligible employees, as defined therein,
the right to purchase shares of common stock. The purchase price per share is
equal to 85% of the fair market value as of certain measurement dates. Such
purchases are limited in any calendar year to the lower of 25% of the
employee's total annual compensation or $25,000.
(7) INCOME TAXES:
NO PROVISION FOR FEDERAL AND STATE INCOME TAXES HAS BEEN RECORDED AS THE
COMPANY HAS INCURRED net operating losses through December 31, 1996. At
December 31, 1996, the Company had approximately $18,000,000 of net operating
loss carryforwards for Federal income tax reporting purposes available to
offset future taxable income; such carryforwards expire from 2009 to 2011.
Under
F-19
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(7) INCOME TAXES:--(CONTINUED)
the Tax Reform Act of 1986, the amounts of and benefits from net operating
losses carried forward may be impaired or limited in certain circumstances.
Events which may cause limitations in the amount of net operating losses that
the Company may utilize in any one year include, but are not limited to, a
cumulative ownership change of more than 50% over a three year period. At
December 31, 1996, the effect of such limitation, if imposed, is not expected
to be significant.
Deferred tax assets at December 31, 1995 and 1996 consist primarily of the
tax effect of net operating loss carryforwards which amounted to approximately
$1,925,000 and $6,335,000, respectively. Other deferred tax assets and
liabilities are not significant. The Company has provided a full 100% valuation
allowance on the deferred tax assets at December 31, 1995 and 1996 to reduce
such deferred income tax assets to zero as it is management's belief that
realization of such amounts do not meet the criteria required by generally
accepted accounting principles. Management will review the valuation allowance
requirement periodically and make adjustments as warranted.
(8) COMMITMENTS AND CONTINGENCIES:
THE COMPANY LEASES ITS OFFICE FACILITY AND COMPUTER AND COMMUNICATIONS
EQUIPMENT UNDER noncancellable leases that expire on various dates through
2001. The office leases require the Company to pay operating costs, including
property taxes and maintenance and include rent adjustment clauses.
Under the terms of one office lease, the Company has provided a letter of
credit to the landlord. The letter of credit is secured by a restricted
certificate of deposit of approximately $139,000 as of December 31, 1996.
Rent expense amounted to approximately $81,000, $97,000 and $163,000 for
the years ended December 31, 1995 and 1996, and for the six months ended June
30, 1997, respectively.
Future minimum lease payments for all leases are as follows as of December
31, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
----------- -----------
<S> <C> <C>
1997 .................................... $232,516 $ 250,000
1998 .................................... 132,142 252,000
1999 .................................... -- 241,000
2000 .................................... -- 182,000
2001 .................................... -- 97,000
-------- ----------
Total minimum lease payments ............... 364,658 $1,022,000
==========
Less: amount representing interest ......... (35,633)
--------
Lease obligations reflected as current
($200,945) and noncurrent ($128,080)......... $329,025
========
</TABLE>
In January 1997, the Company paid the balance of its telecommunication
capital lease; this payment is reflected in the 1997 payment above.
F-20
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(8) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
The Company has entered into various licensing, royalty and consulting
agreements with various content providers, vendors and sports celebrities. The
remaining terms of these agreements range from one to five years as of December
31, 1996. These agreements provide for the payment of royalties, bounties and
certain guaranteed amounts on a per member and/or a minimum dollar amount
basis. Additionally, some agreements provide for a specified percentage of
advertising and merchandising revenue to be paid to the celebrity athlete from
whose Web site the revenue is derived. Minimum guaranteed payments required
under such agreements are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
-------------- ------------
(UNAUDITED)
<S> <C> <C>
1997 ............ $537,000 $ 1,789,000
1998 ............ 341,000 2,831,000
1999 ............ 20,000 1,417,000
2000 ............ 11,000 761,000
2001 ............ -- 96,000
Thereafter ...... -- 5,016,000
-------- -----------
$909,000 $11,910,000
======== ===========
</TABLE>
Certain of the above commitments may be reduced based upon the
appreciation of equity investments issued and the amount of profit sharing
earned under the related agreements.
On March 25, 1997, Weatherline, Inc. ("Weatherline"), a company that
provides pre-recorded weather and sports information by telephone, filed a
complaint against the Company in the United States District Court for the
Eastern District of Missouri. Weatherline owns a United States trademark
registration for the mark "Sportsline" for use in promoting the goods and
services of others by making sports information available to customers of
participating businesses through the telephone; and claims to have used the
mark for this purpose since 1968. The complaint alleges that the Company's use
of the mark "SportsLine USA" and other marks utilizing the term "SportsLine"
infringes upon and otherwise violates Weatherline's rights under its registered
trademark and damages Weatherline's reputation. The complaint seeks a
preliminary and permanent injunction against the Company from using marks
containing the term "Sportsline" or any other similar name or mark which would
be likely to cause confusion with Weatherline's mark. The complaint also seeks
actual and punitive damages and attorneys' fees. The Company believes that its
use of the "SportsLine" mark and "SportsLine" derivative marks does not
infringe upon or otherwise violate Weatherline's trademark rights. The Company
has filed an answer in which it denied all material allegations of the
complaint and asserted several affirmative defenses. The action is still in the
discovery stage, and both parties have agreed to attempt to settle the action
through court-ordered mediation. In the event the Company is unable to obtain a
favorable settlement, the Company intends to vigorously defend itself against
the action. The legal costs that may be incurred by the Company in defending
itself against this action could be substantial, and the litigation could be
protracted and result in diversion of management and other resources of the
Company. In a separate matter, a request for an extension of time to oppose the
Company's application to register the current version of the SportsLine USA
logo has been filed by Weatherline with the United States Patent and Trademark
Office.
F-21
<PAGE>
SPORTSLINE USA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE SIX MONTHS ENDED JUNE
30, 1996 AND 1997
AND EVENTS OCCURRING AFTER JANUARY 31, 1997 ARE UNAUDITED)
(8) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
From time to time, the Company may be involved in other litigation
relating to claims arising out of its operations in the normal course of
business. The Company is not currently a party to any other legal proceedings,
the adverse outcome of which, individually or in the aggregate, would have a
material adverse effect on the Company's financial position or results of
operations.
F-22
<PAGE>
Global Distribution Opportunities
[SportsLine intends to syndicate its programming and distribute its proprietary
content through a variety of media.]
[circular representation]
Radio
Internet
Wireless
Publishing*
Fax/E-Mail*
Television*
[* tageted or under development]
Strategic Relationships
A SAMPLE OF THE NAMES AND LOGOS OF THE COMPANY'S STRATEGIC RELATIONSHIPS
San Francisco 49ers [Logo]
Netscape [Logo]
@Home [Logo]
C Net [Logo]
Bell South dot net [Logo]
TalkCity [Logo]
AirMedia Live [Logo]
MCI Internet [Logo}
US Ski Team [Logo]
Microsoft Internet Explorer [Logo]
International Management Group [Logo]
Excite [Logo]
National Football League Players Association [Logo]
FedEx Orange Bowl [Logo]
Real Audio [Logo]
PointCast [Logo]
National Hockey League Interactive Cyber Enterprises [Logo]
CBS, Inc. [Logo]
America Online [Logo]
<PAGE>
SPORTSLINE USA LOGO
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that expenses payable by it in connection with the
offering described in this registration statement (other than underwriting
discounts and commissions) will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee .................................... $13,940
NASD filing fee ........................................................................ 5,100
Nasdaq National Market listing fee ................................................... *
Printing expenses ..................................................................... *
Accounting fees and expenses ......................................................... *
Legal fees and expenses ............................................................... *
Fees and expenses (including legal fees) for qualifications under state securities laws *
Road show expenses ..................................................................... *
Transfer Agent's fees and expenses ................................................... *
Miscellaneous ........................................................................ *
--------
Total ................................................................................. *
</TABLE>
- ----------------
* To be provided by amendment.
All amounts except the Securities and Exchange Commission registration
fee, the NASD filing fee and the Nasdaq National Market listing fee are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has authority under Section 145 of the Delaware General
Corporations Law to indemnify its directors and officers to the extent provided
in such statute. The Company's Amended and Restated Certificate of
Incorporation, filed as Exhibit 3.2 to this Registration Statement, provides
that the Company shall indemnify its executive officers and directors to the
fullest extent permitted by law either now or hereafter. The Company has also
entered into an agreement with each of its directors and certain of its
officers, in the form attached to this Registration Statement as Exhibit 10.2,
wherein it has agreed to indemnify each of them to the fullest extent permitted
by law.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought, nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification by any officer or director.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the
directors, officers and controlling persons of the Registrant against certain
civil liabilities that may be incurred in connection with this offering,
including certain liabilities under the Securities Act.
The Company intends to obtain prior to the closing of this offering
directors and officers liability insurance for the benefit of its directors and
certain of its officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The registrant has issued and sold the following securities without
registration under the Securities Act:
(1) On February 23, 1994, the registrant issued 3,800,000 shares of Common
Stock to Michael Levy for cash consideration of $173,884. In addition, Mr. Levy
subsequently contributed to the registrant as additional capital property and
equipment valued at $26,116.
II-1
<PAGE>
(2) In August 1994, the registrant issued to each of Joseph W. Namath and
James C. Walsh 250,000 shares of Common Stock and warrants to purchase 250,000
shares of Common Stock, in each case in consideration of consulting services
rendered and the execution of a license agreement between the registrant and a
corporation controlled by such individuals.
(3) In August 1994, the registrant issued to Gary H. Rice, Frank L. Young,
G. Kenneth Dotson and Ellen L. McGowan a total of 200,000 shares of Common
Stock, in each case in consideration of consulting services rendered and, in
the case of Gary H. Rice, an additional $10,000 in cash.
(4) In August 1994, the registrant issued to Burk Zanft, a private
investor, 2,000,000 shares of Common Stock and warrants to purchase 500,000
shares of Common Stock for aggregate cash consideration of $2,000,000.
(5) In May 1995, the registrant issued to Kleiner Perkins Caufield & Byers
VII, KPCB Founders Fund and KPCB Information Sciences Zaibatsu Fund II a total
of 3,000,000 shares of Series A Preferred Stock and warrants to purchase
750,000 shares of Common Stock for aggregate cash consideration of $3,000,000.
(6) In March 1996, the registrant issued to Alliance Technology Venture,
L.P., ATV/MFJ Parallel Fund, L.P., TCI Online Holdings, Inc., Reuters NewMedia
Inc., New York Life Insurance Company, Antares Capital Fund II Limited
Partnership, Transatlantic Venture Partners, C.V., Kleiner Perkins Caufield &
Byers VII, KPCB VII Founders Fund, KPCB Information Sciences Zaibatsu Fund II,
Stanford University, Chase 1991 Revocable Trust and Richard A. Petit a total of
6,162,776 shares of Series B Preferred Stock for aggregate cash consideration
of $11,092,996. The registrant also issued to TCI Online Sports Holdings, Inc.
warrants to purchase an additional 2,528,194 shares of Common Stock, which
warrants expired unexercised in September 1996.
(7) In September 1996, the registrant issued to Alliance Technology
Venture, LP, ATV/MFJ Parallel Fund, L.P., Reuters NewMedia Inc., New York Life
Insurance Company, Antares Capital Fund II Limited Partnership, Transatlantic
Venture Partners, CV, Kleiner Perkins Caufield & Byers VII, KPCB Information
Sciences Zaibatsu Fund II, Stanford University, Chase 1991 Revocable Trust,
Natio Vie Developpement II, Natio Nouveaux Marches Europe and US West
Interactive Services, Inc. a total of 5,333,333 shares of Series C Preferred
Stock for aggregate cash consideration of $15,999,999. The registrant also
issued to US West Interactive Services, Inc. warrants to purchase 2,400,000
shares of Common Stock, which warrants were exercised in March 1997.
(8) In March 1997, the registrant issued to CBS 1,880,683 shares of Common
Stock and warrants to purchase 950,000 shares of Common Stock. The
consideration for such shares and warrants consisted of licenses to CBS logos
and content and CBS's agreement to provide the registrant specified minimum
amounts of advertising and promotion.
(9) Between August 1994 and June 30, 1997, the registrant issued warrants
to purchase a total of 1,914,153 shares of Common Stock to Richard Horrow, Jack
Kemp, Michael Jack, Inc., Comdisco, Inc., Sports Byline USA, Kleiner Perkins
Caufield & Byers VII, Bill Walton, Arnold Palmer Enterprises, Inc., Keyshawn
Johnson, Armato-Is-Shaq Enterprises LLC, Jerry Rice, Sports Management Group,
Gabrielle Reece, Pistol Pete, Inc. BNI, Big Sky, Inc. Jim Lampley, John Daly,
Michael P. Schulhof, Wayne Gretzky, Gerry Hogan, Cal Ripken, Jr., Edward
DeBartolo, Carmen Policy, International Management Group, National Football
League Players Association, Michael Jordan and Tiger Woods, principally in
exchange for advisory and consulting services and, in the case of warrants
issued to Comdisco, Inc. and Kleiner Perkins Caufield & Byers VII, for
providing the registrant equipment financing and guaranteeing debt incurred by
the registrant, respectively.
(10) Between August 1995 and June 30, 1997, the registrant issued options
to purchase a total of shares of Common Stock to employees pursuant to the
registrant's 1995 Stock Option Plan.
No underwriter was involved in any of the above sales of securities. All
of the above securities were issued in reliance upon the exemption set forth in
Section 4(2) of the Securities Act on the basis
II-2
<PAGE>
that they were issued under circumstances not involving a public offering, or,
in the case of certain options and warrants to purchase Common Stock, Rule 701
of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------
<S> <C>
1.1 Proposed form of Underwriting Agreement***
3.1 Form of Amended and Restated Certificate of Incorporation**
3.2 Form of Amended and Restated Bylaws**
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of
the Common Stock being registered*
10.1 Registrant's 1995 Stock Option Plan**
10.2 Form of Indemnification Agreement between the Registrant and each of its directors and
executive officers**
10.3 Registrant's 1997 Incentive Compensation Plan**
10.4 Registrant's Employee Stock Purchase Plan**
10.5 Amended and Restated Investors' Rights Agreement dated as of September 25, 1996, among
the Registrant, the holders of the Registrant's Series A, Series B and Series C Preferred Stock,
The Estate of Burk Zanft and Michael Levy***
10.6 Agreement dated March 5, 1997 between the Registrant and CBS Inc.***
10.7 Licensing Agreement dated September 27, 1996 between the Registrant and US WEST
Interactive Services, Inc.***
10.8 Marketing Agreement dated March 12, 1996 between the Company and Reuters NewMedia,
Inc.***
10.9 Guaranty dated December 1995 executed by Kleiner Perkins Caufield & Byers**
10.10 Consulting Agreement dated September 1, 1994, between the Registrant and Horrow Sports
Ventures***
10.11 Agreement dated June 1996 between the Registrant and Michael P. Schulhof***
10.12 Agreement dated August 1994 between the Registrant and Planned Licensing, Inc.***
10.13 Employment Agreement dated as of September 1, 1997, between the Registrant and
Kenneth W. Sanders***
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (to be included in its
opinion to be filed as Exhibit 5.1)*
23.2 Consent of Arthur Andersen LLP***
24.1 Reference is made to the Signatures section of this Registration Statement for the Power of
Attorney contained therein***
27.1 Financial Data Schedule***
28.1 Consent of Director Nominee***
</TABLE>
- ----------------
* To be filed by amendment.
** Previously filed.
*** Filed herewith.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission (the "Commission") are
not required under the related instructions, the required information is
contained in the financial statements and notes thereto or are not applicable,
and therefore have been omitted.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the 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.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act of 1933") the registrant has duly caused this Amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fort Lauderdale, State of Florida, on
September 16, 1997.
SPORTSLINE USA, INC.
By: /s/ MICHAEL LEVY
---------------------------
Michael Levy, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Michael Levy and Kenneth W. Sanders his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, or any registration
statement relating to this offering to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------------------------- ------------------------------------ -------------------
<S> <C> <C>
/s/ MICHAEL LEVY President, Chief Executive Officer September 16, 1997
- ---------------------------- and Director
Michael Levy (principal executive officer)
/s/ KENNETH W. SANDERS Chief Financial Officer September 16, 1997
- ---------------------------- (principal financial and
Kenneth W. Sanders accounting officer
/s/ * Director September 16, 1997
- ----------------------------
Thomas Cullen
/s/ * Director September 16, 1997
- ----------------------------
Stephen Fleming
/s/ * Director September 16, 1997
- ----------------------------
Gerry Hogan
/s/ * Director September 16, 1997
- ----------------------------
Richard B. Horrow
Director September 16, 1997
- ----------------------------
Joseph Lacob
Director September 16, 1997
- ----------------------------
Sean McManus
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------- ---------- -------------------
<S> <C> <C>
/s/ * Director September 16, 1997
- ----------------------------
Andrew Nibley
/s/ * Director September 16, 1997
- ----------------------------
Liesl Pike
Director September 16, 1997
- ----------------------------
Derek Reisfield
/s/ * Director September 16, 1997
- ----------------------------
James C. Walsh
</TABLE>
- ----------------
*By: /s/ MICHAEL LEVY
- ----------------------------
Michael Levy
Attorney-in-fact
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------- -------------
<S> <C> <C>
1.1 Proposed Form of Underwriting Agreement
10.5 Amended and Restated Investors' Rights Agreement dated as of September 25,
1996, among the Registrant, the holders of the Registrant's Series A, Series B
and Series C Preferred Stock, The Estate of Burk Zanft and Michael Levy
10.6 Agreement dated March 5, 1997 between the Registrant and CBS Inc.
10.7 Licensing Agreement dated September 27, 1996 between the Registrant and US
WEST Interactive Services, Inc.
10.8 Marketing Agreement dated March 12, 1996 between the Registrant and Reuters NewMedia, Inc.
10.9 Guaranty dated December 13, 1995 executed by Kleiner Perkins Caufield & Byers
10.10 Consulting Agreement dated September 1, 1994, between the Registrant and
Horrow Sports Ventures
10.11 Agreement dated June 14, 1996 between the Registrant and Michael P. Schulhof
10.12 Agreement dated August 1994 between the Registrant and Planned Licensing, Inc.
10.13 Employment Agreement dated as of September 1, 1997 between the Registrant
and Kenneth W. Sanders
23.2 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
28.1 Consent of Director Nominee
</TABLE>
Exhibit 1.1
____________ SHARES(1)
SPORTSLINE USA, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
____________, 1997
ROBERTSON, STEPHENS & COMPANY LLC
COWEN & COMPANY
MONTGOMERY SECURITIES
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
SPORTSLINE USA, INC. a Delaware corporation (the "Company"),
addresses you as the Representatives of each of the persons, firms and
corporations listed in Schedule A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and
sell _________ shares of its authorized and unissued Common Stock, $0.01 par
value per share (the "Firm Shares"), to the several Underwriters. The Company
also proposes to grant to the Underwriters an option to purchase up to ________
additional shares of the Company's Common Stock, $0.01 par value (the "Option
Shares"), as provided in Section 7 hereof. As used in this Agreement, the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock, $0.01 par value of the Company to be outstanding after giving
effect to the sales contemplated hereby, including the Shares, are hereinafter
referred to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with
each Underwriter that:
(a) A registration statement on Form S-1 (File
No. 333-25259) with respect to the Shares, including a prospectus subject to
completion, has been prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has
___________________
1 Plus an option to purchase up to _________ additional shares from the Company
to cover over-allotments, if any.
<PAGE>
been filed with the Commission; such amendments to such registration statement,
such amended prospectuses subject to completion and such abbreviated
registration statements pursuant to Rule 462(b) of the Rules and Regulations as
may have been required prior to the date hereof have been similarly prepared and
filed with the Commission; and the Company will file such additional amendments
to such registration statement, such amended prospectuses subject to completion
and such abbreviated registration statements as may hereafter be required.
Copies of such registration statement and amendments, of each related prospectus
subject to completion (the "Preliminary Prospectuses") and of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations have
been delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the registration
statement pursuant to Rule 430A(a) or, if Robertson, Stephens & Company LLC, on
behalf of the several Underwriters, shall agree to the utilization of Rule 434
of the Rules and Regulations, the information required to be included in any
term sheet filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if Robertson,
Stephens & Company LLC, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or (c),
as applicable, of the Rules and Regulations. The term "Registration Statement"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files a
term sheet pursuant to Rule 434 of the Rules and Regulations, the information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and Regulations)
and, in the event of any amendment thereto or the filing of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations
relating thereto after the effective date of such registration statement, shall
also mean (from and after the effectiveness of such amendment or the filing of
such abbreviated registration statement) such registration statement as so
amended, together with any such abbreviated registration statement. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to the
Shares as included in such Registration Statement at the time it becomes
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Rules and Regulations); PROVIDED,
HOWEVER, that if in reliance on Rule 434 of the Rules and Regulations and with
the consent of Robertson, Stephens & Company LLC, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term sheet
pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act, the
term "Prospectus" shall mean the "prospectus subject to completion" (as defined
in Rule 434(g) of the Rules and Regulations) last provided to the Underwriters
by the Company and circulated by the Underwriters to all prospective purchasers
of the Shares (including the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 434(d) of the Rules
and Regulations). Notwithstanding the foregoing, if any revised prospectus shall
be provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
If in reliance on Rule 434 of the Rules and Regulations and with the consent of
Robertson, Stephens & Company LLC, on behalf of the several Underwriters, the
Company shall have provided to the Underwriters a term sheet pursuant to Rule
434(b) or (c), as applicable, prior to the time that a confirmation is sent or
given for purposes of Section 2(10)(a) of the Act, the Prospectus and the term
sheet, together, will not be materially different from the prospectus in the
Registration Statement.
- 2 -
<PAGE>
(b) To the knowledge of the Company, the Commission has not
issued any order preventing or suspending the use of any Preliminary Prospectus
or instituted proceedings for that purpose. Each such Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the Rules
and Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up to
and on the Closing Date (hereinafter defined) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act and
the Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, (ii) the Registration
Statement, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) the Prospectus, and any amendments or supplements thereto,
did not and will not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that none of the representations and warranties contained in this subparagraph
(b) shall apply to information contained in or omitted from the Registration
Statement or Prospectus, or any amendment or supplement thereto, in reliance
upon, and in conformity with, written information relating to any Underwriter
furnished to the Company by any Underwriter specifically for use in the
preparation thereof.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation with full corporate power and authority to own, lease and
operate its properties and conduct its business as described in the Prospectus;
the Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company considered as one
enterprise (a "Material Adverse Effect"); to the knowledge of the Company no
proceeding has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification; the Company is in possession of and operating in compliance with
all authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and effect;
the Company is not in violation of its charter or bylaws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which it or its respective properties may be bound;
and the Company is not in material violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or over its respective properties of which it has knowledge. The Company
does not own or control, directly or indirectly, any corporation, association or
other entity.
(d) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company is a party or by
which it or its respective
- 3 -
<PAGE>
properties may be bound, (ii) the charter or bylaws of the Company. or (iii) any
law, order, rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its respective properties. No consent,
approval, authorization or order of or qualification with any court, government
or governmental agency or body, domestic or foreign, having jurisdiction over
the Company or over its respective properties is required for the execution and
delivery of this Agreement and the consummation by the Company of the
transactions herein contemplated, except such as may be required under the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or under
state or other securities or Blue Sky laws, all of which requirements have been
satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company, or
any of its respective officers or any of its respective properties, assets or
rights before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its respective officers or
properties or otherwise which (i) would or would be reasonably likely to result
in a Material Adverse Effect, (ii) would or would be reasonably likely to
prevent consummation of the transactions contemplated hereby or (iii) is
required to be disclosed in the Registration Statement or the Prospectus and is
not so disclosed; and there are no agreements, contracts, leases or documents of
the Company of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement by the Act or the Rules and Regulations which have not
been accurately described in all material respects in the Registration Statement
or Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and the
authorized and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" and conforms in all material
respects to the statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly state the substance
of the instruments defining the capitalization of the Company); the Firm Shares
and the Option Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company against payment therefor in accordance with the terms of this Agreement,
will be duly and validly issued and fully paid and nonassessable, and will be
sold free and clear of any pledge, lien, security interest, encumbrance, claim
or equitable interest; and no preemptive right, co-sale right, registration
right, right of first refusal or other similar right of stockholders exists with
respect to any of the Firm Shares or Option Shares or the issuance and sale
thereof other than those that have been expressly waived prior to the date
hereof and those that will automatically expire upon and will not apply to the
consummation of the transactions contemplated hereunder on the Closing Date. No
further approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and sale or transfer of the
Shares except as may be required under the Act, the Exchange Act or under state
or other securities or Blue Sky laws. Except as disclosed in the Prospectus and
the financial statements of the Company, and the related notes thereto, included
in the Prospectus, the Company does not have outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the options
or other rights granted and exercised thereunder, set forth in the Prospectus
fairly presents in all material respects the information required to be shown
with respect to such plans, arrangements, options and rights.
(g) Arthur Anderson LLP, which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, as of December 31, 1995 and 1996 and for the period from inception
(February 23, 1994) to December 31, 1994 and for each of the two (2) years ended
December 31, 1996 filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent accountants
within the meaning of the Act and the Rules and Regulations; the audited
consolidated
- 4 -
<PAGE>
financial statements of the Company, together with the related schedules and
notes, and the unaudited consolidated financial information, forming part of the
Registration Statement and the Prospectus, fairly present in all material
respects the financial position and the results of operations of the Company at
the respective dates and for the respective periods to which they apply; and all
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, filed with the Commission as part of the Registration Statement,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be otherwise
stated therein. The selected and summary financial and statistical data included
in the Registration Statement present fairly in all material respects the
information shown therein and have been compiled on a basis consistent with the
audited financial statements presented therein. No other financial statements or
schedules are required to be included in the Registration Statement pursuant to
the Act and the Rules and Regulations.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has not been,
(i) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (ii) any
transaction that is material to the Company except transactions entered into in
the ordinary course of business, (iii) any obligation, direct or contingent,
that is material to the Company incurred by the Company except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of the Company that is material to the
Company, (v) any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company or, (vi) any loss or damage (whether or not
insured) to the property of the Company which has had or is reasonably likely to
have a Material Adverse Effect.
(i) Except as set forth in the Registration Statement and the
Prospectus (i) the Company has good and marketable title to all properties and
assets described in the Registration Statement and the Prospectus as owned by
it, free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest, other than such as would not have a Material Adverse Effect,
(ii) the agreements to which the Company is a party described in the
Registration Statement and the Prospectus are valid agreements, enforceable by
the Company, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and (iii) the Company has valid and enforceable leases
for all properties described in the Registration Statement and the Prospectus as
leased by it, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles. Except as set forth in the Registration Statement and the
Prospectus, the Company owns or leases all such properties as are necessary to
its operations as now conducted or as proposed to be conducted.
(j) The Company has timely filed all necessary federal, state
and foreign income and franchise tax returns and have paid all taxes shown
thereon as due, except where the failure to file or failure to pay would not
have a Material Adverse Effect, and there is no tax deficiency that has been or,
to the best of the Company's knowledge, is reasonably likely to be asserted
against the Company that would have or would be reasonably likely to have a
Material Adverse Effect, and all known tax liabilities are adequately provided
for on the books of the Company.
(k) The Company maintains insurance with insurers of
recognized financial responsibility of the types and in the amounts generally
deemed adequate for its business and consistent with insurance coverage
maintained by similar companies in similar businesses, including, but not
limited to, insurance covering real and personal property owned or leased by the
Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect; the Company has not been refused any insurance coverage sought or
applied for; and the Company has no reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage expires or to
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obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
(l) To the best of Company's knowledge, no labor disturbance
by the employees of the Company exists or is imminent; and the Company is not
aware of any existing or imminent labor disturbance by the employees of any of
its principal suppliers, that might be expected to result in a Material Adverse
Effect. No collective bargaining agreement exists with any of the Company's
employees and, to the best of the Company's knowledge, no such agreement is
imminent.
(m) The Company owns or possesses adequate rights to use all
patents, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names and copyrights which are necessary to conduct its businesses
as described in the Registration Statement and the Prospectus; the expiration of
any patents, patent rights, trade secrets, trademarks, service marks, trade
names or copyrights would not have a Material Adverse Effect; and, except as
described in the Prospectus, the Company has not received any notice of, and has
no knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.
(n) The Common Stock has been approved for quotation on The
Nasdaq National Market, subject to official notice of issuance.
(o) The Company is familiar with the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder, and
has in the past conducted, and intends in the future to conduct, its affairs in
such a manner as to ensure that it will not become an "investment company" or a
company "controlled" by an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(p) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act and the
Rules and Regulations.
(q) The Company has not at any time since inception (i) made
any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(s) Each executive officer and director of the Company and
each beneficial owner of 100,000 or more shares of Common Stock has agreed in
writing that such person will not, for a period ending 180 days from the date
the Registration Statement is declared effective by the Commission (the "Lock-up
Period"), offer to sell, contract to sell, or otherwise sell, dispose of, loan,
pledge or grant any rights with respect to (collectively, a "Disposition") any
shares of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock (collectively, "Securities") now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or
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donees thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners or stockholders of such person, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction, or (iii) with the prior written consent of Robertson, Stephens &
Company LLC. The foregoing restriction has been expressly agreed to preclude the
holder of the Securities from engaging in any hedging or other transaction which
is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even if such Securities would be disposed
of by someone other than such holder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a complete
and accurate list of all securityholders of the Company and the number and type
of securities held by each securityholder. The Company has provided to counsel
for the Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers, directors and stockholders have agreed to such
or similar restrictions (the "Lock-up Agreements") presently in effect or
effected hereby. The Company hereby represents and warrants that it will not
release any of its officers, directors or other stockholders from any Lock-up
Agreements currently existing or hereafter effected without the prior written
consent of Robertson, Stephens & Company LLC.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance, in all material respects, with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) to the best of the Company's knowledge, the
Company will not be required to make future material capital expenditures to
comply with Environmental Laws and (iv) to the best of the Company's knowledge,
no property which is leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, ET SEQ.), or otherwise
designated as a contaminated site under applicable state or local law.
(u) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the executive
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
(w) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government of Cuba
or with any person or affiliate located in Cuba.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company,
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at a purchase price of $_____ per share, the respective number of Firm Shares as
hereinafter set forth. Theobligation of each Underwriter to the Company shall be
to purchase from the Company that number of Firm Shares which is set forth
opposite the name of such Underwriter in Schedule A hereto (subject to
adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by wire
transfer of Federal funds to the account specified by the Company, at the
offices of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., 1221 Brickell
Avenue, Miami, Florida 33131 (or at such other place as may be agreed upon among
the Representatives and the Company, at 7:00 A.M., San Francisco time (a) on the
third (3rd) full business day following the first day that Shares are traded,
(b) if this Agreement is executed and delivered after 1:30 P.M., San Francisco
time, the fourth (4th) full business day following the day that this Agreement
is executed and delivered or (c) at such other time and date not later than
seven (7) full business days following the first day that Shares are traded as
the Representatives and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date;" PROVIDED, HOWEVER, that if the Company has not made available to
the Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives. The certificates for the
Firm Shares to be so delivered will be made available to you at such office or
such other location including, without limitation, in New York City, as you may
reasonably request for checking at least one (1) full business day prior to the
Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the Closing
Date. If the Representatives so elect, delivery of the Firm Shares may be made
by credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the
several Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front
cover page (insofar as such information relates to the Underwriters), on the
inside front cover concerning stabilization and over-allotment by the
Underwriters, and under the section captioned "Underwriting" in any Preliminary
Prospectus and in the Prospectus constitutes the only information furnished by
the Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the respective
Underwriters, represent and warrant to the Company that the statements made
therein do not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with
the several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the
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parties hereto, to become effective as promptly as possible; the Company will
use its best efforts to cause any abbreviated registration statement pursuant to
Rule 462(b) of the Rules and Regulations as may be required subsequent to the
date the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the Prospectus
has been filed; if the Company omitted information from the Registration
Statement at the time it was originally declared effective in reliance upon Rule
430A(a) of the Rules and Regulations, the Company will provide evidence
satisfactory to you that the Prospectus contains such information and has been
filed, within the time period prescribed, with the Commission pursuant to
subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations or as part
of a post-effective amendment to such Registration Statement as originally
declared effective which is declared effective by the Commission; if the Company
files a term sheet pursuant to Rule 434 of the Rules and Regulations, the
Company will provide evidence satisfactory to you that the Prospectus and term
sheet meeting the requirements of Rule 434(b) or (c), as applicable, of the
Rules and Regulations, have been filed, within the time period prescribed, with
the Commission pursuant to subparagraph (7) of Rule 424(b) of the Rules and
Regulations; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; promptly upon your request, it will prepare and file with the
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several Underwriters
("UNDERWRITERS' COUNSEL"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act; and it will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act and
the Rules and Regulations and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that the
Company shall not be required in connection therewith or as a condition thereof
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction.
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<PAGE>
(d) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later than the first (1st) full business day
following the first day that Shares are traded, copies of the Registration
Statement (three of which will be signed and which will include all exhibits),
each Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, all in such quantities as you may from time to time
reasonably request. Notwithstanding the foregoing, if Robertson, Stephens &
Company LLC, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall provide
to you copies of a Preliminary Prospectus updated in all respects through the
date specified by you in such quantities as you may from time to time reasonably
request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Act and covering
a twelve (12) month period beginning after the effective date of the
Registration Statement.
(f) During a period of five (5) years after the date hereof,
as long as the Company is subject to the information requirements of the
Exchange Act, the Company will furnish to its stockholders as soon as
practicable after the end of each respective period, annual reports (including
financial statements audited by independent certified public accountants) and
unaudited quarterly reports of operations for each of the first three quarters
of the fiscal year, and will furnish to you and the other several Underwriters
hereunder, upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders, (ii)
concurrently with furnishing to its stockholders, a balance sheet of the Company
as of the end of such fiscal year, together with statements of operations, of
stockholders' equity, and of cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate or report thereon of independent
certified public accountants, (iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders, (iv) as soon as they are
available, copies of all reports and financial statements furnished to or filed
with the Commission, any securities exchange or the National Association of
Securities Dealers, Inc. ("NASD"), (v) every material press release and every
material news item or article in respect of the Company or its affairs which was
generally released to stockholders or prepared by the Company or any of its
subsidiaries, and (vi) any additional information of a public nature concerning
the Company or its subsidiaries, or its business which you may reasonably
request. During such five (5) year period, if the Company shall have active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and shall be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement pursuant to Section 11(a) hereof, or if
the Underwriters shall terminate this Agreement pursuant to
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Section 11(b)(i), the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including reasonable fees and disbursements of
Underwriters' Counsel) incurred by the Underwriters in investigating or
preparing to market or marketing the Shares.
(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is reasonably likely to
be materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to the Company and you, responding to or commenting on such rumor, publication
or event.
(l) During the Lock-up Period, the Company will not, without
the prior written consent of Robertson Stephens & Company LLC, effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Firm Shares and the Option Shares hereunder, the Company's issuance of
options or Common Stock under the Company's presently authorized 1995 Stock
Option Plan, the 1997 Incentive Compensation Plan and the 1997 Employee Stock
Purchase Plan (collectively, the "Equity Plans") and the Company's issuance of
warrants to purchase shares of Common Stock to consultants and advisors on the
terms and in amounts consistent with prior practice, provided, however, that
such warrants not be exercisable during the Lockup Period.
(m) During a period of ninety (90) days from the effective
date of the Registration Statement, the Company will not file a registration
statement registering shares under the Equity Plans or other employee benefit
plan.
5. EXPENSES.
(a) The Company agree with each Underwriter that:
(i) The Company will pay and bear all costs
and expenses in connection with the preparation, printing and
filing of the Registration Statement (including financial
statements, schedules and exhibits), Preliminary Prospectuses
and the Prospectus and any amendments or supplements thereto;
the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary
Blue Sky Survey and any Supplemental Blue Sky Survey, the
Underwriters' Questionnaire and Power of Attorney, and any
instruments related to any of the foregoing; the issuance and
delivery of the Shares hereunder to the several Underwriters,
including transfer taxes, if any, the cost of all certificates
representing the Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company;
all fees and other charges of the Company's independent
certified public accountants; the cost of furnishing to the
several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and
the Prospectus, and any amendments or supplements to any of
the foregoing; NASD filing fees and the cost of qualifying the
Shares under the laws of such jurisdictions as you may
designate (including filing fees and reasonable fees and
disbursements of Underwriters' Counsel in connection with such
NASD filings and Blue Sky qualifications); and all other
expenses directly incurred by the Company in connection with
the performance of their obligations hereunder.
(ii) In addition to its other obligations
under Section 8(a) hereof, the Company agrees that, as an
interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the
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Underwriters on a monthly basis for all reasonable legal or
other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such
expenses and the possibility that such payments might later be
held to have been improper by a court of competent
jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Company
together with interest, compounded daily, determined on the
basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) listed from time to
time in The Wall Street Journal which represents the base rate
on corporate loans posted by a substantial majority of the
nation's thirty (30) largest banks (the "Prime Rate"). Any
such interim reimbursement payments which are not made to the
Underwriters within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the
date of such request.
(b) In addition to their other obligations under Section 8(c)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(c) hereof, they will reimburse the
Company on a monthly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(ii) and 5(b) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(ii) and 5(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 8(a) and 8(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 8(d) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date and
any later date on which Option Shares are to be purchased, as the case may be,
of the representations and warranties of the Company herein, to the performance
by the Company of their respective obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
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Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares, shall have been reasonably satisfactory to Underwriters' Counsel, and
such counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, or any later date on which Option Shares are to
be purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus; and
(d) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, the
following opinion of counsel for the Company dated the Closing Date or such
later date on which Option Shares are to be purchased addressed to the
Underwriters and with reproduced copies or signed counterparts thereof for each
of the Underwriters, to the effect that:
(i) The Company has been duly incorporated
and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation;
(ii) The Company has the corporate power and
authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company is duly qualified to do
business as a foreign corporation and is in good standing in
each jurisdiction, if any, in which the ownership or leasing
of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or
be in good standing would not have a material adverse effect
on the condition (financial or otherwise), earnings,
operations or business of the Company. To such counsel's
knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity;
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" as of the dates stated
therein; the issued and outstanding shares of capital stock of
the Company have been duly and validly issued and are fully
paid and nonassessable; and, to such counsel's knowledge, will
not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of
first refusal or other similar right;
(v) The Firm Shares or the Option Shares, as
the case may be, to be issued by the Company pursuant to the
terms of this Agreement have been duly authorized and, upon
issuance and delivery against payment therefor in accordance
with the terms hereof, will be duly and validly issued and
fully paid and nonassessable, and, to such counsel's
knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right.
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(vi) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued and sold
by it hereunder;
(vii) This Agreement has been duly
authorized by all necessary corporate action on the part of
the Company and has been duly executed and delivered by the
Company and, assuming due authorization, execution and
delivery by you, is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except
insofar as indemnification provisions may be limited by
applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally or
by general equitable principles;
(viii) The Registration Statement has become
effective under the Act and, to such counsel's knowledge, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the
Act;
(ix) The Registration Statement and the
Prospectus, and each amendment or supplement thereto (other
than the financial statements (including supporting schedules)
and financial data derived therefrom as to which such counsel
need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material
respects with the requirements of the Act and the applicable
Rules and Regulations;
(x) The information in the Prospectus under
the caption "Description of Capital Stock," to the extent that
it constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is a fair summary of such matters
and conclusions; and the form of certificate evidencing the
Common Stock and filed as an exhibit to the Registration
Statement complies with Delaware law;
(xi) The description in the Registration
Statement and the Prospectus of the charter and bylaws of the
Company is accurate and fairly presents the information
required to be presented by the Act and the applicable Rules
and Regulations and the description in the Registration
Statement and the Prospectus of statutes fairly presents in
all material respects the information required to be presented
by the Act and the applicable Rules and Regulations;
(xii) To such counsel's knowledge, there are
no agreements, contracts, leases or documents to which the
Company is a party of a character required to be described or
referred to in the Registration Statement or the Prospectus or
to be filed as an exhibit to the Registration Statement
pursuant to the Act or the Rules and Regulations which are not
described or referred to therein or filed as required;
(xiii) The performance of this Agreement and
the consummation of the transactions herein contemplated
(other than performance of the Company's indemnification
obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such counsel's
knowledge, result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any bond,
debenture, note or other evidence of indebtedness, or any
lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument
known to such counsel to which the Company is a party or by
which its properties are bound, or any applicable statute,
rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court, government
or governmental agency or body having jurisdiction over the
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Company, or over any of its properties or operations where
such breach or violation would have or be reasonably likely to
have a Material Adverse Effect;
(xiv) No consent, approval, authorization or
order of or qualification with any court, government or
governmental agency or body having jurisdiction over the
Company, or over any of their properties or operations is
necessary in connection with the consummation by the Company
of the transactions herein contemplated, except such as have
been obtained under the Act or such as may be required under
state or other securities or Blue Sky laws in connection with
the purchase and the distribution of the Shares by the
Underwriters (as to which such counsel need express an
opinion);
(xv) To such counsel's knowledge, there are
no legal or governmental proceedings pending or threatened
against the Company of a character required to be disclosed in
the Registration Statement or the Prospectus by the Act or the
Rules and Regulations, other than those described therein;
(xvi) To such counsel's knowledge, the
Company is not presently (a) in violation of its respective
charter or bylaws, or (b) in breach of any applicable statute,
rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the
Company, or over any of its properties or operations, except
where such breach or violation would not have or not be
reasonably likely to have a Material Adverse Effect; and
(xvii) To such counsel's knowledge, except
as set forth in the Registration Statement and the Prospectus,
no holders of Common Stock or other securities of the Company
have registration rights with respect to securities of the
Company and, except as set forth in the Registration Statement
and the Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of such
shares of Common Stock or other securities, because of the
filing of the Registration Statement by the Company have, with
respect to the offering contemplated thereby, waived such
rights or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the
Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full
satisfaction of such rights.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on which
Option Shares are to be purchased, the Registration Statement and any amendment
or supplement thereto (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which such counsel need express no comment) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Registration Statement, the Prospectus and any amendment
or supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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<PAGE>
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the State of
Florida or the General Corporation Law of the State of Delaware upon opinions of
local counsel, and as to questions of fact upon representations or certificates
of officers of the Company, and of government officials. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, in form and substance satisfactory
to you, with respect to the sufficiency of all such corporate proceedings and
other legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter from Arthur Andersen LLP addressed to the Underwriters, dated the Closing
Date or such later date on which Option Shares are to be purchased, as the case
may be, confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
five (5) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company from that
set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from Arthur Andersen LLP
shall be addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the balance sheet of the Company as of December 31, 1996 and related statements
of operations, stockholders' equity, and cash flows for the twelve (12) months
ended December 31, 1996, (iii) state that Arthur Andersen LLP has performed the
procedures set out in Statement on Auditing Standards No. 71 ("SAS 71") for a
review of interim financial information and providing the report of Arthur
Andersen as described in SAS 71 on the financial statements for the quarter
ended March 31, 1997 (the "Quarterly Financial Statements"), (iv) state that in
the course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the Quarterly
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, and (v) address other matters agreed upon by Arthur Andersen LLP and
you. In addition, you shall have received from Arthur Andersen LLP a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's financial statements as of December
31, 1996, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such
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later date on which Option Shares are to be purchased, as the case may be,
signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of
the Company in this Agreement are true and correct in all
material respects, as if made on and as of the Closing Date or
any later date on which Option Shares are to be purchased, as
the case may be, and the Company has complied in all material
respects with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or
prior to the Closing Date or any later date on which Option
Shares are to be purchased, as the case may be;
(ii) To the best of their knowledge, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the
delivery of such certificate, the Registration Statement and
the Prospectus, and any amendments or supplements thereto,
contained all material information required to be included
therein by the Act and the Rules and Regulations and in all
material respects conformed to the requirements of the Act and
the Rules and Regulations, the Registration Statement, and any
amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, the Prospectus,
and any amendment or supplement thereto, did not and does not
include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading, and, since the effective date of
the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as
of which information is given in the Registration Statement
and the Prospectus, there has not been (a) any material
adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the
Company, (b) any transaction that is material to the Company,
except transactions entered into in the ordinary course of
business, (c) any obligation, direct or contingent, that is
material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of business, (d)
any change in the capital stock or outstanding indebtedness of
the Company that is material to the Company, (e) any dividend
or distribution of any kind declared, paid or made on the
capital stock of the Company, or (f) any loss or damage
(whether or not insured) to the property of the Company which
has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business
prospects of the Company.
(h) The Company shall have obtained and
delivered to you the Lock-up Agreements.
(i) The Company shall have furnished to you
such further certificates and documents
as you shall reasonably request (including certificates of officers of the
Company as to the accuracy of the representations and warranties of the Company
herein, as to the performance by the Company of its obligations hereunder and as
to the other conditions concurrent and precedent to the obligations of the
Underwriters hereunder.
All such opinions, certificates, letters and
documents will be in compliance with the provisions hereof only if they are
reasonably satisfactory to Underwriters' Counsel. The Company will furnish you
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with such number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, for the purpose of
covering over-allotments in connection with the distribution and sale of the
Firm Shares only, a nontransferable option to purchase up to an aggregate of
________ Option Shares at the purchase price per share for the Firm Shares set
forth in Section 3 hereof. Such option may be exercised by the Representatives
on behalf of the several Underwriters on one (1) or more occasions in whole or
in part during the period of thirty (30) days after the date on which the Firm
Shares are initially offered to the public, by giving written notice to the
Company. The number of Option Shares to be purchased by each Underwriter upon
the exercise of such option shall be the same proportion of the total number of
Option Shares to be purchased by the several Underwriters pursuant to the
exercise of such option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
Shares purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representatives in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to
be purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by wire transfer of Federal funds to the
account specified by the Company. Such delivery and payment shall take place at
the offices of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., 1221
Brickell Avenue, Miami, Florida 33131 or at such other place as may be agreed
upon among the Representatives and the Company (i) on the Closing Date, if
written notice of the exercise of such option is received by the Company at
least two (2) full business days prior to the Closing Date, or (ii) on a date
which shall not be later than the third (3rd) full business day following the
date the Company receives written notice of the exercise of such option, if such
notice is received by the Company less than two (2) full business days prior to
the Closing Date.
The certificates for the Option Shares to be so delivered will
be made available to you at such office or such other location including,
without limitation, in New York City, as you may reasonably request for checking
at least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, to the conditions set forth in Section 6 hereof, and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may request in order to evidence the accuracy and completeness of any of the
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representations, warranties or statements, the performance of any of the
covenants or agreements of the Company or the satisfaction of any of the
conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act, the
Exchange Act or otherwise, specifically including, but not limited to, losses,
claims, damages or liabilities (or actions in respect thereof) arising out of or
based upon (i) any breach of any representation, warranty, agreement or covenant
of the Company herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such Preliminary Prospectus or the Prospectus, or any such amendment or
supplement thereto, in reliance upon, and in conformity with, written
information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, PROVIDED FURTHER, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Act or otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or based
upon (i) any breach of any representation, warranty, agreement or covenant of
such Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(c) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof, and agrees to
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reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such loss, claim,
damage, liability or action.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each director
of the Company, and each person, if any, who controls the Company within the
meaning of the Act or the Exchange Act. This indemnity agreement shall be in
addition to any liabilities which each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 8(a) and 8(b) hereof who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; PROVIDED that such consent shall not be unreasonably withheld. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or has been threatened to be named a party and
indemnification has been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on all claims that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this Section
8 but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and the Company are responsible for the remaining portion,
PROVIDED, HOWEVER, that (i) no Underwriter shall be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds
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the amount of damages which such Underwriter has otherwise required to pay and
(ii) no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. The contribution agreement
in this Section 8(e) shall extend upon the same terms and conditions to, and
shall inure to the benefit of, each person, if any, who controls any
Underwriter, the Company within the meaning of the Act or the Exchange Act and
each officer of the Company who signed the Registration Statement and each
director of the Company.
(e) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO
SURVIVE DELIVERY. All representations, warranties, covenants and agreements of
the Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter within the meaning of the Act or the Exchange Act, or by or on
behalf of the Company or any of its officers, directors or controlling persons
within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Shares to the several Underwriters hereunder or termination of
this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or
Underwriters shall fail to take up and pay for the number of Firm Shares agreed
by such Underwriter or Underwriters to be purchased hereunder upon tender of
such Firm Shares in accordance with the terms hereof, and if the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters so
agreed but failed to purchase does not exceed 10% of the Firm Shares, the
remaining Underwriters shall be obligated, severally in proportion to their
respective commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed to take up and pay for exceeds 10% of the Firm
Shares, the remaining Underwriters shall have the right, but shall not be
obligated, to take up and pay for (in such proportions as may be agreed upon
among them) the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase, the Closing Date
shall be postponed for twenty-four (24) hours to allow the several Underwriters
the privilege of substituting within twenty-four (24) hours (including
non-business hours) another underwriter or underwriters (which may include any
nondefaulting Underwriter) satisfactory to the Company. If no such underwriter
or underwriters shall have been substituted as aforesaid by such postponed
Closing Date, the Closing Date may, at the option of the Company, be postponed
for a further twenty-four (24) hours, if necessary, to allow the Company the
privilege of finding another underwriter or underwriters, satisfactory to you,
to purchase the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriter or underwriters to take up the Firm
Shares of the defaulting Underwriter or Underwriters as provided in this Section
10, (i) the Company shall have the right to postpone the time of delivery for a
period of not more than seven (7) full business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees promptly to file any amendments to the Registration Statement,
supplements to the Prospectus or other such documents which may thereby be made
necessary, and (ii) the respective number of Firm Shares to be purchased by the
remaining Underwriters and substituted underwriter or underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so
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<PAGE>
agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to
the preceding paragraph of this Section 10, neither the Company shall be liable
to any Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company, and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any
person substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be, (i)
if the Company shall have failed, refused or been unable to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
from that set forth in the Registration Statement or Prospectus, which, in your
sole judgment, is material and adverse, or (ii) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange or
on the American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political or
economic conditions or financial markets as in your reasonable judgment makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the reasonable opinion of
the Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. In the event of
termination pursuant to subparagraph (i) above, the Company shall remain
obligated to pay costs and expenses pursuant to Sections 4(j), 5 and 8 hereof.
Any termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in Sections
5 and 8 hereof.
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<PAGE>
If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 11, you shall
promptly notify the Company by telephone, telecopy or telegram, in each case
confirmed by letter. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone, telecopy
or telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except
as herein otherwise specifically provided, shall be in writing and if sent to
you shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to you c/o Robertson, Stephens & Company
LLC, 555 California Street, Suite 2600, San Francisco, California 94104,
telecopier number (415) 781-0278, Attention: General Counsel, with a copy to
Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th Floor, New York, New York
10019, telecopier number (212) 586-7878, Attention: Ellen B. Corenswet, Esq.; if
sent to the Company, such notice shall be mailed, delivered, telegraphed (and
confirmed by letter) or telecopied (and confirmed by letter) to 6340 N.W. 5th
Way, Fort Lauderdale, Florida 33309, telecopier number (954) 351-9175,
Attention: Michael Levy, Chief Executive Officer, with a copy to Greenberg
Traurig Hoffman Lipoff Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami,
Florida 33131, telecopier number (305) 579-0717, Attention: Kenneth C. Hoffman,
Esq.
13. PARTIES. This Agreement shall inure to the benefit of and
be binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
or entity, other than the parties hereto and their respective executors,
administrators, successors and assigns, and the controlling persons within the
meaning of the Act or the Exchange Act, officers and directors referred to in
Section 8 hereof, any legal or equitable right, remedy or claim in respect of
this Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company under this Agreement, you
shall act on behalf of each of the several Underwriters, and the Company shall
be entitled to act and rely upon any statement, request, notice or agreement
made or given by you jointly or by Robertson, Stephens & Company LLC on behalf
of you.
14. APPLICABLE LAW. This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of New York.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE>
If the foregoing correctly sets forth the understanding among
the Company and the several Underwriters, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Company and the several Underwriters.
Very truly yours,
SPORTSLINE USA, INC.
By
--------------------------------------------
Accepted as of the date first above written:
ROBERTSON, STEPHENS & COMPANY LLC
COWEN & COMPANY
MONTGOMERY SECURITIES
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By ROBERTSON, STEPHENS & COMPANY LLC
By ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By
-------------------------------------------
Authorized Signatory
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<PAGE>
SCHEDULE A
NUMBER OF
FIRM SHARES
TO BE
UNDERWRITERS PURCHASED
- ------------ ---------
Robertson, Stephens & Company LLC...................................
Cowen & Company.....................................................
Montgomery Securities...............................................
----------
Total......................................................
==========
EXHIBIT 10.5
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (this "AGREEMENT")
is made and entered into as of September 25, 1996 by and among (i) SportsLine
USA, Inc., a Delaware corporation (the "COMPANY"), (ii) the holders of the
Series A Preferred Stock of the Company ("SERIES A STOCK") outstanding as of the
date hereof, as listed on Exhibit A attached hereto (the "SERIES A HOLDERS"),
(iii) the holders of the Series B Preferred Stock of the Company ("SERIES B
STOCK") outstanding as of the date hereof, as listed on Exhibit B attached
hereto (the "SERIES B HOLDERS") (iv) the parties listed on Exhibit C attached
hereto (the "INVESTORS"), (v) The Estate of Burk Zanft ("ZANFT"), and (vi)
Michael Levy ("LEVY").
R E C I T A L S
A. The Company, the Series A Holders, the Series B Holders, Zanft
and Levy have entered into that certain Amended and Restated Investors' Rights
Agreement dated as of March 12, 1996 (the "INVESTORS' RIGHTS AGREEMENT").
B. Concurrently herewith, the Investors are purchasing from the Company
shares of its Series C Preferred Stock (the "SERIES C STOCK") pursuant to a
Subscription Agreement dated of even date herewith among the Company and the
Investors (the "SUBSCRIPTION AGREEMENT").
C. To induce the Investors to purchase the Series C Preferred Stock
pursuant to the Subscription Agreement, the parties to the Investors' Rights
Agreement desire to enter into this Agreement and to amend and restate the
Investors' Rights Agreement as set forth herein.
D. It is the intention of the parties hereto that, upon execution of
this Agreement by the holders of not less than eighty percent (80%) of the
Registrable Securities (as such term is defined in the Investor's Rights
Agreement), the Investors' Rights Agreement shall be amended and restated as set
forth herein and that the Investors shall become parties hereto.
NOW THEREFORE, in consideration of the above recitals and the mutual
covenants made herein, the parties hereby agree that the Investors' Rights
Agreement shall be amended and restated as follows:
1. INFORMATION RIGHTS.
1.1 FINANCIAL INFORMATION. The Company covenants and agrees that
(i) with respect to the Investors, for so long as the Investors hold at least
250,000 shares of Series C Stock and/or the equivalent number (on an as
converted basis) of shares of Common Stock of the Company ("COMMON STOCK")
issued upon the conversion of shares of Series A Stock or Series B Stock
("CONVERSION STOCK"), (ii) with respect to the Series A Holders, so long as
Series A Holders collectively hold at least 500,000 shares of Series A Stock
and/or the equivalent number (on an as converted basis) of shares of Conversion
Stock, (iii) with respect to the Series B Holders, so long as Series B Holders
collectively hold at least 270,000 shares of Series B Stock and/or the
equivalent number (on an as converted basis) of shares of Conversion Stock, and
(iv) with respect to Zanft, for so long as Zanft holds at least 500,000 shares
of Common Stock, the Company will:
<PAGE>
(a) ANNUAL REPORTS. Furnish to the Investors, the Series A Holders, the
Series B Holders and Zanft, as soon as practicable and in any event within 90
days after the end of each fiscal year of the Company, a consolidated Balance
Sheet as of the end of such fiscal year, a consolidated Statement of Income and
a consolidated Statement of Cash Flows of the Company and its subsidiaries for
such year, setting forth in each case in comparative form the figures from the
Company's previous fiscal year (if any), all prepared in accordance with
generally accepted accounting principles and practices ("GAAP") and audited by
nationally recognized independent certified public accountants;
(b) OUARTERLY REPORTS. Furnish to the Investors, the Series A Holders,
the Series B Holders and Zanft, as soon as practicable, and in any case within
forty-five (45) days of the end of each f seal quarter of the Company (except
the last quarter of the Company's fiscal year), quarterly unaudited financial
statements, including an unaudited Balance Sheet and an unaudited Statement of
Income and a statement of shareholder's equity as of the end of such fiscal
quarter and a statement showing the number of shares of each class and series of
capital stock and securities convertible into or exercisable for shares of
capital stock outstanding at the end of the period, the number of common shares
issuable upon conversion or exercise of any outstanding securities convertible
or exercisable for common shares and the exchange ratio or exercise price
applicable thereto, all in sufficient detail as to permit each Investor, Series
A Holder, Series B Holder and Zanft to calculate its or his percentage equity
ownership in the Company;
(c) MONTHLY REPORTS. Furnish to the Investors, the Series A Holders,
the Series B Holders and Zanft as soon as practicable, and in any case within
forty-five (45) days of the end of each calendar month (except the last month of
the Company's fiscal year), monthly unaudited financial statements, including an
unaudited Balance Sheet and an unaudited Statement of Income;
(d) ANNUAL BUDGET. Furnish to the Investors, the Series A Holders, the
Series B Holders and Zanft as soon as practicable and in any event no later than
thirty (30) days after the-close of each fiscal year of the Company, an annual
operating plan and budget, prepared on a monthly basis, for the next immediate
fiscal year. The Company shall also furnish to the Investors, the Series A
Holders, the Series B Holders and Zanft, within a reasonable time of its
preparation, amendments to the annual budget, if any; and
(e) OFFICER STATEMENT. With respect to the financial statements called
for in subsections (b) and (c) of this Section 1.1, an instrument executed by
the Chief Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of foot-notes and normal
year-end audit adjustments that may be required by GAAP) and fairly present the
financial condition of the Company and its results of operation for the period
specified.
1.2 INSPECTION RIGHTS: CONFIDENTIALITY. The Company shall permit (i)
each Investor holding shares of Series C Stock and/or shares of Conversion
Stock, or any combination thereof, at such Investor's expense, (ii) each Series
B Holder holding shares of Series B Stock
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<PAGE>
and/or shares of Conversion Stock, or any combination thereof, at such Series B
Holder's expense, (iii) each Series A Holder holding at least 500,000 shares of
Series A Stock and/or the equivalent number (on an as-converted basis) of shares
of Conversion Stock, or any combination thereof, at such Series A Holders'
expense, and (iv) Zanft, so long as Zanft owns at least 500,000 shares of Common
Stock, at Zanft's expense, to visit and inspect the Company's properties, to
examine and copy its books or account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable times
as may be requested by such Investor, Series A Holder or Zanft, as the case may
be. Each Investor, Series A Holder, Series B Holder or Zanit, as the case may
be, agrees to hold all information received pursuant to this Section in
confidence, and not to use or disclose any of such information to any third
party (other than an Investor or one of its principals, or to any regulatory
authority (including the National Association of Insurance Commisioners) to
which an Investor is subject requesting the same), except to the extent such
information may be made publicly available by the Company.
1.3 DELIVERY. All information and documents required to be delivered to
Series A Holders under this Section 1 may be delivered to Kleiner, Perkins,
Caubield & Byers only, thereby fully satisfying any such delivery requirements.
1.4 OBSERVER RIGHTS. So long as an Investor or Series B Holder owns not
less than 250,000 shares of Series C Preferred Stock or Series B Preferred
Stock, as the case may be (or an equivalent amount of Common Stock issued upon
conversion thereof), such Investor or Series B Holder, at its own expense, shall
be entitled to have a representative attend all meetings of the Company's Board
of Directors in a nonvoting observer capacity (each, an "INVESTOR
REPRESENTATIVE"). If such an Investor or Series B Holder designates an Investor
Representative to the Company, the Company shall concurrently provide the
Investor Representative with copies of all notices, minutes, consents and other
materials it provides to members of the Board of Directors; provided, that the
Investor Representative shall agree to hold in confidence and trust and to act
in a fiduciary manner with respect to all information so provided; and provided
further, that the Company reserves the right to withhold any information and to
exclude any Investor Representative from any meeting or portion thereof if
access to such information or meeting or attendance at such meeting could
adversely affect the attorney-client privilege between the Company and its
counsel or would result in disclosure of trade secrets to any Investor
Representative representing an Investor or series B Holder that is a direct
competitor of the Company.
1.5 TERMINATION OF CERTAIN RIGHTS. The Company's obligations under
Sections 1.1, 1.2 and 1.4 above will terminate upon the closing of the Company's
initial public offering of Common Stock pursuant to an effective registration
statement filed under the U.S. Securities Act of 1933, as amended (the
"SECURITIES ACT").
3
<PAGE>
2. REGISTRATION RIGHTS.
2.1 DEFINITIONS. For purposes of this Section 2:
(a) REGISTRATION. The terms "REGISTER, " "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) REGISTRABLE SECURITIES. The term "REGISTRABLE SECURITIES" means:
(1) all the shares of Common Stock of the Company issued or issuable upon the
conversion of any shares of Series A Stock, Series B Stock or Series C Stock;
(2) the shares of Common Stock now held collectively by Levy (the "LEVY SHARES")
and Zanft and set forth in EXHIBIT D attached hereto (the "SHAREHOLDERS'
SHARES"); (3) any shares of Common Stock of the Company issuable upon the
exercise of warrants to purchase Common Stock currently held by the Series A
Holders; (4) any shares of Common Stock of the Company issuable upon the
exercise of warrants to purchase Common Stock currently held by Zanft ("ZANFT
WARRANT SHARES"); (5) any shares of Common Stock of the Company issuable upon
the exercise of warrants to purchase Common Stock currently held by US WEST
Interactive Services, Inc.; and (6) any shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, all such shares of Common Stock
described in clause (1), (2), (3), (4) or (S) of this Section 2.1(b); EXCLUDING
in all cases, however, any Registrable Securities sold by a person in a
transaction in which rights under this Section 2 are not assigned in accordance
with this Agreement or any Registrable Securities sold to the public or sold
pursuant to Rule 144 promulgated under the Securities Act or; PROVIDED, HOWEVER,
that notwithstanding anything herein to the contrary, the Shareholders' Shares,
the Zanft Warrant Shares and any shares of Common Stock described in clause (6)
of this Section 2. l(b) that are issued in respect of any Shareholders' Shares
or the Zanft Warrant Shares (which with the Shareholders' Shares are
collectively hereinafter referred to as the "EXCLUDED SHARES"), shall not be
Registrable Securities for purposes of Section 2.2 of this Agreement and the
Levy Shares shall not-be Registrable Securities for purposes of Sections 2.4 or
3. By virtue of being a "Holder" for purposes of Section 2.3, the Holders of the
Excluded Shares shall have piggyback registration rights with respect to
offerings under Sections 2.2 or 2.4 hereof.
(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of shares of
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the number of shares of
Common Stock which are Registrable Securities and (1) are then issued and
outstanding or (2) are then issuable pursuant to the exercise or conversion of
then outstanding and then exercisable options, warrants or convertible
securities.
(d) HOLDER. For purposes of this Section 2 and Section 4 hereof, the
term "HOLDER" means any person owning of record Registrable Securities that have
not been sold to the public or pursuant to Rule 144 promulgated under the
Securities Act or any assignee of record of such Registrable Securities to whom
rights under this Section 2 have been duly assigned in accordance with this
Agreement; PROVIDED, HOWEVER, that for purposes of this Agreement, a record
holder of shares of Series A Stock, Series B Stock or Series C Stock
4
<PAGE>
convertible into such Registrable Securities shall be deemed to be the Holder of
such Registrable Securities; PROVIDED FURTHER, that a holder of Excluded Shares
(as defined in Section 2. l(b)) shall not be a Holder with respect to such
Excluded Shares for purposes of Section 2.2 (and as to the Levy Shares, Sections
2.4 or 3) of this Agreement; and PROVIDED FURTHER, that the Company shall in no
event be obligated to register shares of Series A Stock, Series B Stock or
Series C Stock, and that Holders of Registrable Securities will not be required
to convert their shares of Series A Stock, Series B Stock or Series C Stock, as
the case may be, into Common Stock in order to exercise the registration rights
granted hereunder, until immediately before the closing of the offering to which
the registration relates.
(e) FORM S-3. The term "FORM S-3" means such form under the Securities
Act as is in effect on the date hereof or any successor registration form under
the Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(f) SEC. The term "SEC" or "COMMISSION" means the U.S. Securities and
Exchange Commission.
2.2 DEMAND REGISTRATION.
(a) REQUEST BY HOLDERS. If the Company shall receive at any time after
the earlier of (i) the effective date of the Company's initial public offering
of its securities pursuant to a registration filed under the Securities Act or,
(ii) May 5, 2000 (provided such date is not within six months after the
effective date of the Company's initial public offering), a written request from
the Holders of at least forty percent (40%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities
Act covering the registration of Registrable Securities pursuant to this Section
2.2, then the Company shall, within ten (10) business days of the receipt of
such written request, give written notice of such request ("REQUEST NOTICE") to
all Holders, and effect, as soon as practicable and in any event within sixty
(60) days of the receipt of such request, the registration under the Securities
Act of all Registrable Securities which Holders request to be registered and
included in such registration by written notice given by such Holders to the
Company within twenty (20) days after receipt of the Request Notice, subject
only to the limitations of this Section 2.2; PROVIDED that the Registrable
Securities requested by all Holders to be registered pursuant to such request
must either (i) be at least fifty percent (50%) of all Registrable Securities
then outstanding, (ii) in the case of a request by the Holders of Series B Stock
or Series C Stock, be at least twenty percent (20%) of all Registrable
Securities issued or issuable upon conversion of the Series B Stock or Series C
Stock, as the case may be, or (iii) have an anticipated aggregate public
offering price (before any underwriting discounts and commissions) of not less
than $5,000,000.
(b) UNDERWRITING. If the Holders initiating the registration request
under this Section 2.2 ("INITIATING HOLDERS") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). The underwriter shall be
selected by the Company with the consent of the majority in interest of the
Initiating Holders,
5
<PAGE>
which consent will not unreasonably be withheld. In such event, the right of any
Holder to include its or his Registrable Securities in such registration shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 2.2, if the underwriter(s) advise(s) the Company
in writing that marketing factors require a limitation of the number of
securities to be underwritten then the Company shall so advise all Holders of
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of Registrable Securities that may be included
in the underwriting shall be reduced as required by the underwriter(s) and
allocated among the Holders of Registrable Securities on a pro rata basis
according to the number of Registrable Securities then outstanding held by each
Holder requesting registration (including the Initiating Holders); PROVIDED,
HOWEVER, that the number of shares of Registrable Securities to be included in
such underwriting and registration shall not be reduced unless all other
securities of the Company are first entirely excluded from underwriting and
registration. Any Registrable Securities excluded and withdrawn from such
underwriting shall be withdrawn from the registration.
(c) MAXIMUM NUMBER OF DEMAND REGISTRATIONS. The Company is obligated to
effect only two (2) such registrations pursuant to this Section 2.2. The Company
shall not be deemed to have effected a registration pursuant to this Section 2.2
unless a registration statement in respect thereof shall have been declared
effective by the Commission.
(d) DEFERRAL. Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting the filing of a registration statement pursuant to
this Section 2.2, a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than 120 days
after receipt of the request of the Initiating Holders; PROVIDED, HOWEVER, that
the Company may not utilize this right more than once in any twelve (12) month
period.
(e) EXPENSES. All expenses incurred in connection with a registration
pursuant to this Section 2.2, including without limitation all registration and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel for the selling Holders (but excluding underwriters' discounts and
commissions), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.2 shall bear such Holder's proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Company) of all discounts and commissions payable to
underwriters or brokers in connection with such offering. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 2.2 if the registration
request is subsequently withdrawn at the request of the Holders of a
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majority of the Registrable Securities to be registered, unless the Holders of a
majority of the Registrable Securities then outstanding agree to forfeit their
right to one (1) demand registration pursuant to this Section 2.2 (in which case
such right shall be forfeited by all Holders of Registrable Securities);
PROVIDED, FURTHER, HOWEVER, that if at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business, or
prospects of the Company not known to the Holders at the time of their request
for such registration and have withdrawn their request for registration with
reasonable promptness after learning of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to this Section 2.2.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (INCLUDING, but not limited to,
registration statements relating to secondary offerings of securities of the
Company and registration statements relating to any registration under Section
2.2 or Section 2.4 of this Agreement but EXCLUDING any employee benefit plan or
a corporate reorganization) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(a) UNDERWRITING. If a registration statement under which the Company
gives notice under this Section 2.3 is for an underwritten offering, then the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, FIRST, to the
Company, and SECOND, to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder;
PROVIDED, HOWEVER, that the right of the underwriters to exclude shares
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that the number of Registrable Securities
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included in any such registration is not reduced below thirty three and
one-third percent (33 1/3%) of the shares included in the registration, except
for a registration relating to the Company's initial public offering from which
all Registrable Securities may be excluded. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter, delivered at least ten (10)
business days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder which is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "Holder", and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder", as defined in this sentence.
(b) EXPENSES. All expenses incurred in connection with a registration
pursuant to this Section 2.3 (excluding underwriters' and brokers' discounts and
commissions), including, without limitation all federal and "blue sky"
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and reasonable fees and disbursements
of one counsel for the selling Holders shall be borne by the Company.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, then the Company will:
(a) NOTICE. Promptly give written notice of the proposed registration
and the Holder's or Holders' request therefor, and any related qualification or
compliance, to all other Holders of Registrable Securities; and
(b) REGISTRATION. As soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within twenty (20) days after receipt of such written notice from the
Company; PROVIDED, HOWEVER, that the Company shall not be obligated to effect
any such registration, qualification or compliance pursuant to this Section 2.4:
(1) if Form S-3 is not available for such offering by the Holders;
(2) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public of less than $1,000,000;
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(3) if the Company shall furnish to the Holders a certificate signed by
the President or Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement no more than once during
any twelve month period for a period of not more than 120 days after receipt of
the request of the Holder or Holders under this Section 2.4;
(4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two (2) registrations on Form S-3 for
the Holders pursuant to this Section 2.4; or
(5) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) EXPENSES. Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered pursuant to this Section 2.4 as soon as
practicable after receipt of the request or requests of the Holders for such
registration. The Company shall pay all expenses incurred in connection with
each registration requested pursuant to this Section 2.4, (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of one counsel for the selling
Holder or Holders and counsel for the Company.
(d) NOT DEMAND REGISTRATION. Form S-3 registrations shall not be deemed
to be demand registrations as described in Section 2.2 above.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days or
until the distribution contemplated in the Registration Statement has been
completed; provided, however, that such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
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(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by them that
are included in such registration.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holders, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perforrn its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a "comfort"
letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange or market on which similar securities
issued by the Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
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2.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
2.7 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) BY THE COMPANY. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as deemed in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Securities Exchange Act of 1934, as amended
(the "1934 ACT"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION"):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the 1934 Act, any federal or state securities law or any rule or
regulation promulgated under the Securities Act, the 1934 Act or any federal or
state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 2.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case to a Holder, partner,
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officer or director, underwriter or controlling person of such Holder for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director or controlling person of
such Holder.
(b) BY SELLING HOLDERS. To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder within the meaning of the Securities Act or the
1934 Act, against any losses, claims, damages or liabilities to which the
Company or any such director, officer, controlling person, underwriter or such
Holder, partner or director, officer or controlling person of such other Holder
may become subject under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other Holder,
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the indemnity agreement contained
in this subsection 2.8(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and PROVIDED FURTHER, that the total amounts payable in indemnity by a
Holder under this Section 2.8(b) in respect of any Violation shall not exceed
the net proceeds received by such Holder in the registered offering out of which
such Violation arises.
(c) NOTICE. Promptly after receipt by an indemnified party under this
Section 2.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the
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indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.8.
(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing indemnity
agreements of the Company and Holders are subject to the condition that, insofar
as they relate to any Violation made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL PROSPECTUS"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(e) CONTRIBUTION. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.8 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
2.8; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others and based on equitable considerations)
in such proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of its Registrable
Securities offered by and sold under the registration statement bears to the
public offering price of all securities offered by and sold under such
registration statement, and the Company and other selling Holders are
responsible for the remaining portion; PROVIDED, HOWEVER, that, in any such
case, (A) no such Holder will be required to contribute any amount in excess-of
the net proceeds received by such Holder from the offering pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(f) SURVIVAL. The obligations of the Company and Holders under this
Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
(g) CONFLICT WITH UNDERWRITING AGREEMENT. In the event of any conflict
between the indemnity provisions of this Agreement and those of any Underwriting
Agreement entered into by the Company with respect to a registration with the
SEC of Registrable Securities, the provisions of the Underwriting Agreement
shall supersede and control.
2.9 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell
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or otherwise transfer or dispose of any Registrable Securities or other shares
of stock of the Company then owned by such Holder (other than to donees or
partners of the Holder who agree to be similarly bound) for up to one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act; PROVIDED, HOWEVER, that:
(a) such agreement shall be applicable only to the first two such
registration statements of the Company which cover securities to be sold on its
behalf to the public in an underwritten offering but not to Registrable
Securities sold pursuant to such registration statement; and
(b) all executive officers and directors and, to the extent finally
required by the Company's underwriters, employees of the Company then holding
Common Stock of the Company enter into or become bound by similar agreements.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
2.10 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act fled by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the 1934 Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Holder owns any Registrable Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of the
Securities Act and the 1934 Act (at any time after it has become subject to the
reporting requirements of the 1934 Act), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration (at any time after the Company has become subject to the
reporting requirements of the 1934 Act).
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2.11 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have
no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i) any
request or requests for registration made by any Holder on a date more than five
(5) years after the closing date of the Company's initial public offering; or
(ii) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel
to the Company that is reasonably satisfactory to such Holder, all such
Registrable Securities proposed to be sold by a Holder may be sold in a
three-month period without registration under the Securities Act pursuant to
Rule 144 under the Securities Act.
2.12 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the holders of a majority of the Registrable Securities held by the
Investors, the Series A Holders and the Series B Holders then outstanding, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder to include such
securities in any registration filed under Section 2.2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Investors, the Series A Holders and the Series B Holders which are included.
3. RIGHT OF FIRST REFUSAL.
3.1 GENERAL. Each Holder (as defined in Section 2.1(d)) and any party
to whom such Holder's rights under this Section 3 have been duly assigned in
accordance with Section 4.1 (b) (EACH such Holder or assignee being hereinafter
referred to as a "RIGHTS HOLDER") has the right of first refusal to purchase
such Rights Holder's Pro Rata Share (as defined below), of all (or any part) of
any "New Securities" (as defined in Section 3.2) that the Company may from time
to time issue after the date of this Agreement. A Rights Holder's "PRO RATA
SHARE" for purposes of this right of first refusal is the ratio of (a) the
number of Registrable Securities as to which such Rights Holder is the Holder
(and/or is deemed to be the Holder under Section 2.1 (d)), to (b) a number of
shares of Common Stock of the Company equal to the sum of (i) the total number
of shares of Common Stock of the Company then outstanding plus (ii) the total
number of shares of Common Stock of the Company into which all then outstanding
shares of Preferred Stock of the Company are then convertible plus (iii) the
number of shares of Common Stock of the Company reserved for issuance under
stock purchase and stock option plans of the Company and outstanding warrants.
3.2 NEW SECURITIES. "NEW SECURITIES" shall mean any Common Stock or
Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; PROVIDED, HOWEVER, that
the term "New Securities" DOES NOT INCLUDE:
(i) up to 1,750,000 shares of the Company's Common Stock
(and/or options or warrants therefor) issued to employees, officers,
directors, contractors, advisors or consultants of the Company pursuant to
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incentive agreements or plans approved by the Board of Directors of the
Company (inclusive of 1,585,650 shares issuable upon exercise of options
and warrants outstanding or to be granted as of the date hereof), or such
greater number of shares as shall be unanimously approved by the Board of
Directors of the Company ("EMPLOYEE OPTIONS")(such numbers of shares being
subject to proportional adjustment to reflect subdivisions, combinations
and stock dividends affecting the number of outstanding shares of such
stock);
(ii) any securities issuable upon conversion of or with respect to any
then outstanding shares of Series A Stock, Series B Stock, Series C Stock
or Common Stock or other securities issuable upon conversion thereof;
(iii) any securities issuable upon exercise of any of the options,
warrants or rights (other than Employee Options)("WARRANT SECURITIES") to
purchase 2,475,000 shares of Common Stock outstanding as of the date
hereof, any Warrant Securities hereafter unanimously approved by the Board
of Directors of the Company, and any securities issuable upon the
conversion of any Warrant Securities;
(iv) shares of the Company's Common Stock or Preferred Stock issued in
connection with any stock split or stock dividend;
(v) any shares of Common Stock of the Company issuable upon the
exercise of warrants to purchase Common Stock currently held by US WEST
Interactive Services, Inc.;
(vi) securities offered by the Company to the public pursuant to a
registration statement filed under the Securities Act; or
(vii) up to 50,000 shares of the Company's Common Stock (and/or options
or warrants therefor) issued or issuable to nonaffiliate third parties
providing the Company with equipment leases, real property leases, loans,
credit lines, guaranties of indebtedness, cash price reductions or similar
financing (such number of shares being subject to proportional adjustment
to reflect subdivisions, combinations and stock dividends affecting the
number of outstanding shares of such stock), provided that this exception
(vi) shall not apply unless the arrangement is unanimously approved by the
Company's Board of Directors; or
(viii) securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger, purchase of
all or substantially all of the assets, or other reorganization in which
the Company acquires, in a single transaction or series of related
transactions, all or substantially all of the assets of such other
corporation or entity or
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fifty percent (50%) or more of the voting power of such other corporation
or entity or fifty percent (50%) or more of the equity ownership of such
other entity.
3.3 PROCEDURES. In the event that the Company proposes to undertake an
issuance of New Securities, it shall give to each Rights Holder written notice
of its intention to issue New Securities (the "Notice"), describing the type of
New Securities and the price and the general terms upon which the Company
proposes to issue such New Securities. Each Rights Holder shall have fifteen
(15) days from the date of mailing of any such Notice to agree in writing to
purchase such Rights Holder's Pro Rata Share of such New Securities for the
price and upon the general terms specified in the Notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased (not to exceed such Rights Holder's Pro Rata Share). If any Rights
Holder fails to so agree in writing within such fifteen (15) day period to
purchase such Rights Holder's full Pro Rata Share of an offering of New
Securities (a "NONPURCHASING HOLDER"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of its or his Pro Rata Share
of such New Securities that it or he did not so agree to purchase, and the
Company shall promptly give each Rights Holder who has timely agreed to purchase
its or his full Pro Rata Share of such offering of New Securities (a "PURCHASING
HOLDER") written notice of the failure of any Nonpurchasing Holder to purchase
such Nonpurchasing Rights Holder's full Pro Rata Share of such offering of New
Securities (the "OVERALLOTMENT NOTICE"). Each Purchasing Holder shall have a
right of overallotment such that such Purchasing Holder may agree to purchase a
portion of the Nonpurchasing Holders' unpurchased Pro Rata Shares of such
offering on a pro rata basis according to the relative Pro Rata Shares of the
Purchasing Holders, at any time within ten (10) days after receiving the
Overallotment Notice.
3.4 FAILURE TO EXERCISE. In the event that the Rights Holders fail to
exercise in full the right of first refusal within such fifteen (15) plus ten
(10) day period, then the Company shall have 120 days thereafter to sell the New
Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms not-materially
more favorable to the purchasers thereof than specified in the Company's Notice
to the Rights Holders. In the event that the Company has not issued and sold the
New Securities within such 120 day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New
Securities to the Rights Holders pursuant to this Section 3.
3.5 TERMINATION. This right of first refusal shall terminate (i)
immediately upon the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public, or (ii) upon (a) the acquisition of all or
substantially all the assets of the Company or (b) an acquisition of the Company
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) or more of the voting
power of the corporation or other entity surviving such transaction pursuant to
this Section 3. Notwithstanding clause (i) above, if (i) the Series A Stock, the
Series
17
<PAGE>
B Stock and the Series C Stock are not automatically converted to Common Stock
as a result of such IPO, and (ii) Investors, Series A Holders, Series B Holders
or Series C Holders do not exercise their rights under Section 2 hereof with
respect to such offering, then this right of refusal shall remain in effect
until the earlier of (i) the third anniversary of the IPO; (ii) termination of
the Amended and Restated Voting Agreement of even date herewith by and among the
Company, the Investors, the Series A Holders, the Series B Holders and holders
of the Company's Common Stock; or (iii) such time as the Company's traded stock
price on a national exchange or the Nasdaq National Market exceeds $5.00 for a
period of thirty (30) or more consecutive days and the Company has in excess of
$10,000,000 in cash or cash equivalents, as shown on its most recent financial
statements.
4. ASSIGNMENT AND AMENDMENT.
4.1 ASSIGNMENT. Notwithstanding anything herein to the contrary:
(a) INFORMATION RIGHTS. The rights of an Investor, a Series A Holder o
a Series B Holder under Sections 1.1 and 1.4 are not assignable, other than to
an assignee requiring such rights to comply with applicable ERISA requirements.
(b) REGISTRATION RIGHTS; REFUSAL RIGHTS. The registration rights of a
Holder under Section 2 hereof and the rights of first refusal of a Rights Holder
under Section 3 hereof may be assigned only to (i) in the case of an Investor, a
party who acquires from such Investor at least twenty percent (20%) of the
shares of Series C Stock issued to such Investor under the Subscription
Agreement and/or an equivalent number (on an as-converted basis) of Registrable
Securities issued upon conversion thereof, (ii) in the case of a Series B
Holder, a party who acquires from such Series B Holder at least twenty percent
(20%) of the shares of Series B Stock originally issued to such Series B Holder
and/or an equivalent number (on an as-converted basis) of Registrable Securities
issued upon conversion thereof, (iii) in the case of a Series A Holder, a party
who acquires from such Series A Holder at least 250,000 shares of Series A Stock
and/or an equivalent number (on an as-converted basis) of Registrable Securities
issued upon conversion thereof, or (iv) in the case of Levy or Zanft, a party
who acquires from either of them at least 250,000 shares of Common Stock
(subject to Section 4.1 (c) below); PROVIDED, HOWEVER, that no party may be
assigned any of the foregoing rights unless the Company is given written notice
by the assigning party at the time of such assignment stating the name and
address of the assignee and identifying the securities of the Company as to
which the rights in question are being assigned; and PROVIDED FURTHER, that any
such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 4.
(c) PERMITTED TRANSFEREES. Notwithstanding any other provision of this
Agreement or any minimum share holding requirements in this Agreement to the
contrary, in the event that any of Zanft, Levy or any Series A Holder, Series B
Holder or Investor makes any of the following types of assignment to any of the
following transferees, such transferee shall succeed to all of such assignor's
rights under this Agreement, subject to such assignor's obligations hereunder:
(i) any sale, assignment, pledge, hypothecation or other transfer or disposition
("TRANSFER") or gift (A) by any such assignor to any spouse, child, child of a
spouse,
18
<PAGE>
parent or grandchild of such assignor or (B) by any of such relatives to such
assignor, or (C) by any such assignor to (x) a trust of which there are no
principal beneficiaries other than such assignor or one or more of such
relatives of such assignor, (y) a partnership of which there are no partners
other than such assignor, one or more of such relatives of such assignor or one
or more trusts which would qualify as a Permitted Transferee (as defined below)
under clause (i)(C)(x) hereof, or (z) a corporation of which there are no
stockholders other than such assignor, one or more of such relatives of such
assignor or one or more trusts which would qualify as a Permitted Transferee
under clause (i)(C)(x) hereof; (ii) any Transfer to a legal representative or
guardian of an assignor or any such relative in the event the assignor or any
such relative becomes mentally incompetent; (iib any Transfer by will or the
laws of descent; (iv) with respect to a corporate or partnership assignor, a
Transfer to any affiliate (as such term is defined in Rule 12b-2 under the
Exchange Act) thereof; PROVIDED, HOWEVER, that in each of cases (i) through (iv)
each such transferee, donee or distributee agrees to take subject to and to be
bound by and to comply with the provisions of this Agreement (a "PERMITTED
TRANSFEREE"). Accordingly, wherever in this Agreement the terms "Series A
Holder," "Series B Holder," "Investor," "Zanft" or "Levy" appears, it shall be
deemed to include a reference to the respective Permitted Transferees thereof.
4.2 AMENDMENT OF RIGHTS. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of 80% of the Registrable Securities;
PROVIDED, that the provisions of Section 5 hereof may only be amended or waived
with the written consent of the Company, Zanft and Levy. Any amendment or waiver
effected in accordance with this Section 4.2 shall be binding upon the Company
and each Series A Holder, each Series B Holder, each Investor, each Holder,
Zanft, Levy and each permitted successor or assignee of each of the foregoing.
5. PUT IN THE EVENT OF DEATH OF LEVY.
5.1 Subject to applicable law, upon the death of Levy, Zanft and
Zanft's Permitted Transferees (collectively, the "ZANFT HOLDERS") shall have the
irrevocable option to require Levy's estate to purchase all of the shares of
Common Stock, securities convertible into or exchangeable for shares of Common
Stock, and options or warrants to acquire shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock (the "ZANFT
SECURITIES"), held by all such Zanft Holders for an aggregate purchase price of
$2,000,000. Such option shall be exercisable by notice from the Zanft Holders
given within sixty (60) days after the date of death of Levy. Upon receipt of
any such notice, Levy's estate shall purchase from the Zanft Holders all of the
Zanft Securities at a closing to be held on or prior to the 30th day following
the date of such notice on a date to be designated by the administrator of
Levy's estate, or such later date on which Levy's estate shall have received the
proceeds of the life insurance policy to be maintained pursuant to Section 5.2.
At the closing, the Zanft Holders shall present to Levy's estate all
certificates for the Zanft Securities in proper form for transfer. The Zanft
Securities shall be transferred free of all liens and encumbrances, or adverse
claims of any kind or character.
19
<PAGE>
5.2 So long as the provisions of Section 5.1 shall remain in effect,
the Company shall maintain and be the beneficiary of an insurance policy (the
"POLICY") providing not less than $2,000,000 insurance on the life of Levy, the
proceeds of which shall be assigned to the Zanft Holders pursuant to an
assignment substantially in the form of Exhibit C to that certain Subscription
Agreement between the Company and Zanft, Levy and Zanft agree that the proceeds
of insurance payments under the Policy shall be applied as follows: FIRST, if
the Zanft Holders shall have exercised their option pursuant to Section 5.1 to
require Levy's estate to purchase all of the Zanft Securities, $2,000,000 of
such proceeds shall be paid to or retained by the Zanft Holders at the closing
provided for in Section 5.1 hereof in satisfaction of Levy's estate's obligation
to pay such amount, if not already paid by Levy's estate, or, if already paid by
Levy's estate shall be applied to reimburse Levy's estate therefor; and SECOND,
the balance, if any, of such proceeds shall be paid to or retained by Levy's
estate. Levy shall request that his insurance broker advise Zanft in writing
promptly of Levy's failure to pay any premium for the Policy or of the
cancellation, expiration or termination for any reason of the Policy. If Levy
shall fail to maintain the Policy or to make any payment of premiums in respect
of the Policy, the Zanft Holders shall have the right to obtain a Policy or pay
premiums in respect of any Policy maintained by Levy, and any expenses incurred
by the Zanft Holders in connection therewith shall be payable by Levy on demand.
5.3 This Section 5 shall terminate at the first to occur of any of the
following:
(a) August 1, 2004 (provided that such date may be extended for up to
ten additional years with the written consent of Zanft and Levy);
(b) the consummation of the first sale of securities of the Company to
the public pursuant to an effective registration statement filed by the Company
under the Securities Act of 1933, as amended;
(c) the first date on which Zanft owns less than 150,000 shares of
Common Stock (as adjusted for stock splits, recapitalizations and the like);
(d) upon the closing of (i) any consolidation or merger of the Company
with or into any other corporation or corporations in which the holders of the
Company's outstanding shares immediately before such consolidation or merger do
not, immediately after such consolidation or merger, retain stock representing a
majority of the voting power of the surviving corporation of such consolidation
or merger or stock representing a majority of the voting power of a corporation
that wholly owns, directly or indirectly, the surviving corporation of such
consolidation or merger; (ii) the sale, transfer or assignment of securities of
the Company representing a majority of the voting power of all the Company's
outstanding voting securities-by the holders thereof to an acquiring party in a
single transaction or series of related transactions; or (iii) the sale of all
or substantially all the Company's assets; or
(e) upon mutual agreement to such termination by Levy and Zanft
expressed in a written jointly executed document.
6. GENERAL PROVISIONS.
20
<PAGE>
6.1 NOTICES. All notices hereunder (including the Exercise Notice)
shall be in writing and shall be given by (i) certified or registered mail,
return receipt requested; (ii) hand delivery; or (iii) nationally recognized
overnight courier service; a notice shall be deemed to have been given (a) when
delivered by hand; (b) three days after mailing, in the case of certified or
registered mail; and (c) one business day after being forwarded to a nationally
recognized overnight courier service for overnight delivery; in each case
correctly addressed to such party at its address set forth below or such other
address as such party may specify by notice to the other parties hereto:
(a) if to a Series A Holder, at such Series A Holder's respective
address as set forth on Exhibit A hereto;
(b) if to a Series B Holder, at such Series B Holder's respective
address as set forth on Exhibit B hereto;
(c) if to an Investor, at such Investor's respective address as set
forth on Exhibit C hereto;
(d) if to the Company or Levy, at 6340 N.W. 5th Way, Fort Lauderdale,
Florida 33309; and
(e) if to Zanft, at c/o Marvin Freeman, Executor, 745 Downing Street,
Teaneck, New Jersey 07666.
6.2 ENTIRE AGREEMENT. This Agreement, together with all the Exhibits
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of Delaware as
applied to agreements among Delaware residents entered into and to be performed
entirely within Delaware, excluding that body of law relating to conflict of
laws and choice of law.
6.4 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
6.5 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
6.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 4.1,
the provisions of this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the parties hereto.
21
<PAGE>
6.7 CAPTIONS. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.9 COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
6.10 ADJUSTMENTS FOR STOCK SPLITS. ETC. Wherever in this Agreement
there is a reference to a specific number of shares of Common Stock or Preferred
Stock of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.
6.11 AGGREGATION OF STOCK. All shares held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
6.12 REGULATED FINANCIAL INSTITUTIONS COMPLIANCE OBLIGATION. Nothing in
this Agreement shall diminish the continuing obligations of any financial
institution to comply with applicable requirements of law that it maintain
responsibility for the disposition of, and control over its admitted assets,
investments and property, including (without limiting the generality of the
foregoing) the provisions of Section 1141(b) of the New York Insurance Law, as
amended, and as hereafter from time to time in effect.
6.13 SIGNATURES OF PARTIES. Each person who executes this Agreement
acknowledges and agrees that such person's signature on the Signature Pages
hereof shall constitute its or his agreement to the terms and conditions hereof
in all applicable capacities (i.e., as an Investor, Series A Holder and/or
Series B Holder, as the case may be).
(CONTINUED ON SIGNATURE PAGE)
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investors' Rights Agreement as of the date and year first above
written.
SPORTSLINE USA, INC.
By: /s/ MICHAEL LEVY
------------------------------------------
Michael Levy, President
US WEST INTERACTIVE SERVICES, INC.
By: /s/ JOHN O'FARRELL
------------------------------------------
John O'Farrell, President
ALLIANCE TECHNOLOGY VENTURES, L.P.
By: /s/ STEPHEN FLEMING
------------------------------------------
Stephen Fleming, General Partner
ATV/MFJ PARALLEL FUND, L.P.
By: /s/ STEPHEN FLEMING
------------------------------------------
Stephen Fleming, General Partner
TCI ONLINE SPORTS HOLDINGS, INC.
By: /s/ B. RAVENEL
------------------------------------------
Title:
REUTERS NEWMEDIA INC.
By: /s/ STEVEN LAKE
------------------------------------------
Steven Lake, Senior Vice President
NEW YORK LIFE INSURANCE COMPANY
By: /s/ PHILLIP A. SMITH
-------------------------------------------
Phillip A. Smith, Investment Vice President
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ANTARES CAPITAL FUND II LIMITED PARTNERSHIP
By: ANTARES CAPITAL PARTNERS II, INC.,
its General Partner
By: /s/ RANDALL E. POLINER
-------------------------------------------
Randall E. Poliner, President
TRANSATLANTIC VENTURE PARTNERS, C.V.
By: /s/
-------------------------------------------
Title:
KLEINER PERKINS CAUFIELD & BYERS VII
By: /s/ JOSEPH S. LACOB
-------------------------------------------
Title: General Partner of KPCB VII Associates,
the General Partner of Kleiner Perkins
Caufield & Byers VII
KPCB VII FOUNDERS FUND
By: /s/ JOSEPH S. LACOB
-------------------------------------------
Title: General Partner of KPCB VII Associates,
the General Partner of KPCB VII
Founders Fund
KPCB INFORMATION SCIENCES ZAIBATSU
FUND II
By: /s/ JOSEPH S. LACOB
-------------------------------------------
Title: General Partner of KPCB VII Associates,
the General Partner of KPCB Information
Sciences Zaibatsu Fund II
STANFORD UNIVERSITY
By: /s/ CAROL GILINER
-------------------------------------------
Title:
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
<PAGE>
CHASE 1991 REVOCABLE TRUST DTD 4/2/91
By: /s/ ANDREW CHASE
-------------------------------------------
Andrew Chase, Trustee
NATIO VIE DEVELOPPEMENT II
By: /s/ DOMINIQUE BELLANGER
-------------------------------------------
Dominique Bellanger, Fund Manager
NATIO NOUVEAUX MARCHES EUROPE
By: /s/ DOMINIQUE BELLANGER
-------------------------------------------
Dominique Bellanger, Fund Manager
-------------------------------------------
Richard A. Petit
/s/ MICHAEL LEVY
-------------------------------------------
Michael Levy
THE ESTATE OF BURK ZANFT
By: /s/ MARVIN FREEMAN
-------------------------------------------
Marvin Freeman, Executor
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
LIST OF SERIES A HOLDERS
NUMBER OF SHARES HELD
NAME AND ADDRESS SERIES A STOCK
------------------------------------------ ---------------------
Kleiner Perkins Caufield & Byers VII 2,637,000
2750 Sand Hill Road
Menlo Park, CA 94025
KPCB VII Founders Fund 288,000
2750 Sand Hill Road
Menlo Park, CA 94025
KPCB Information Sciences Zaibatsu Fund II 75,000
2750 Sand Hill Road
Menlo Park, CA 94025
<PAGE>
EXHIBIT B
LIST OF SERIES B HOLDERS
NUMBER OF SHARES HELD
NAME AND ADDRESS SERIES B STOCK
----------------------------------- ---------------------
Alliance Technology Ventures, L.P. 1,028,778
3343 Peachtree Road N.E.
Suite 1140, East Tower
Atlanta, Georgia 30326
Attn: Stephen Fleming
ATV/MFJ Parallel Fund, L. P. 82,333
3343 Peachtree Road N.E.
Suite 1140, East Tower
Atlanta, Georgia 30326
Attn: Stephen Fleming
TCI Online Sports Holdings, Inc. 1,666,667
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attn: Bruce Ravenel
Reuters NewMedia Inc. 1,666,667
1700 Broadway
New York, New York 10019
Attn: Steven Lake
New York Life Insurance Company 555,555
51-Madison Avenue
New York, New York 10010-1603
Attn: Investment Department -
Venture Capital Group, Room 207
Antares Capital Fund II Limited Partnership 277,778
10270 South Tropical Trail
Merritt Island, Florida 32952
Attn: Randall E. Poliner
Transatlantic Venture Partners, C.V. 277,777
3000 Sand Hill Road
Building 2, Suite 205
Menlo Park, California 49205
Attn: Eric Di Benedetto
Kleiner Perkins Caufield & Byers VII 488,334
2750 Sand Hill Road
Menlo Park, CA 94025
<PAGE>
KPCB VII Founders Fund 53,333
2750 Sand Hill Road
Menlo Park, CA 94025
KPCB Information Sciences Zaibatsu Fund II 13,889
2750 Sand Hill Road
Menlo Park, CA 94025
Stanford University 27,777
2770 Sand Hill Road
Menlo Park, California 94025
Attn: Carol Gilmer
Andrew Chase and Laura Chase, Trustees 13,888
Chase 1991 Revocable Trust
145 Stonegate Road
Portola Valley, California 94028
Richard A. Petit 10,000
1270 Forest Avenue
Palo Alto, California 94301
<PAGE>
EXHIBIT C
LIST OF INVESTORS
NUMBER OF SHARES HELD
NAME AND ADDRESS SERIES C STOCK
----------------------------------- ---------------------
US West Interactive Services, Inc. 2,589,630
9000 East Nichols
Englewood, Colorado 80122
Attn: John O'Farrell
Alliance Technology Ventures, L.P. 85,453
3343 Peachtree Road N.E.
Suite 1140, East Tower
Atlanta, Georgia 30326
Attn: Stephen Fleming
ATV/MFJ Parallel Fund, L.P. 6,847
3343 Peachtree Road N.E.
Suite 1140, East Tower
Atlanta, Georgia 30326
Attn: Stephen Fleming
Reuters NewMedia Inc. 447,515
1700 Broadway
New York, New York 10019
Attn: Steven Lake
New York Life Insurance Company 833,333
51 Madison Avenue
New York, New York 10010-1603
Attn: Investment Department -
Venture Capital Group, Room 207
Antares Capital Fund II Limited Partnership 100,000
10270 South Tropical Trail
Merritt Island, Florida 32952
Attn: Randall E. Poliner
Transatlantic Venture Partners, C.V. 416,667
3000 Sand Hill Road
Building 2, Suite 205
Menlo Park, California 49205
Attn: Eric Di Benedetto
<PAGE>
Kleiner Perkins Caufield & Byers VII 487,500
2750 Sand Hill Road
Menlo Park, CA 94025
KPCB Information Sciences Zaibatsu Fund II 12,500
2750 Sand Hill Road
Menlo Park, CA 94025
Stanford University 9,259
2770 Sand Hill Road
Menlo Park, California 94025
Attn: Carol Gilmer
Andrew Chase and Laura Chase, Trustees 11,296
Chase 1991 Revocable Trust
145 Stonegate Road
Portola Valley, California 94028
Natio Vie Developpement II 266,666
c/o BANEXI
12, rue Chauchat
75009 Paris, France
Attn: Dominique Bellanger
Natio Nouveaux Marches Europe 66,667
c/o BANEXI
12, rue Chauchat
75009 Paris, France
Attn: Dominique Bellanger
<PAGE>
EXHIBIT D
LIST OF SHARES HELD BY ZANFT AND LEVY
NUMBER OF SHARES
NAME OF COMMON STOCK HELD
----------------------------------- ---------------------
Michael Levy 3,800,000
Estate of Burk Zanft 2,000,000 (directly)
500,000 (by Warrant)
EXHIBIT 10.6
AGREEMENT
This Agreement (the "Agreement") is entered into as of the 5th day of
March, 1997 (the "Effective Date") between SPORTSLINE USA, INC., a Delaware
corporation with principal offices at 6340 NW 5th Way, Ft. Lauderdale, FL 33309
("SportsLine USA Inc.") and CBS INC., a New York corporation, with principal
offices at 51 West 52nd Street, New York, New York 10019 ("CBS").
RECITALS
A. SportsLine USA Inc. owns and operates the SportsLine USA Inc. Site
(as hereinafter defined).
B. SportsLine USA Inc. desires that CBS grant it the right to change
the name of the SportsLine USA Inc. Site to "CBS SportsLine" and to display
certain CBS sports-related content on such site.
C. SportsLine USA Inc. further desires that CBS promote the site to be
known as "CBS SportsLine" during certain CBS Television Network broadcasts as
specified herein.
D. In consideration of the performance by CBS of its obligations
hereunder, SportsLine USA Inc. desires to sell to CBS and CBS desires to
purchase from SportsLine USA Inc. a specified number of shares of SportsLine USA
Inc.'s common stock, in accordance with the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, SportsLine USA Inc. and CBS agree as follows:
1. DEFINITIONS
1.1 "AD GUARANTEE" shall have the meaning ascribed to it in
subparagraph 8.1 hereof;
1.2 "AD SHARES" shall have the meaning ascribed to it in subparagraph
10.2 hereof;
1.3 "CBS COMPETITOR" means any person, firm or corporation, other than
CBS, who is engaged either directly, or indirectly through an Affiliate, in
radio or television programming or program distribution (whether free
over-the-air, cable, telephone, local, microwave, or direct broadcast satellite
or otherwise) in North America. For purposes of this paragraph an "Affiliate" of
a person, firm or corporation shall mean another person, firm or corporation
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such person, firm or
corporation;
1.4 "CBS CONTENT PAGES" shall have the meaning ascribed to it in
subparagraph 8.4 hereof;
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<PAGE>
1.5 "CBS INTERNET SITE " shall have the meaning ascribed to it in
subparagraph 7.4 hereof;
1.6 "CBS LICENSE GUIDELINES AND RESTRICTIONS" means the clearance,
form, format and use restrictions and procedures set forth in Exhibit C attached
hereto and hereby made a part hereof which SportsLine USA, Inc. shall adhere to
in its use of CBS Sports Content, CBS Logos, CBS Merchandise and SportsLine USA
Inc. Content on the CBS SportsLine Site and on any Other SportsLine Site linked
from the CBS SportsLine Site (as such capitalized terms are hereinafter
defined);
1.7 "CBS LOGOS" means the logos specified in Exhibit B attached hereto
and hereby made a part hereof; the term "CBS Logos" shall not include the "CBS
SportsLine" logo.
1.8 "CBS MERCHANDISE" shall have the meaning ascribed to it in
subparagraph 8.7 hereof;
1.9 "CBS SPORTS CONTENT" means that certain Television Related Sports
Content and any additional sports-related Content which CBS has the right to
license to use on the Internet and which CBS and SportsLine USA Inc. mutually
agree pursuant to subparagraph 5.1 hereof should be placed on the CBS SportsLine
Site (as hereinafter defined), including, but not limited to the Content set
forth in Exhibit A attached hereto and hereby made a part hereof, to the extent
CBS already holds Internet rights to such Content. Nothing herein shall be
construed to grant SportsLine USA, Inc. any rights to CBS Radio Content or any
Content of CBS Cable;
1.10 "CBS SPORTS EVENT BROADCAST" shall have the meaning ascribed to it
in subparagraph 8.2 hereof;
1.11 "CBS SPORTSLINE SITE" means the SportsLine USA Inc. Site to be
renamed "CBS SportsLine" as provided herein, which shall be operated by
SportsLine USA Inc. and accessible through the URL http://cbs.sportsline.com and
/or such other URL as may be agreed between the parties;
1.12 "COMMON STOCK" shall have the meaning ascribed to it in
subparagraph 10.1 hereof;
1.13 "CONTENT" means text, graphics, photographs, video, audio and/or
other data or information relating to any subject;
1.14 "CONTENT SHARES" shall have the meaning ascribed to it in
subparagraph 10.1 hereof;
1.15 "CONTRACT YEAR" shall have the meaning ascribed to it in
subparagraph 3.1 hereof;
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<PAGE>
1.16 "DEFICIT AD AMOUNT" shall have the meaning ascribed to it in
subparagraph 10.3 hereof;
1.17 "EFFECTIVE DATE" shall have the meaning ascribed to it in the
opening paragraph hereof;
1.18 "INTELLECTUAL PROPERTY RIGHTS" means all inventions, discoveries,
trademarks, patents, trade names, copyrights, jingles, know-how, intellectual
property, software, shop rights, licenses, developments, research data, designs,
technology, trade secrets, test procedures, processes, route lists, computer
programs, computer discs, computer tapes, literature, reports and other
confidential information, intellectual and similar intangible property rights,
whether or not patentable or copyrightable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized third party usage),
and any and all applications for, registrations of and extensions, divisions,
renewals and reissuance of, any of the foregoing, and rights therein, including
without limitation (i) rights under any royalty or licensing agreements, and
(ii) programming and programming rights (including, but not limited to sports
material and outtakes), whether on film, tape or any other medium, whether
completed, in production or otherwise, and whether arising by contract, statute,
common law or otherwise;
1.19 "INTERNET" means a global network of interconnected computer
networks, each using the Transmission Control Protocol/Internet Protocol and/or
such other standard network interconnection protocols as may be adopted from
time to time, which is used to transmit Content that is directly or indirectly
delivered to a computer or other digital electronic device for display to an
end-user, whether such Content is delivered through on-line browsers, off-line
browsers, or through "push" technology, electronic mail, broadband distribution,
satellite, wireless or otherwise;
1.20 "INTERNET SITE" means any site or service delivering Content on or
through the Internet, including, without limitation, any on-line service such as
America Online, Compuserve, Prodigy and the Microsoft Network;
1.21 "INTERNET ADVERTISING DEFICIT" shall have the meaning ascribed to
it in subparagraph 8.8 hereof;
1.22 "NET ADVERTISING REVENUES" shall have the meaning ascribed to it
in subparagraph 8.5 hereof;
1.23 "NET MERCHANDISING REVENUES" shall have the meaning ascribed to it
in subparagraph 8.7 hereof;
1.24 "NEWS REPORTING" means the use of Television Related Sports
Content to report current news events, the use of which is licensed or which
does not require any third party license;
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1.25 "OTHER SECURITIES" shall have the meaning ascribed to it in
subparagraph 11.1 hereof;
1.26 "OTHER SPORTSLINE SITE" means any Internet Site owned in whole or
in part and/or operated by SportsLine USA Inc. other than the CBS SportsLine
Site or any Third Party Site;
1.27 "SIGNATURE EVENT" shall have the meaning ascribed to it in
subparagraph 8.5 hereof;
1.28 "SPORTSLINE USA, INC. CONTENT" shall have the meaning ascribed to
it in subparagraph 7.2 hereof;
1.29 "SPORTSLINE USA, INC. SITE" means that certain Internet Site
currently known as "SportsLine" and accessible through the URL
"http://www.sportsline.com"; it being understood that the term "SportsLine USA
Inc. Site" shall not include any Third Party Site or Other SportsLine Site;
1.30 "STOCKHOLDER AGREEMENT" shall have the meaning ascribed to it in
paragraph 13 hereof;
1.31 "TELEVISION RELATED SPORTS CONTENT" consists of video broadcast on
television and other Content which was used in the production and/or broadcast
of video on television;
1.32 "THIRD PARTY SITE" shall mean any Internet Site developed,
operated or maintained for a third party by SportsLine USA Inc.;
1.33 "UNITED STATES" means the United States of America, its
territories and possessions, including Puerto Rico;
1.34 "WARRANT" shall have the meaning ascribed to it in subparagraph
10.4 hereof.
2. LICENSES
2.1 CBS SPORTS CONTENT LICENSE. CBS hereby grants to SportsLine USA
Inc. during the term of this Agreement the exclusive right and license (to the
extent CBS owns or controls exclusive right or license) to use, copy, publicly
display, publicly perform, distribute or otherwise make available through the
CBS SportsLine Site and otherwise through the Internet, the CBS Sports Content,
subject to the terms and conditions contained herein. CBS agrees that users of
the CBS SportsLine Site may view, access, retrieve, copy and print only for
noncommercial private home use any CBS Sports Content distributed hereunder on
the CBS SportsLine Site. SportsLine USA, Inc. will present all video CBS Sports
Content in a streaming format or in another format designed to prevent
redistribution.
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2.2 CBS LOGO LICENSE. CBS hereby grants to SportsLine USA Inc. a
non-exclusive license to use the CBS Logos during the term of this Agreement in
connection with SportsLine USA Inc.'s operation of the CBS SportsLine Site,
subject to the terms and conditions contained herein. Nothing in this Agreement
grants SportsLine USA Inc. ownership or other rights in or to the CBS Logos,
except in accordance with this license.
2.3 CBS LICENSE GUIDELINES AND RESTRICTIONS. SportsLine USA Inc. shall
use the licenses granted by CBS hereunder subject to the terms and conditions of
this Agreement including, without limitation, and any restrictions or
requirements set forth in the CBS License Guidelines and Restrictions. It is
understood that the CBS License Guidelines and Restrictions may be revised,
frequently during the first three (3) months of the term of this Agreement and
from time to time thereafter, as mutually agreed upon by the parties to reflect
any changes in the business, practice, procedures or policies of CBS or
SportsLine USA Inc.
2.4 LICENSE EXEMPTIONS. SportsLine USA Inc. acknowledges that:
(i) CBS, in CBS's ordinary and regular course of
business, has the right to authorize or license the following
CBS or CBS related entities (herein individually referred to
as a "CBS Related Entity"and collectively referred to as the
"CBS Related Entities") the use of CBS Sports Content on said
CBS Related Entity's Internet Sites solely for the purpose of
(i) the advertising, marketing and promoting CBS Sports Event
Broadcasts to be exhibited on the CBS Related Entity's
facilities and to advertise, market and promote the CBS
Related Entity ("Promotion") and (ii) News Reporting:
(A) the CBS Television Network (e.g. CBS
Entertainment, CBS News and CBS Sports) and any CBS owned and
operated or affiliated standard television station;
(B) CBS Cable (e.g. CBS EYE ON PEOPLE, THE NASHVILLE
NETWORK (TNN), COUNTRY MUSIC TELEVISION (CMT) and CBS
TELENOTICIAS) and any CBS non-standard television network or
any CBS owned or affiliated non-standard television
facilities.
(C) the CBS Radio Network and any CBS owned and
operated or affiliated radio station.
CBS will advise all of said CBS Related Entities that they do not have
the right to use CBS Sports Content for any purpose other than News
Reporting and Promotion and that if they want to make a use of the CBS
Sports Content other than for a News Reporting or Promotion purpose,
CBS and SportsLine USA, Inc. have agreed, in their agreement
establishing the CBS SportsLine Site, that the CBS Related Entities
must negotiate in
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good faith with CBS SportsLine the terms and conditions for such use
and that a fee or other form of compensation will be due and owing for
such use. The CBS Related Entities will also be advised that (i) absent
reaching an agreement with CBS SportsLine, it was agreed that the CBS
Related Entities will pay to CBS SportsLine fifty percent (50%) of the
Net Advertising Revenues generated from the CBS Related Entity's web
site page containing the CBS Sports Content and (ii) that the CBS
Related Entity's Internet Site should have a link to the CBS SportsLine
Site on its home or sports page.
(ii) CBS may license CBS Sports Content to any entity, which
is not a CBS Related Entity, throughout the world in perpetuity in any
media now known or hereafter developed, other than the Internet,
including, without limitation, all forms of standard and non-standard
television, in connection with home video, CD-ROM and other interactive
multi-media distribution;
(iii) CBS may use, and authorize others to use CBS Sports
Content to advertise, market and/or promote in any media now known or
hereafter developed, including the Internet, CBS, any CBS Related
Entities, any programming of CBS and such CBS Related Entities, or any
distributor of such programming. CBS will use reasonable efforts to
establish a promotional link from any Internet Site page containing the
CBS Sports Content to the CBS SportsLine Site.
As used herein "standard television" shall mean terrestrial
over-the-air free television and "non-standard television" shall mean
all forms of television now existing or in the future developed, other
than standard television, including but not limited to cable
television, pay-cable television, master antenna television,
closed-circuit television, in-flight, hotel, motel or hospital room
service, and multi-point distribution videograms (such as videodiscs
and videocassettes and other copies of audiovisual works in all forms,
whether now or hereafter known or developed).
2.5 USE BY CBS SPORTSLINE OF CBS TELEVISION STATION SPORTS CONTENT. If
any CBS owned and operated television station creates any Television Related
Sports Content ("Television Station Sports Content") that is contained on the
television station's Internet Site and CBS SportsLine wishes to use the
Television Station Sports Content on the CBS SportsLine Site, CBS SportsLine and
the CBS Television Station shall negotiate in good faith the terms and
conditions for the inclusion of the Television Station Sports Content on the CBS
SportsLine Site. Absent an agreement, and provided there are no third party
restrictions with respect to such rights to the contrary, CBS SportsLine will
(A) pay to the CBS Television Station fifty percent (50%) of the Net Advertising
Revenues generated from the CBS SportsLine Site page containing the Television
Station's Sports Content and (B) link to the CBS Television Station's Internet
Site. With respect to CBS Television Network affiliates, SportsLine USA Inc.
will need to negotiate separate agreements.
2.6 USE BY CBS RELATED ENTITIES OF NON-CBS CONTENT FROM THE CBS
SPORTSLINE
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SITE. CBS Related Entities shall have the right to use non-CBS Content from the
CBS SportsLine Site on their Internet Site; provided that such use does not
exceed (i) a headline page, (ii) a sports score page and (iii) three (3) stories
or similar items, provided that such Content (A) links to the CBS SportsLine
Site and (B) the use of such Content does not violate any agreements which CBS
and/or SportsLine USA, Inc. have with a third party. CBS will advise all CBS
Related Entities that they do not have the right to use any non-CBS Content from
the CBS SportsLine Site for any purpose other than to publish such Content on
their Internet Site. The CBS Related Entities will also be advised that absent
reaching an agreement with CBS SportsLine, it was agreed that the CBS Related
Entities will pay to SportsLine USA, Inc. fifty percent (50%) of the Net
Advertising Reserves generated from the CBS Related Entity's Internet Site page
containing such non-CBS CBS SportsLine Content and that the CBS Related Entity's
Internet Site shall have a link to the CBS SportsLine Site on its sports page
and any page containing such non-CBS Content.
3. TERM
3.1 INITIAL TERM. This Agreement shall begin on the Effective Date and
shall continue in full force and effect through and including December 31, 2001,
unless it is terminated earlier in accordance with the terms and conditions
contained herein. Each successive one (1) year period during the term hereof
commencing January 1 and ending December 31 shall sometimes be referred to
herein as a "Contract Year," except that the first Contract Year shall commence
on the Effective Date and end on December 31, 1997.
3.2 EXTENSION OF TERM. The parties shall negotiate exclusively with
each other in good faith for a period of six (6) consecutive months (the
"Negotiation Period") with respect to any extension(s) of the term of this
Agreement at any time after July 1, 2000. The Negotiation Period shall be deemed
to commence either (i) upon the date of written notice from one party to the
other to initiate such Negotiation Period or (ii) on January 1, 2001, whichever
occurs first. At no time prior to or during the Negotiating Period shall
SportsLine USA, Inc. or CBS discuss, negotiate or enter into any agreement with
any third party for the comprehensive rights set forth in this Agreement. If at
the end of the Negotiating Period, CBS and SportsLine USA Inc. have not reached
agreement, CBS shall notify SportsLine USA Inc. in writing of the terms on which
it is then willing to extend the term of this Agreement (the "CBS Offer") and
SportsLine USA Inc. shall have a period of thirty (30) days in which to accept
the CBS Offer. If SportsLine USA Inc. does not accept the CBS Offer, SportsLine
USA Inc. shall have the right until September 30, 2001 (the "Offer Deadline") to
enter into any agreement with any third party with respect to the right to use
Television Related Sports Content on any Internet Site after the expiration of
this Agreement (a "Third Party Offer"), provided, however, that SportsLine USA
Inc. first in each instance furnish CBS a copy of all of the terms and
conditions of such Third Party Offer, signed by SportsLine USA Inc. and by the
third party making such offer. CBS shall only consider the terms and conditions
of any Third Party Offer which are readily reducible to a determinable sum of
money. If prior to the Offer Deadline, SportsLine USA, Inc. receives any Third
Party Offer which contains terms and conditions which do not exceed the CBS
Offer by more than ten percent
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(10%), CBS shall have the option, exercisable no later than twenty (20) business
days after its receipt of notice of such Third Party Offer, to offer SportsLine
USA, Inc. the same terms and conditions contained in such Third Party Offer.
Except as otherwise expressly provided in this Agreement, during the term of
this Agreement and for a period of six (6) months thereafter, SportsLine USA
Inc. shall not use Television Related Sports Content provided by any CBS
Competitor on any Internet Site or use the logos or tradenames of any CBS
Competitor to brand any Internet Site, unless SportsLine USA Inc.'s right to use
such Television Related Sports Content or such logos or tradenames is derived
from (i) the acceptance by SportsLine USA Inc. of a Third Party Offer which
exceeds the CBS Offer by more than ten percent (10%), or (ii) the acceptance by
SportsLine USA Inc. of a Third Party Offer which does not exceed the CBS Offer
by more than ten percent (10%), which Third Party Offer CBS declined to match
within twenty (20) business days after receiving written notice thereof from
SportsLine USA Inc.
4. EXCLUSIVE RELATIONSHIP
4.1 EXCLUSIVITY OBLIGATIONS - SPORTSLINE USA INC. Except as otherwise
specified in this Agreement, during the term of this Agreement, without CBS's
prior written approval:
(i) SportsLine USA Inc. shall not display, perform,
distribute, transmit or otherwise make available in any media now known
or hereafter developed, other than through the CBS SportsLine Site, any
CBS Sports Content, CBS Logos, CBS Merchandise (as defined in
subparagraph 8.7 hereof) or any portion thereof;
(ii) SportsLine USA Inc. shall not display, perform,
distribute, transmit or otherwise make available in any media now known
or hereafter developed, including, without limitation, on the CBS
SportsLine Site or on any Other SportsLine Site, any non-CBS or
non-SportsLine USA Inc. Television Related Sports Content; provided,
however, SportsLine USA Inc. may use such Television Related Sports
Content (i) in connection with its operation of a Third Party Site,
(ii) in connection with News Reporting by SportsLine USA Inc. or (iii)
if furnished to SportsLine USA Inc. under its Golf Channel Agreement as
currently in effect excluding any renewals unless such renewals are
mutually agreed to by CBS and SportsLine USA, Inc.; or
(iii) SportsLine USA Inc. shall not advertise, promote or
market in any media now known or hereafter developed, including the
Internet, any non-CBS or non-SportsLine USA Inc. Television Related
Sports Content, except to the extent that CBS would permit such
advertising, promotion or marketing on the CBS Television Network
pursuant to its Date & Time Network Guidelines (by way of example, the
CBS Date & Time Network Guidelines currently permit the advertising of
pay-per-view events on the CBS Television Network); it is understood
that the foregoing restrictions and allowances may be revised by CBS to
promote maximizing advertising revenues for the CBS SportsLine Site in
keeping with CBS advertising policy; provided, however, SportsLine USA
Inc. may advertise, promote or market such Television Related Sports
Content (i) in
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connection with its operation of a Third Party Site, (ii) in connection
with News Reporting by SportsLine USA Inc. or (iii) if furnished to
SportsLine USA Inc. under its Golf Channel Agreement as currently in
effect excluding any renewals unless such renewals are mutually agreed
to by CBS and SportsLine USA Inc.
4.2 EXCLUSIVITY OBLIGATIONS - CBS. Except as otherwise specified in
this Agreement, during the term of this Agreement, without SportsLine USA Inc.'s
prior written approval (i) CBS shall not display, perform, distribute, transmit
or otherwise make any Television Related Sports Content available on any
Internet Site, other than on the CBS SportsLine Site, and (ii) CBS shall not
own, in whole or in part, and/or operate for or on behalf of CBS Sports an
Internet Site competitive to the CBS SportsLine Site.
5. CBS SPORTS CONTENT
5.1 CLEARANCE - GENERAL. Subject to the provisions of subparagraphs
5.2, 5.3 and 5.4 hereof, SportsLine USA Inc. shall have access to all CBS Sports
Content. CBS shall also attempt in accordance with standard CBS business
practices, including such editorial and financial considerations, as determined
by CBS, to obtain Internet rights (other than with respect to on-air sports
talent and music) for all other CBS sports-related Content not yet cleared for
Internet use which CBS and SportsLine USA Inc. mutually desire to place on the
CBS SportsLine Site. Any such Content once cleared for Internet use shall be
deemed CBS Sports Content. Except as provided by subparagraphs 5.2 and 5.3
hereof, in the event that there are costs associated with obtaining any
additional Internet rights (whether for already or subsequently cleared CBS
Sports Content), prior to paying or entering into any arrangements to pay such
costs, CBS and SportsLine USA Inc. shall in good faith mutually agree on how
such costs shall be allocated between them.
5.2 CLEARANCE - TALENT. It is understood that CBS shall have no
obligation to secure the right to perform original services on the Internet from
its on-air sports talent. Without limiting the foregoing, CBS shall permit
SportsLine USA Inc. to contact all CBS on-air sports talent whose services have
not been secured by CBS to perform original services on the Internet. SportsLine
USA will consult CBS prior to contacting any such talent. CBS shall have the
right to be present at all presentations, conferences, discussions, negotiations
or other meetings between SportsLine USA Inc. and such CBS talent. SportsLine
USA Inc. shall have the right to negotiate and enter into any agreement with
such CBS talent with respect to the use of their original services on the CBS
SportsLine Site, so long as such negotiation or agreement does not infringe upon
or conflict or interfere with the rights of CBS or any third party. SportsLine
USA Inc. agrees that CBS shall at all times have first priority over such
talent's services. SportsLine USA Inc. shall be solely responsible for any
payments to be made to such talent for the use of such talent's original
services on the CBS SportsLine Site.
5.3 CLEARANCE - MUSIC. In the event that SportsLine USA, Inc. desires
to use any music contained in any CBS Sports Content on the CBS SportsLine Site,
prior to such use,
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SportsLine USA Inc. shall (i) report to the applicable music rights society on
behalf of CBS, all titles and publishers of all such music and, (ii) secure, at
its sole cost and expense, and pay for all performing, duplication and/or
recording rights licenses, if any, necessary for the use of such music on the
Internet. CBS shall endeavor to deliver to SportsLine USA Inc. accurate music
cue sheets for all such music.
5.4 DELIVERY. CBS shall deliver, at times reasonably requested by
SportsLine USA Inc., all CBS Sports Content in a mutually agreed form and
format. SportsLine USA Inc. shall be responsible for and shall reimburse CBS for
all actual and reasonable costs and expenses, above and beyond those expenses
normally incurred by CBS in the ordinary course of business, which are incurred
by CBS in preparing and/or delivering the CBS Sports Content in such form and
format, so long as CBS has notified SportsLine USA Inc. in advance, and
SportsLine USA Inc. has authorized the expenditure, of such costs and expenses.
5.5 CONTROL AND USE. During the term of this Agreement, CBS shall have
full and complete editorial and creative control and approval over the
presentation, look and feel of the CBS Sports Content as it appears on the CBS
SportsLine Site, and SportsLine USA Inc. may use any CBS Sports Content on the
CBS SportsLine Site, subject to any restrictions or requirements set forth in
the CBS License Guidelines and Restrictions. SportsLine USA Inc. shall be solely
responsible for the engineering, production, maintenance and monitoring of all
CBS Sport Content which SportsLine USA Inc. makes available on the CBS
SportsLine Site and for any commercial services that SportsLine USA Inc. offers
or makes available on the CBS SportsLine Site on behalf of CBS, including
without limitation any such services that SportsLine USA Inc. offers or makes
available pursuant to subparagraph 8.7 hereof. SportsLine USA Inc. shall have
the right to edit and revise the CBS Sports Content subject to any restrictions
or requirements set forth in the CBS License Guidelines and Restrictions. In
addition, subject to any restrictions or requirements in the CBS License
Guidelines and Restrictions, SportsLine USA Inc. shall have the right, but not
the obligation, to correct any errors, omissions and/or inaccuracies in the CBS
Sports Content identified by SportsLine USA Inc. or reported to SportsLine USA
Inc. by CBS SportsLine Site users. Notwithstanding anything to the contrary
contained herein, upon written notice from CBS, SportsLine USA Inc. shall cease
using any CBS Sports Content (i) which, in CBS's sole opinion, conflicts,
interferes with or is detrimental to CBS's reputation or business or (ii) which
becomes subject to any third party restriction or claim which would prohibit,
limit or restrict the use thereof on the Internet.
6. LOGOS
6.1 CBS LOGOS AND "SPORTSLINE" LOGOS. CBS shall deliver to SportsLine
USA Inc. a copy of each of the CBS Logos in the form in which it may be used by
SportsLine USA Inc. on the CBS SportsLine Site. SportsLine USA Inc. acknowledges
that the CBS Logos, including, without limitation, the trademark "CBS," are
trademarks owned or controlled by CBS Inc. and that all use by SportsLine USA
Inc. of such CBS Logos shall inure to CBS's benefit. CBS acknowledges that the
logo "SportsLine" is owned or controlled by SportsLine USA Inc. and that
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all use thereof by CBS shall inure to the benefit of SportsLine USA Inc. Each
party shall maintain such quality standards with respect to the use of the
other's logos, and otherwise use the other's logos subject to any restrictions
or requirements in the CBS License Guidelines and Restrictions.
6.2 CBS SPORTSLINE LOGO. CBS and SportsLine USA Inc. shall jointly
develop the "CBS SportsLine" logo. It is understood that CBS shall have the
right to use the "CBS SportsLine" logo in the exercise of its advertising,
promotional and marketing rights hereunder and SportsLine USA Inc. shall have
the right to use the "CBS SportsLine" logo in connection with its operation of
the CBS SportsLine Site and its advertising, promotion and marketing of the CBS
SportsLine Site in any media now known or hereafter developed. Each party shall
maintain such quality standards with respect to the use of the "CBS SportsLine"
logo, and otherwise use the "CBS SportsLine" logo subject to any restrictions or
requirements in the CBS License Guidelines and Restrictions. Except as otherwise
provided by subparagraph 6.1 above, the use by SportsLine USA Inc. and CBS of
the "CBS SportsLine" logo shall inure to the benefit of each of them equally.
6.3 USE OF SPORTSLINE LOGO ON OTHER INTERNET SITES. Subject to the
provisions of subparagraph 7.5 hereof, CBS acknowledges that SportsLine USA Inc.
may operate any Other SportsLine Site under the SportsLine name or logo which
(i) contains Content that either relates primarily to events occurring outside
of the United States or is intended to be delivered primarily to residents
outside of the United States (a "Foreign SportsLine Site") or (ii) is mutually
agreed to. SportsLine USA Inc. may also use the name "SportsLine" in connection
with its operation of any Third Party Site but only as a credit to identify
SportsLine USA Inc. as the operator of such site; it being understood that no
Third Party Site shall use the word "SportsLine" as the name or logo of such
site. Notwithstanding anything to the contrary contained herein, unless
otherwise mutually agreed, (i) no Third Party Site shall have the look and feel
of the CBS SportsLine Site and (ii) no Foreign SportsLine Site will use a
graphic look similar to the CBS SportsLine Site.
6.4 SIMILAR TRADEMARKS. CBS shall not file any application in any
country to register a trademark which contains the word "SportsLine," or is the
same as, similar to, or deceptive or misleading with respect to the "SportsLine"
logo, the "CBS SportsLine" logo or any other SportsLine USA Inc. trademark and
SportsLine USA Inc. shall not file any application in any country to register a
trademark which contains "CBS," or is the same as, similar to, or deceptive or
misleading with respect to the CBS Logos, the "CBS SportsLine" logo, or any
other CBS trademark, except as provided under subparagraph 6.3 above. If any
application for registration is filed in any country by CBS or SportsLine USA
Inc. in contravention of this subparagraph 6.4, the other party shall have the
right to take appropriate action against the infringing party, including seeking
injunctive relief, to prohibit or otherwise restrain the infringing party's use
of the infringing mark.
6.5 NOTICE OF THIRD PARTY INFRINGEMENT OF TRADEMARKS. In the event that
either party learns of any infringement, threatened infringement, or passing off
of the other's trademarks or
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logos licensed for used in connection with this Agreement, or that any third
party claims or alleges that the such trademarks or logos are liable to cause
deception or confusion to the public, then such party shall notify the other
party of the particulars thereof. It is understood that each party shall defend
and bear the cost of defending its own trademarks and logos, except that the
parties shall jointly defend and share equally in the cost of defending the "CBS
SportsLine" logo.
6.6 TERMINATION OF USE. Upon the expiration or earlier termination of
this Agreement, SportsLine USA Inc. and CBS shall each cease all use of the "CBS
SportsLine" logo and all use of the logos of the other, as well as, discontinue
the use of the CBS SportsLine URL, as soon as commercially and technically
practicable, but in no event shall any such use continue for more than fifteen
(15) days after the expiration, or for more than thirty (30) days after the
earlier termination, of this Agreement.
7. OPERATION OF CBS SPORTSLINE SITE
7.1 RENAMING OF THE SPORTSLINE URL. SportsLine USA Inc. shall take all
steps necessary (including filing any required domain name registration or
amendment) to adopt a new URL "http://cbs.sportsline.com" for the CBS SportsLine
Site. The new URL shall access the CBS SportsLine Site during the term of this
Agreement.
7.2 APPROVAL OF SPORTSLINE USA INC. CONTENT. SportsLine USA Inc. agrees
that all Content not furnished by CBS which SportsLine USA Inc. intends to use
on the CBS SportsLine Site ("SportsLine USA Inc. Content") shall include only
sports-related Content. During the term of this Agreement, any use of the
SportsLine USA Inc. Content on the CBS SportsLine Site shall be subject to any
restrictions or requirements set forth in the CBS License Guidelines and
Restrictions. Notwithstanding anything to the contrary contained herein, CBS
shall have the right to demand the withdrawal from the CBS SportsLine Site of
any SportsLine USA Inc. Content which in CBS's sole opinion conflicts,
interferes with or is detrimental to CBS's reputation or business. Upon written
notice from CBS setting forth the reason for such withdrawal, SportsLine USA
Inc. shall cease using any such Content on the CBS SportsLine Site as soon as
commercially and technically feasible, but in any event within fifteen (15) days
after the date of the receipt of CBS's notice. If SportsLine USA Inc. cannot
cease using such Content within seventy-two (72) hours, SportsLine USA Inc. will
provide CBS with the details of why the cessation cannot be accomplished within
seventy-two (72) hours. Subject to the provisions of subparagraph 7.5 hereof,
SportsLine USA Inc. shall have the right to place any such Content on any other
Internet Sites provided that such Internet Site shall not have the look and feel
of the CBS SportsLine Site, shall not contain the word "SportsLine" or "CBS" in
its name or logo nor have any other name or logo similar to, or deceptive or
misleading with respect thereto ("private labeled Content"). Notwithstanding the
foregoing, and subject to the provisions of subparagraph 7.5 hereof, SportsLine
USA Inc. may establish, subject to any restrictions or requirements in the CBS
License Guidelines and Restrictions, a cross-link between any private labeled
Content and any page within the CBS SportsLine Site which does not contain any
CBS Sports Content, CBS Logos or CBS Merchandise (as defined in subparagraph 8.7
hereof). If the removal of any
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Content (other than Content related to gambling, alcohol or tobacco) as a result
of a request by CBS can reasonably be expected to result in a material adverse
effect to the CBS SportsLine Site, which, for purposes of this Paragraph 7.2
shall mean any effect, such as a loss of existing or potential revenues, of more
than (i) during the first ten (10) months of this Agreement One Million Dollars
($1,000,000) and (ii) thereafter, ten percent (10%) of the revenues of
SportsLine USA, Inc. during the preceding fiscal year, then SportsLine USA, Inc.
shall have the right to terminate this Agreement unless CBS agrees to compensate
SportsLine USA Inc. for the effect of such removal in a mutually agreed amount.
7.3 CROSS LINKS BETWEEN THE CBS SPORTSLINE SITE AND SPORTSLINE USA INC.
OWNED OR OPERATED SITES. If SportsLine USA Inc. desires to establish a
cross-link between the CBS SportsLine Site and any Foreign SportsLine Site or
Third Party Site, SportsLine USA Inc. shall notify CBS in advance in writing.
Subject to the provisions of subparagraph 7.5 hereof, CBS shall permit
SportsLine USA Inc. to establish, subject to any restrictions or requirements in
the CBS License Guidelines and Restrictions, such cross-linkage if CBS has
determined that the cross-link will not in CBS's sole opinion, conflict with,
interfere with or be detrimental to CBS's reputation or business or violate any
agreement to which CBS is a party. Notwithstanding anything to the contrary
contained herein, SportsLine USA Inc. shall not operate any Other SportsLine
Site or Third Party Site relating to the 1998 Winter Olympics without CBS's
prior approval which will not be unreasonably withheld. SportsLine USA Inc.
acknowledges that no CBS Sports Content may be used on any Foreign SportsLine
Site or any Third Party Site without CBS's prior written approval.
7.4 CROSS LINKS BETWEEN THE CBS SPORTSLINE SITE AND CBS INTERNET SITES.
CBS and SportsLine USA Inc. agree that, subject to any restrictions or
requirements in the CBS License Guidelines and Restrictions a link shall be
established to the CBS SportsLine Site and all Internet Sites operated by or on
behalf of CBS (a "CBS Internet Site") which include any sports Content. This
provision excludes CBS Radio Network, CBS Radio Stations and CBS Cable entities.
7.5 PROHIBITION OF GAMBLING ACTIVITIES. SportsLine USA Inc. at no time
shall publicize, advertise, distribute, transmit, promote or otherwise make
available information about gambling or lotteries in violation of any federal,
state, local or foreign law, regulation, order or act of government or
governmental instrumentality to which either CBS or SportsLine USA Inc. is
subject, nor shall SportsLine USA Inc. engage in, aid or abet, any such gambling
or lottery activity in violation of any federal, state, local or foreign law,
regulation, order or act of government or governmental instrumentality to which
either CBS or SportsLine USA Inc. is subject. Furthermore, SportsLine USA Inc.
shall not at any time permit or authorize any cross-links between the CBS
SportsLine Site and any Other SportsLine Site or any Third Party Site that
publicizes, advertises, distributes, transmits, promotes or otherwise makes
available information about gambling or lotteries in violation of any federal,
state, local or foreign law, regulation, order or act of government or
governmental instrumentality to which either CBS or SportsLine USA Inc. is
subject.
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7.6 PROMOTION OF CBS SPORTSLINE SITE ON THE INTERNET. SportsLine USA,
Inc. shall have the right to use the Content from the CBS SportsLine Site to
advertise, market or promote the CBS SportsLine Site on other Internet Sites,
subject to CBS's approval, which will not be unreasonably withheld.
8. ADVERTISING, PROMOTIONAL AND MERCHANDISING OBLIGATIONS
8.1 GENERAL. During each Contract year during the term hereof, CBS
shall (i) arrange for the placement of broadcast advertising and promotion of
the CBS SportsLine Site in the type of media set forth in the Advertising and
Promotion placement schedule set forth in Exhibit D attached hereto and hereby
made a part hereof and (ii) provide such advertising and promotion in the
minimum amounts specified in Exhibit E attached hereto and hereby made a part
hereof (the "Ad Guarantee"). SportsLine USA Inc. shall pay for such advertising
and promotion provided by CBS in accordance with paragraph 10 hereof. The value
of all broadcast advertising and promotion provided to SportsLine USA, Inc.
shall be based upon the average paid unit price, excluding barter, for spots
purchased during the specific CBS Television Network broadcast in which the
advertising or promotion occurs, except as otherwise specified in Exhibit E. The
value of all advertising and promotion shall be subject to audit by SportsLine
USA Inc. pursuant to paragraph 12 hereof.
8.2 PLACEMENTS DURING CBS TELEVISION NETWORK BROADCASTS. Without
limiting the generality of subparagraph 8.1 above, at least semi-annually, CBS
shall, in consultation with SportsLine USA Inc., develop a schedule for the
placement of advertising and promotion of the CBS SportsLine Site and/or the URL
for the CBS SportsLine Site (an "ad placement") occurring in connection with a
CBS Sports broadcast of a sports events over the CBS Television Network during
the term of this Agreement (a "CBS Sports Event Broadcast") or any other ad
placement. Notwithstanding the foregoing, CBS shall not have to make any ad
placements if the exigencies of time or, despite CBS's reasonable efforts,
current or future contractual obligations, prevent or restrict CBS from doing
so. SportsLine USA Inc. acknowledges that CBS is contractually prohibited from
making any ad placements within the CBS Sports Event Broadcast of the Masters
Golf Tournament. CBS agrees that a minimum of seventy percent (70%) of the value
of all advertisement and promotion to be paid for by SportsLine USA Inc. during
each Contract Year shall be placed during, within and/or adjacent to CBS Sports
Event Broadcasts. CBS will deliver to SportsLine USA, Inc., within thirty (30)
days after the end of each Contract Year a statement, certified by an officer of
CBS, summarizing the value of the ad placements that CBS made for the CBS
SportsLine Site during such Contract Year (herein called a "Report"). Each
Report will include for each ad placement the time delivered, the average paid
unit price received by CBS and the total value of the ad placements received by
CBS SportsLine Site for the Contract Year.
8.3 OTHER PLACEMENTS. CBS agrees that, during the term of this
Agreement, it shall consult with SportsLine USA Inc. and discuss in good faith
additional promotional opportunities for the CBS SportsLine Site, including
without limitation the promotion of the CBS SportsLine Site on CBS's owned and
operated television stations and on the CBS Radio Network as
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described in Exhibit D.
8.4 INTERNET ADVERTISING - SALES STRATEGY. CBS and SportsLine USA Inc.
shall each have the right to sell advertising space on any pages of the CBS
SportsLine Site. CBS and SportsLine USA Inc. agree that the most critical
element necessary to ensure that advertising sales revenues are maximized will
be to avoid confusion in the marketplace of corporate and product identity. For
"CBS Content Pages" and Signature Events (as defined herein) CBS shall determine
ad sales strategy, sales call lists and pricing in consultation with a joint
staff designated by CBS and SportsLine USA Inc. to coordinate CBS SportsLine
Site advertising sales; provided that, unless otherwise agreed by SportsLine
USA, Inc., CBS shall not set the pricing of such advertising at a rate of more
than fifteen percent (15%) less than the average rate received from advertisers
on the CBS SportsLine Site during the preceding three (3) months. CBS represents
that all prior Internet advertising obligations it has for sports-related
programming are set forth in Exhibit K, and shall be honored within the CBS
SportsLine Site in a manner agreed to by CBS and SportsLine USA Inc. For all
other pages of the CBS SportsLine Site, SportsLine USA Inc. shall determine ad
sales strategy, call lists and pricing in consultation with CBS. For purposes of
this Agreement "CBS Content Pages" are pages of the CBS SportsLine Site that
include any CBS Sports Content and any CBS Merchandise. During the term of this
Agreement, SportsLine USA Inc. will give CBS access to all advertising and
customer usage research generated by SportsLine USA Inc.
8.5 INTERNET ADVERTISING -SALES SPLIT FOR CBS CONTENT PAGES. CBS shall
receive sixty percent (60%) and SportsLine USA Inc. shall receive forty percent
(40%) of the "Net Advertising Revenues" (as defined herein) from advertising
sold by either party relating to a Signature Event (as defined herein). In
addition, the parties shall share equally in Net Advertising Revenues from
advertising sold by either party on CBS Content Pages not relating to a
Signature Event. For purposes of this Agreement "Net Advertising Revenues" means
the gross U.S. dollar sums actually received from the sale of advertising on the
CBS SportsLine Site by SportsLine USA Inc. or CBS, as the case may be, less all
third-party payments actually made, including, without limitation, sales
representative commissions provided such sales representative commissions do not
exceed twenty percent (20%) in each instance. For purposes of this Agreement a
"Signature Event" means each of the sports events set forth in Exhibit F
attached hereto and hereby made a part hereof so long as CBS continues to hold
the free over-the-air television broadcast rights in the United States for the
CBS Television Network. CBS and SportsLine USA Inc. agree that all advertising
sales made under this Agreement shall be made in cash in U.S. dollars, unless
the parties mutually agree in advance to another method of payment.
8.6 INTERNET ADVERTISING -NEW EVENTS. If CBS acquires the free over the
air television broadcast rights in the United States for the CBS Television
Network for any of the events listed in Exhibit L, those events shall be
Signature Event for so long as CBS continues to hold such rights. If CBS
acquires the free over the air television broadcast rights in the United States
for the CBS Television Network to any regular season NFL or NBA games, CBS and
SportsLine USA, Inc. shall negotiate in good faith a revenue sharing arrangement
based on the following
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considerations:
(i) the quality of the package that CBS has acquired;
(ii) the history of traffic on the NFL or NBA sections of the
CBS SportsLine Site prior to the commencement of the broadcast of such
package;
(iii) the projected traffic of those sections absent such
broadcast package based on CBS SportsLine's historical performance and
projected industry trends; and
(iv) CBS's ability to promote the CBS SportsLine Site during
such broadcast packages.
8.7 INTERNET MERCHANDISING. For purposes of this Agreement "CBS
Merchandise" shall mean any CBS merchandise, whether or not related to CBS
sports programming. CBS and SportsLine USA Inc. agree that any and all CBS
Merchandise may be offered for sale on CBS Content Pages or on any other
merchandising page of the CBS SportsLine Site so long as such Merchandise has
been approved in advance by CBS. CBS and SportsLine USA Inc. shall share equally
in "Net Merchandising Revenues" (as defined herein) derived from the sales of
CBS Merchandise sold by SportsLine USA, Inc. For purposes of this Agreement "Net
Merchandising Revenues" means the gross U.S. dollar sums actually received from
the sale of CBS Merchandise (exclusive of VAT, sales and similar taxes) less all
taxes other than VAT, sales and similar taxes initially excluded, the costs of
goods sold, packaging costs, credits, rebates, credit card processing fees,
reserves against returns not exceeding twenty percent (20%) of gross sales,
insurance and shipping charges. CBS and SportsLine USA Inc. agree that all CBS
Merchandise sales made under this Agreement shall be made in U.S. dollars.
8.8 INTERNET ADVERTISING DEFICITS . In the event that either CBS or
SportsLine USA Inc. is unable to deliver the number of impressions guaranteed to
any advertiser buying inventory on any CBS Content Page, then the parties shall
mutually agree to: (i) provide such advertiser with substitute inventory on
another CBS Content Page in the value amount due and owing such advertiser (the
"Internet Advertising Deficit"), in which event the parties shall share in Net
Advertising Revenues as they would pursuant to subparagraph 8.5 or 8.6 above, or
(ii) in the event that there is no available inventory on a CBS Content Page,
SportsLine shall deliver the Internet Advertising Deficit on any other page of
the CBS SportsLine Site and may keep all of Net Advertising Revenues derived
therefrom.
8.9 CBS SPORTSLINE MERCHANDISING. For purposes of this Agreement "CBS
SportsLine Merchandise" shall mean any merchandise, whether or not related to
CBS Sports Content which contains the CBS SportsLine logo. CBS and SportsLine
USA Inc. agree that any and all CBS SportsLine Merchandise may be offered for
sale, so long as such CBS SportsLine Merchandise has been approved in advance by
CBS, on CBS Content Pages or on any other merchandising page of the CBS
SportsLine Site, on any CBS Internet Site, in the CBS Store, catalogues, or any
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other manner or means which CBS uses to merchandise it own CBS Merchandise . CBS
and SportsLine USA Inc. shall share equally in "Net Merchandising Revenues" (as
defined herein) derived from the sales of CBS SportsLine Merchandise. For
purposes of this Agreement "Net Merchandising Revenues" means the gross U.S.
dollar sums actually received from the sale of CBS SportsLine Merchandise
(exclusive of VAT, sales and similar taxes), less all taxes other than VAT,
sales and similar taxes initially excluded, the costs of goods sold, packaging
costs, credits, rebates, credit card processing fees, reserves against returns
not exceeding twenty percent (20%) of gross sales, insurance and shipping
charges. CBS and SportsLine USA Inc. agree that all CBS SportsLine Merchandise
sales made under this Agreement shall be made in U.S. dollars.
9. OTHER OBLIGATIONS
CBS shall use reasonable efforts to secure media credentials for a
reasonable number of SportsLine USA Inc.'s editorial staff to cover Signature
Events. CBS shall also use reasonable efforts to provide SportsLine USA Inc.
with a reasonable number of tickets to Signature Events and access to
hospitality suites therefor. SportsLine USA Inc. acknowledges that for certain
Signature Events such as the Masters, the 1998 Winter Olympics and the NCAA
Final Four, tickets and access may be difficult for CBS to provide. If
appropriate office space is available, CBS will sub-lease to SportsLine USA Inc.
such office space within its New York, Chicago, San Francisco, Los Angeles, and
Detroit offices, on terms to be mutually agreed upon the parties in good faith.
SportsLine USA Inc. shall reimburse CBS for all actual direct costs which CBS
incurs in fulfilling its obligations under this paragraph 9, provided that CBS
has notified SportsLine USA Inc. in advance of such costs, and SportsLine USA
Inc. has authorized the expenditure thereof.
10. COMPENSATION
10.1 SHARES FOR CBS SPORTS CONTENT AND CBS LOGOS. In consideration of
the grant by CBS of the licenses set forth in subparagraphs 2.1 and 2.2 hereof ,
on the first business day of each Contract Year during the term hereof,
SportsLine USA Inc. shall issue to CBS a stock certificate for the number of
shares of SportsLine USA Inc. common stock, par value $.01 per share ("Common
Stock") specified in the Content Contribution schedule set forth in Exhibit G
attached hereto and hereby made a part hereof ("Content Shares"). The Content
Shares shall not be subject to forfeiture except as provided in subparagraph
19.2 hereof.
10.2 SHARES FOR CBS'S ADVERTISING AND PROMOTION. In consideration of
CBS providing advertising and promotion during each Contract Year in the minimum
amount of the Ad Guarantee, on the first business day of each Contract Year
during the term hereof, SportsLine USA Inc. shall issue to CBS a stock
certificate for the number of shares of Common Stock specified in Exhibit E ("Ad
Shares").
10.3 ADVERTISING AND PROMOTION DEFICITS. If at the end of any Contract
Year during the term hereof, CBS has failed to meet its Ad Guarantee for such
Contract Year, CBS shall deliver advertisement and promotion valued at the
balance due and owing of such Ad Guarantee (the
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"Deficit Ad Amount") by the end of the third month of the subsequent Contract
Year (which shall be in addition to the Ad Guarantee allocated for such
subsequent Contract Year). If the value of the advertising and promotion
provided by CBS during any Contract Year (other than any advertising and
promotion provided by CBS pursuant to the preceding sentence) is in excess of
the Ad Guarantee, SportsLine USA, Inc. shall have no obligation to compensate
CBS for such excess (whether by issuance of additional shares of Common Stock or
otherwise).
10.4 WARRANTS. On the first business day of each Contract Year during
the term hereof, SportsLine USA Inc. shall grant CBS a warrant, in the form set
forth in Exhibit H attached hereto and hereby made a part hereof (the
"Warrant"), to purchase all or any part of the number of shares of Common Stock
set forth in Exhibit I attached hereto and hereby made a part hereof at the
price specified in Exhibit I. CBS may exercise each such Warrant at such time or
number of times as CBS shall elect; provided, that each such Warrant must be
exercised by written notice to SportsLine USA Inc. on or prior to the last
business day of the Contract Year in which it is granted.
11. EQUITY ADJUSTMENTS
11.1 SECURITIES ISSUABLE TO CBS. All amounts payable by SportsLine USA
Inc. to CBS pursuant to Paragraphs 10.1 and 10.2 hereof shall be payable solely
by the issuance by SportsLine USA Inc. of shares of Common Stock in the amounts
specified in such paragraphs. Notwithstanding the foregoing, the number and type
of securities issuable by SportsLine USA Inc. to CBS pursuant to Paragraphs 10.1
and 10.2, and the number and type of securities subject to Warrants to be
granted by SportsLine USA Inc. to CBS pursuant to Paragraph 10.4, shall be
subject to adjustment as set forth in Paragraphs 11.2 and 11.3. The term "Other
Securities" shall mean any securities of SportsLine USA Inc., other than Common
Stock, that, as a result of any adjustment made pursuant to Paragraphs 11.2 or
11.3, may hereafter be issuable as Content Shares or Ad Shares or subject to
Warrants granted hereunder. All shares of Common Stock or Other Securities
issuable by SportsLine USA Inc. hereunder shall, upon such issuance, be fully
paid and nonassessable.
11.2 ADJUSTMENT FOR RECAPITALIZATION, ETC. If SportsLine USA Inc. shall
at any time subdivide its outstanding shares of Common Stock (or Other
Securities at the time receivable by CBS hereunder as Content Shares or Ad
Shares) by recapitalization, reclassification or split-up thereof, or if
SportsLine USA Inc. shall declare a stock dividend or distribute shares of
Common Stock to its shareholders, the number of shares of Common Stock (or Other
Securities) issuable after the date of such subdivision to CBS as Content Shares
or Ad Shares pursuant to Paragraphs 10.1 and 10.2, respectively, and the number
of shares of Common Stock (or Other Securities) subject to any Warrants granted
after the date of such subdivision to CBS pursuant to Paragraph 10.4, shall be
proportionately increased and the price per Content Share or Ad Share or the
exercise price of any such Warrants, as the case may be, shall be
proportionately decreased; and if SportsLine USA Inc. shall at any time combine
the outstanding shares of Common Stock (or Other Securities) by
recapitalization, reclassification or combination thereof, the number of shares
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of Common Stock (or Other Securities) issuable after the date of such
combination to CBS as Content Shares or Ad Shares pursuant to Paragraphs 10.1
and 10.2, respectively, and the number of shares of Common Stock (or Other
Securities) subject to any Warrant granted after the date of such combination to
CBS pursuant to Paragraph 10.4, shall be proportionately decreased and the price
per Content Share or Ad Share and the exercise price of any such Warrants shall
be proportionately increased. Any such adjustments pursuant to this Paragraph
11.2 shall be effective at the close of business on the effective date of such
subdivision or combination or, if any adjustment is the result of a stock
dividend or distribution, then the effective date for such adjustment shall be
the record date therefor.
11.3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case of any reorganization of SportsLine USA Inc. (or any other corporation, the
securities of which are at the time receivable hereunder as Content Shares or Ad
Shares or subject to any Warrants granted hereunder) after the date hereof or in
case after the date hereof SportsLine USA Inc. (or any such other corporation)
shall consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation, then, and in each such
case, CBS, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the number of shares of Common Stock (or Other Securities) issuable to CBS as
Content Shares or Ad Shares prior to such consummation, or subject to Warrants
thereafter granted, the securities or property to which CBS would have been
entitled (or which would have been issuable upon exercise of such Warrants)
after such consummation if such Content Shares, Ad Shares or Warrants had been
issued immediately prior thereto).
11.4 RESTRICTED SECURITIES. CBS understands that the Content
Securities, the Ad Securities, the Warrants and the shares of Common Stock
issuable upon exercise of the Warrants (collectively, the "Securities") will be
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from SportsLine USA, Inc. in a transaction not involving a public
offering; and that under such laws and applicable regulations, such Securities
may be resold without registration under the Securities Act only in certain
limited circumstances. CBS agrees that the Securities are being and will be
acquired for investment for CBS's own account, and not with a view to the resale
or distribution thereof, and that CBS has no present intention of selling,
granting any participation in, or otherwise distributing the Securities. CBS
further agrees not to make any disposition of all or any portion of the
Securities unless (i) there is then in effect a registration statement under the
Securities Act of 1933 covering such proposed disposition and such disposition
is made in accordance with such registration statement, or (ii) CBS shall have
furnished SportsLine USA, Inc. with an opinion of counsel, reasonably
satisfactory to SportsLine USA, Inc., that such disposition will not require
registration under the Securities Act. Each certificate representing the
Securities shall be stamped or otherwise imprinted with a legend substantially
in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD,
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TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER
DELIVERS TO THE COMPANY AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
In addition to the foregoing, during each Contract Year, the Content Shares and
Ad Shares issued to CBS on the first day of such Contract Year shall not, until
the first business day of the subsequent Contract Year, be transferred, sold or
otherwise disposed of by CBS, except as may be permitted by Paragraph 20.1
hereof. To enforce the foregoing covenant, SportsLine USA, Inc. shall have right
to place the following restrictive legend on the certificates representing the
Securities and to refuse to transfer and/or impose stop transfer instructions
with respect to the Securities during any period that the foregoing restrictions
remain in effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF FOR A PERIOD OF ONE YEAR
AFTER THE DATE OF ISSUANCE.
12. AUDITS
During the term of this Agreement and for a period of two (2) years
thereafter, each party shall keep and maintain accurate books and records
relating to this Agreement. CBS will furnish to SportsLine USA, Inc. a certified
statement of an officer of CBS stating that the Reports furnished to SportsLine
USA Inc are complete and are based upon and accurately reflect all relevant
facts, figures, records and information. Upon request, SportsLine USA Inc. or
its agent(s) may inspect, audit and analyze copies of those records of CBS
relating to this Agreement certified by an officer of CBS as being the only
records relevant to the purpose of SportsLine USA Inc.'s audit. Upon request,
CBS or its agent(s) may inspect, audit and analyze copies of those records of
SportsLine USA Inc. relating to this Agreement certified by an officer of
SportsLine USA Inc. as being the only records relevant to the purpose of CBS's
audit. Any such audit by a party (the "auditing party") shall be conducted at
the auditing party's own cost and expense, during normal business hours at the
regular place of business of the other party (the "audited party") upon at least
ten (10) days prior written notice. Each party may exercise its right to audit
hereunder no more than once per year, unless a material discrepancy (i.e a
discrepancy in excess of Ten Thousand Dollars ($10,000) or ten percent (10%))
was discovered in an audit. In such cases, the auditing party may audit every
six (6) months until the results of the audit show that a material discrepancy
no longer exists. All underpayments shall be promptly remitted to the auditing
party. No payments rendered under this Agreement shall be subject to audit more
than two (2) years from the date of its presentation. Neither party shall
exercise its audit rights unless it has a reasonable basis to believe the
information provided by the other party is inaccurate.
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13. STOCKHOLDER AGREEMENT
SportsLine USA Inc. and CBS hereby agree that simultaneously with the
execution of this Agreement, the parties shall execute the " CBS/SportsLine
Stockholder Agreement" attached hereto as Exhibit J and hereby made a part
hereof (the "Stockholder Agreement"). It is understood that the stock provisions
of this Agreement shall be subject to the CBS Stockholder Agreement.
14. PUBLICITY
Upon execution of this Agreement, the parties will cooperate in
preparing a press release announcing the relationship between them. Each party
consents to the other party's use of its name in describing their relationship
in such press release. It is understood that no press release shall be released
without the consent of both parties, which shall not be unreasonably withheld.
The selection of a public relations agency for CBS SportsLine Site will be made
jointly by the parties with neither party unreasonably withholding its approval.
CBS shall approve the overall public relations strategy of the CBS SportsLine
Site.
15. CONFIDENTIALITY
15.1 CONFIDENTIAL INFORMATION. For purposes of this Agreement,
Confidential Information means: (i) business or technical information of either
party, including but not limited to any information relating to either party's
product plans, designs, costs, product prices and names, finances, marketing
plans, business opportunities, personnel, research, development or know-how;
(ii) any written information designated by either party as confidential or
proprietary or, if orally disclosed, reduced to writing by the disclosing party
within thirty (30) days of such disclosure; (iii) all materials furnished by one
party in connection with any audit conducted hereunder; and (iv) the terms and
conditions of this Agreement.
15.2 EXCLUSIONS. Confidential Information will not include: (i)
information that is or becomes generally known or available by publication,
commercial use or otherwise through no fault or breach of this Agreement by the
receiving party; (ii) information that is rightfully in the receiving party's
possession prior to first receiving it from the disclosing party; (iii)
information that is lawfully received by the receiving party from a third party,
without restriction on disclosure and without breach of a nondisclosure
obligation; or (iv) information that the receiving party can prove with written
evidence is independently developed by the receiving party, without use of or
access to Confidential Information of the disclosing party.
15.3 OBLIGATIONS. Each party shall not use the other party's
Confidential Information, except as expressly permitted under this Agreement and
will not disclose such Confidential Information to any third party, except to
its employees and consultants with a need to know for such party's performance
of this Agreement (and only subject to binding use and disclosure restrictions
at least as protective as those set forth herein executed in writing by such
employees
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or consultants). However, each party may disclose Confidential Information of
the other party: (i) pursuant to an order or requirement, to which it is
subject, of a court, administrative agency or other governmental body, provided
that such party gives reasonable notice to the other party to contest such order
or requirement; (ii) on a confidential basis to legal and financial advisors;
provided, however, that prior to such disclosure, the party disclosing the
Confidential Information shall use its best efforts to secure an agreement from
the third party receiving the Confidential Information to keep such information
confidential; and (iii) as required by any law, rule, or regulation, to which it
is subject.
16. OWNERSHIP
16.1 CBS OWNERSHIP. Subject to the terms and conditions of this
Agreement, as between CBS and SportsLine USA Inc., CBS presently owns and shall
continue to own all right, title, and interest throughout the world in any and
all media now known and hereafter developed, to the CBS Sports Content, the CBS
Logos, the CBS Merchandise and all Intellectual Property Rights therein
(excluding the joint CBS SportsLine logo).
16.2 SPORTSLINE USA INC. OWNERSHIP. Subject to the terms and conditions
of this Agreement, as between SportsLine USA Inc. and CBS, SportsLine USA Inc.
presently owns the SportsLine Site and, upon such site becoming the CBS
SportsLine Site, shall continue to own, all right, title, and interest
throughout the world in any and all media now known and hereafter developed, to
such site (including, without limitation, the "SportsLine" logo and the
SportsLine USA Inc. Content) and all Intellectual Property Rights therein
(excluding the CBS Sports Content, the CBS Logos, the joint CBS SportsLine logo,
the CBS Merchandise and all Intellectual Property Rights therein).
16.3 COPYRIGHT NOTICES. SportsLine USA Inc. shall place a notice of
copyright on each CBS Content Page in accordance with the CBS Licence Guidelines
and Restrictions. No CBS Content Page, upon which a notice of copyright is
placed pursuant to the preceding sentence, shall contain any other copyright
notice whatsoever except as provided in the CBS License Guidelines and
Restrictions. SportsLine USA Inc. shall cooperate fully with CBS in connection
with CBS's obtaining appropriate copyright protection in the name of CBS for any
CBS Content Page. SportsLine USA Inc. acknowledges and agrees that all
copyrights and rights of copyright referred to in subparagraph 16.3 in the name
of and/or owned by CBS shall be and remain the sole and complete property of
CBS; that all such copyrights and rights of copyright in the name of and/or
owned by any copyright proprietor other than CBS or SportsLine USA Inc. shall be
and remain the sole and complete property of such copyright proprietor; that
SportsLine USA Inc. shall not at any time acquire or claim any right, title or
interest of any nature whatsoever in any such copyright by virtue of this
Agreement or of SportsLine USA Inc.'s uses thereof in connection with CBS Sports
Content, CBS Logos, CBS Merchandise or any Intellectual Property Rights therein;
and that any right, title or interest in or relating to any such copyright which
comes into existence as a result of, or during the term of, the exercise by
SportsLine USA Inc. of any right granted to it hereunder shall immediately vest
in CBS.
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16.4 FURTHER ACTION. Each party agrees to take all action and cooperate
as is necessary, at the other party's request and expense, to protect the
other's respective rights, titles, and interests specified in this paragraph 16,
and further agrees to execute any documents that might be necessary to perfect
each party's ownership of such rights, titles and interests.
17. REPRESENTATIONS AND WARRANTIES
17.1 CBS GENERAL REPRESENTATIONS AND WARRANTIES. CBS represents and
warrants to SportsLine USA Inc. that:
(i) it has full corporate power and authority to enter
into this Agreement;
(ii) the execution, delivery and performance of this
Agreement have been duly authorized by CBS, and this Agreement
constitutes the valid and binding obligation of CBS enforceable against
CBS in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of
specific performance, injunctive relief and other equitable remedies.;
(iii) it has sufficient right and authority to grant to
SportsLine USA Inc. all licenses and rights granted by CBS hereunder;
(iv) it owns or controls all right, title, and interest in
the CBS Sports Content, the CBS Logos, the CBS Merchandise and all
Intellectual Property Rights therein, (subject to the qualifications
set forth in this Agreement) necessary to carry out its obligation
hereunder and to grant and assign the rights and license granted to
SportsLine USA Inc. herein;
(v) the use as specified in this Agreement of the CBS
Sports Content, the CBS Logos and the CBS Merchandise, shall not
infringe or otherwise violate any rights of any third party; and
(vi) CBS is and shall be at the time of each issuance of
Content Shares, Ad Shares or Warranties hereunder an accredited
investor as defined in Regulation D under the Securities Act of 1933,
as amended.
17.2 SPORTSLINE USA INC. GENERAL REPRESENTATIONS AND WARRANTIES.
SportsLine USA Inc. represents and warrants to CBS that, as of the Effective
Date (and as to Subclause (v), at the time of each issuance of Content Share, Ad
Shares and Warrants):
(i) SportsLine USA Inc. is a corporation duly
incorporated, validly existing
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and in good standing under the laws of the State of Delaware.
SportsLine USA Inc. (A) has full corporate power and authority to own,
lease and operate its properties and assets and to conduct and carry on
its business as it is now being conducted and operated and as proposed
to be conducted and operated; (B) is duly qualified to do business and
is in good standing, and is duly licensed, authorized or qualified to
transact or conduct business, in each jurisdiction in which it is
required to be so licensed, authorized or qualified; and (C) has all
governmental licenses, certifications, permits, approvals and other
authorizations necessary to own its properties and assets and carry on
its business as it is presently being conducted and proposed to be
conducted.
(ii) SportsLine USA Inc. has full power and authority to
execute and deliver this Agreement and to execute and deliver the
Stockholder Agreement, and consummate the transactions contemplated by
this Agreement and the Stockholder Agreement, and to issue (or reserve
for issuance), sell and deliver the Common Stock being delivered
hereunder and the Common Stock issuable upon exercise of the CBS
Warrants (the "Warrant Shares"). Upon execution of this Agreement and
the Stockholder Agreement by SportsLine USA Inc., each of this
Agreement and the Stockholder Agreement shall have been duly and
validly executed and delivered by SportsLine USA Inc., and constitute
the legal, valid and binding obligation of SportsLine USA Inc.,
enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application affecting enforcement of creditors'
rights generally, and as limited by laws relating to the availability
of specific performance, injunctive relief and other equitable
remedies.
(iii) As of the Effective Date and prior to the issuance of
the Content Shares, Ad Shares and Warrants issuable hereunder on such
date, (A) the authorized and issued and outstanding capital stock of
SportsLine USA Inc. is as follows: fifty million (50,000,000) shares of
Common Stock, of which six million five hundred thousand (6,500,000)
shares are outstanding; three million (3,000,000) shares of Series A
Preferred Stock, all of which are outstanding, six million one hundred
sixty-two thousand seven hundred seventy-six (6,162,776) shares of
Series B Preferred Stock, all of which are outstanding; and five
million three hundred thirty-three thousand three hundred thirty-three
(5,333,333) shares of Series C Preferred Stock, all of which are
outstanding and (B) all of the issued and outstanding capital stock of
SportsLine USA Inc. has been duly authorized, validly issued, fully
paid, nonassessable and issued in compliance with applicable state and
federal securities laws. Other than that certain Amended and Restated
Voting Agreement dated as of September 25, 1996 and that certain
Amended and Restated Investors' Rights Agreement dated as of September
25, 1996, there are no outstanding or existing (A) proxies, voting
trusts, shareholder agreements or other rights, understanding or
arrangements regarding the voting or disposition of the capital stock
of SportsLine USA Inc.; (B) securities convertible into or exchangeable
for capital stock of SportsLine USA Inc.; (C) obligations, options,
warrants or other rights of any kind or character to acquire, purchase
or subscribe for capital stock of SportsLine USA Inc. or
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securities convertible into or exchangeable for capital stock of
SportsLine USA Inc., except for outstanding options and warrants to
purchase an aggregate of six million eight hundred sixty-one thousand
nine hundred sixty-five (6,861,965) shares of Common Stock; or (D)
agreements, arrangements or understandings of any kind relating to the
authorization, issuance or sale of capital stock of SportsLine USA Inc.
or securities convertible into or exchangeable for capital stock of
SportsLine USA Inc., except for SportsLine USA, Inc.'s agreements with
International Merchandising Corporation and Sports Placement Services,
each of which provides for the issuance of warrants under certain
circumstances.
(iv) The execution, delivery and performance of this
Agreement and the Stockholder Agreement by SportsLine USA Inc. does not
and will not (A) conflict with or violate any provision of SportsLine
USA Inc.'s Certificate of Incorporation or Bylaws, each as amended to
date; (B) violate or breach any provision of, or result, through the
mere passage of time, in a violation of, or result in the termination
or acceleration of, or entitle any party to terminate or accelerate
(whether after the giving of notice or lapse of time or both), any
obligation under, be in conflict with or constitute or result in a
default (or an event which, with notice or lapse of time or both, would
constitute such a default) under, or result in the imposition of any
lien upon or the creation of a security interest in, the stock or any
assets, business or properties of SportsLine USA Inc. pursuant to, any
note, bond, mortgage, indenture, deed, license, franchise, permit,
lease, contract, agreement or other instrument, commitment or
obligation to which SportsLine USA Inc. is a party or by which
SportsLine USA Inc. or any of its assets is bound or subject, or
violate or conflict with any other material restriction of any kind or
character to which SportsLine USA Inc., or any of its properties or
assets, is subject; (C) violate any order, writ, injunction, decree,
judgment or ruling of any court or governmental authority to which
SportsLine USA Inc. is a party or it or its property is bound; or (D)
violate any statute, law, rule or regulation applicable to SportsLine
USA Inc.
(v) CBS shall acquire from SportsLine USA Inc. good title
to the Common Stock purchased under this Agreement, free and clear of
any and all liens, claims, charges, encumbrances or other security
interests (collectively, "Security Interests"), other than such
Security Interests as may arise out of acts or claims against CBS. The
Common Stock, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration provided for herein, will
be duly and validly issued, fully paid and nonassessable and will be
free of restrictions on transfer other than restrictions on transfer
under this Agreement, the Stockholder Agreement and applicable
securities laws. The Warrant Shares have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the
Warrants, as the case may be, will be duly and validly issued, fully
paid and nonassessable and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement, the
Stockholder Agreement and applicable securities laws, free and clear of
any and all Security Interests, other than such Security Interests as
may arise out of acts or claims against CBS. The offer, sale and
issuance of
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the Common Stock and (assuming no change in applicable law and no
unlawful distribution of the Common Stock by CBS or other parties), the
Warrant Shares will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the
"Securities Act") by virtue of the exemption afforded by Section 4(2)
of the Securities Act (provided that with respect to the Warrant
Shares, no commission or other remuneration is paid or given, directly
or indirectly, for soliciting the exercise of the Warrants, as
applicable).
(vi) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with,
any federal, state or local governmental authority on the part of
SportsLine USA Inc. is required in connection with the execution and
delivery by SportsLine USA Inc. of this Agreement or the Stockholder
Agreement (including the issuance of the Common Stock), except for such
filings under the Securities Act and the regulations thereunder and all
other applicable securities laws as may be required in connection with
the transactions contemplated by this Agreement and the Stockholder
Agreement and such consents or filings which the failure to obtain or
file would not, individually or in the aggregate, have a Material
Adverse Effect (as defined in subclause (xxvii)(A) hereof). All such
filings will be made within the time prescribed by law.
(vii) There is no action, suit, proceeding, claim,
arbitration or investigation ("Action") pending (or, to the best of
SportsLine USA Inc.'s knowledge, currently threatened) against
SportsLine USA Inc., its activities, properties or assets or, to the
best of SportsLine USA Inc.'s knowledge, against any officer, director
or employee of SportsLine USA Inc. in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf
of, SportsLine USA Inc. SportsLine USA Inc. is not a party to or
subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality, and there
is no Action by SportsLine USA Inc. currently pending or which
SportsLine USA Inc. intends to initiate.
(viii) SportsLine USA Inc. has full title to and ownership
of, or is duly licensed under or otherwise authorized to use, all
Intellectual Property Rights necessary to enable it to carry on its
business as now conducted and as proposed to be conducted without, to
SportsLine USA Inc.'s knowledge, any conflict with or infringement of
any rights of others.
(ix) SportsLine USA Inc. has not received any
communications alleging that SportsLine USA Inc. has infringed or, by
conducting its business as proposed, would infringe any of the
Intellectual Property Rights of any other person or entity. To
SportsLine USA Inc.'s best knowledge, none of SportsLine USA Inc.'s
employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency,
that would interfere with the use of his or her best efforts to
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promote the interests of SportsLine USA Inc. or that would conflict
with SportsLine USA Inc.'s business as proposed to be conducted.
Neither the execution nor delivery of this Agreement or the Stockholder
Agreement, nor the carrying on of SportsLine USA Inc.'s business by the
employees of SportsLine USA Inc., nor the conduct of SportsLine USA
Inc.'s business by the employees of SportsLine USA Inc., nor the
conduct of SportsLine USA Inc.'s business as proposed, will, to
SportsLine USA Inc.'s knowledge, conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any of such employees
is now obligated. SportsLine USA Inc. does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary
information of any of its employees (or people it currently intends to
hire) made or developed prior to their employment by SportsLine USA
Inc., other than inventions, trade secrets or proprietary information
which have been assigned to SportsLine USA Inc.
(x) SportsLine USA Inc. is not in violation or default of
any provisions of its Certificate of Incorporation or Bylaws, and to
SportsLine USA Inc.'s best knowledge, except for any violations that
individually or in the aggregate would not have a Material Adverse
Effect (as defined in subclause (xxvii)(A) hereof, SportsLine USA Inc.
is in compliance with all applicable statutes, laws, regulations and
executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having
jurisdiction over SportsLine USA Inc.'s business or properties, and (B)
is in compliance with all contracts and agreements to which it is a
party.
(xi) SportsLine USA Inc. has not granted or agreed to
grant to any person or entity any rights (including piggyback
registration rights) to have any securities of SportsLine USA Inc.
registered with the United States Securities and Exchange Commission
("SEC") or any other governmental authority, except as set forth in (i)
that certain Amended and Restated Investors' Rights Agreement dated as
of September 25, 1996, (ii) the CBS/SportsLine Stockholder Agreement
and (iii) in SportsLine USA, Inc.'s agreements with International
Merchandising Corporation and certain athletes.
(xii) The audited Balance Sheet of SportsLine USA Inc. as
of December 31, 1996 reflects all of the personal property used by
SportsLine USA Inc. in its business or otherwise held by SportsLine USA
Inc., except for (A) property acquired or disposed of in the ordinary
course of business since the date of such audited Balance Sheet, and
(B) property not required under generally accepted accounting
principles to be reflected thereon. Except as reflected in the audited
Balance Sheet as of December 31, 1996 or the notes thereto, the
properties and assets SportsLine USA Inc. owns are owned by SportsLine
USA Inc. free and clear of all mortgages, deeds of trust, liens,
encumbrances and security interests except for statutory liens for the
payment of current taxes that are not yet delinquent and liens,
encumbrances and security interests which arise in the ordinary course
of business and which do not affect material properties and assets of
SportsLine USA Inc.. With respect to the property and assets it leases,
SportsLine USA
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Inc. is in material compliance with such leases and holds valid
leasehold interests free of any liens, claims or encumbrances.
(xiii) SportsLine USA Inc. does not have any Employee
Pension Benefit Plan as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended.
(xiv) SportsLine USA Inc. has delivered to CBS its audited
financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and statement of cash flows,
including notes thereto) at December 31, 1996 for the year then ended
(the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principals
applied on a consistent basis throughout the periods indicated and with
each other, except that unaudited Financial Statements may not contain
all footnotes or year-end audit adjustments required by generally
accepted accounting principles (which year-end audit adjustments are
not expected to have a material effect on the unaudited Financial
Statements). The Financial Statements fairly present the financial
condition and operating results of SportsLine USA Inc. as of the dates,
and for the periods, indicated therein. Except as set forth in the
December 31, 1996 audited Balance Sheet, SportsLine USA Inc. has no
material liabilities, contingent or otherwise, other than (A)
liabilities incurred in the ordinary course of business subsequent to
December 31, 1996 and (B) obligations under contracts and commitments
incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the
Financial Statements. Except as disclosed in the Financial Statements,
SportsLine USA Inc. is not a guarantor or guarantor or indemnitor of
any other person, firm or corporation. SportsLine USA Inc. maintains
and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted
accounting principles.
(xv) SportsLine USA Inc. is not bound by or subject to any
written or oral, express or implied, contract, commitment or
arrangement with any labor union, and to SportsLine USA Inc.'s
knowledge, no labor union has requested, sought or attempted to
represent any employees, representatives or agents of SportsLine USA
Inc. There is no strike or other labor dispute involving SportsLine USA
Inc. pending nor, to SportsLine USA Inc.'s best knowledge, threatened,
nor is SportsLine USA Inc. aware of any labor organization activity
involving its employees. SportsLine USA Inc. is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with SportsLine USA Inc., and SportsLine USA
Inc. does not have a present intention to terminate the employment of
any of the foregoing. The employment of each officer and employee of
SportsLine USA Inc. is terminable at the will of SportsLine USA Inc. To
SportsLine USA Inc.'s best knowledge, SportsLine USA Inc. has complied
in all material respects with all applicable state and federal equal
employment opportunity and other laws related to employment.
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(xvi) Since its inception SportsLine USA Inc. has not been
a "United States real property holding corporation", as defined in
Section 897(c)(2) of the U.S. Internal Revenue Code of 1986, as
amended, and in Section 1.897-2(b) of the Treasury Regulations issued
thereunder.
(xvii) SportsLine USA Inc. does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity, other than an interest in
Web-on-Site and in entities for Foreign SportsLine Sites. SportsLine
USA Inc. is not a participant in any joint venture, partnership, or
similar arrangement.
(xviii) SportsLine USA Inc. has not (A) declared or paid any
dividends or authorized or made any distribution upon or with respect
to any class or series of its capital stock, (B) incurred any
indebtedness for money borrowed or, except as contemplated by this
Agreement, any other liabilities individually in excess of $500,000 or,
in the case of indebtedness and/or liabilities individually less than
$500,000, in excess of $5,000,000 in the aggregate, (C) made any loans
or advances to any person, other than ordinary advances for travel
expenses, or (D) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary
course of business.
(xix) For the purposes of subsections (xx) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities SportsLine USA Inc. has reason to
believe are affiliated therewith) shall be aggregated for the purpose
of meeting the individual minimum dollar amounts of such subsections.
(xx) SportsLine USA Inc. is not a party to and is not
bound by any contract, agreement or instrument, or subject to any
restriction under its Certificate of Incorporation or Bylaws, that
adversely affects its business as now conducted or as proposed to be
conducted, its properties or its financial condition.
(xxi) Except as disclosed to the Board of Directors of
SportsLine USA Inc., SportsLine USA Inc. has not engaged in the last
three (3) months in any discussion (A) with any representative of any
corporation or corporations regarding the consolidation or merger of
SportsLine USA Inc. with or into any such corporations or corporations,
with any corporation, partnership, association or other business entity
or any individual regarding the sale, conveyance or disposition of all
or substantially all of the assets of SportsLine USA Inc. or a
transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of SportsLine USA Inc. is disposed
of, or (B) regarding any other form of acquisition, liquidation,
dissolution or winding up of SportsLine USA Inc.
(xxii) No officer, or director of SportsLine USA Inc. or
member of his or her
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immediate family is indebted to SportsLine USA Inc., nor is SportsLine
USA Inc. indebted (or committed to make loans or extend or guarantee
credit) to any of them, other than for travel advances in the ordinary
course of business. To the best of SportsLine USA Inc.'s knowledge,
none of such persons has any direct or indirect ownership interest in
any firm or corporation with which SportsLine USA Inc. is affiliated or
with which SportsLine USA Inc. has a business relationship, or any firm
or corporation that competes with SportsLine USA Inc., except that
employees, officers, or directors of SportsLine USA Inc. and members of
their immediate family may own stock in publicly traded companies that
may compete with SportsLine USA Inc. No member of the immediate family
of any officer or director of SportsLine USA Inc. is directly or
indirectly interested in any material contract with SportsLine USA Inc.
(xxiii) SportsLine USA Inc. has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which could have a
Material Adverse Effect (as defined in subclause (xxvii)(A) hereof),
and SportsLine USA Inc. believes it can obtain, without undue burden or
expense, any similar authorization to conduct its business as proposed
to be conducted. SportsLine USA Inc. is not in default in any material
respect under any of such franchises, permits, licenses, or other
similar authority.
(xxiv) To SportsLine USA Inc.'s best knowledge, SportsLine
USA Inc. is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and
safety, and to SportsLine USA Inc.'s best knowledge, no material
expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
(xxv) SportsLine USA Inc. has fully provided CBS with all
the information that CBS has requested for deciding whether to enter
into this Agreement and the Stockholder Agreement. Neither this
Agreement, the Stockholder Agreement, nor any other statements or
certificates made or delivered in connection herewith or therewith,
when read in their entirety and in light of the circumstances in which
such statements were made, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
(xxvi) SportsLine USA Inc. has timely filed all Tax Returns
required by applicable law to be filed. All Tax Returns of SportsLine
USA Inc. are true, complete and correct in all material respects.
SportsLine USA Inc. has paid all Taxes, except those, which are
currently being contested by it in good faith in the Financial
Statements in accordance with generally accepted accounting procedure
and for which adequate reserves have been made. The provision for taxes
of SportsLine USA Inc. as shown in the Financial Statements is adequate
for taxes due or accrued as of the date thereof. SportsLine USA Inc.
has not elected pursuant to the Internal Revenue Code of 1986, as
amended (the "Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant
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to Section 1362(a) or Section 341(f) of the Code respectively , nor has
it made any other elections pursuant to the Code (other than elections
that relate solely to methods of accounting, depreciation or
amortization) that would have a Material Adverse Effect (as defined in
subclause (xxvii)(A) hereof). No deficiency or adjustment for any Taxes
has been threatened, proposed, asserted or assessed against the
SportsLine USA Inc. There are no liens for Taxes upon the assets of
SportsLine USA Inc., except liens for current Taxes not yet due. No Tax
Returns of SportsLine USA Inc. have been examined by any Taxing
Authority and it has not been notified by any such Tax Authority that
such Tax Authority intends to audit such Returns. SportsLine USA Inc.
has not given or been requested to give any waiver of statutes of
limitations relating to the payment of Taxes. SportsLine USA Inc. is
not a party to, bound by, or has any obligation with respect to Taxes
under any tax sharing, cost sharing or similar agreement or policy.
SportsLine USA Inc. has not entered into agreements that would result
in the disallowance of any Tax deductions pursuant to Section 280G of
the Code. Since the date of the Financial Statements, SportsLine USA
Inc. has made adequate provisions on its books of account in accordance
with generally accepted accounting procedures for all Taxes with
respect to its business, properties and operations for such period.
SportsLine USA Inc. has withheld or collected from each payment made to
each of its employees, the amount of all Taxes (including, but not
limited to, federal income tax, Federal Insurance Contribution Act
taxes and Federal Unemployment Tax Act taxes) required to be withheld
or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories. "Tax or Taxes" shall
mean all federal, state, local and foreign taxes and other assessments
of a similar nature (whether imposed directly or through withholding),
including any interest, additions to tax, or penalties applicable
thereto. "Tax Returns" shall mean all federal, state, local and foreign
tax returns, declarations, statements, reports, schedules, forms and
information returns, and any amended Tax Return relating to Taxes.
"Taxing Authority" shall mean the Internal Revenue Service and any
other domestic or foreign governmental authority responsible for the
administration of any Taxes.
(xxvii) Since January 31, 1997 there has not been:
(A) any change in the business, operations, assets,
liabilities, financial condition or operating results of
SportsLine USA Inc. from that reflected in the audited
Financial Statements, which had a material adverse effect on
the business (as such business is presently conducted and as
it is proposed to be conducted), finances, properties or
prospects of SportsLine USA Inc. (a "Material Adverse
Effect");
(B) any damage, destruction or loss, whether or not
covered by insurance to or of the assets of SportsLine USA
Inc. which would have a Material Adverse Effect;
(C) any waiver by SportsLine USA Inc. of a valuable
right or of a
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material debt owed to it;
(D) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by SportsLine USA
Inc., except in the ordinary course of business and which
would not have a Material Adverse Effect;
(E) any material change or amendment to a material
contract or arrangement by which SportsLine USA Inc. or any of
its assets or properties is bound or subject;
(F) any material change in any compensation
arrangement or agreement with any employee of or consultant to
SportsLine USA Inc.;
(G) any sale, assignment or transfer of any patent,
trademarks, copyrights, trade secrets, proprietary software or
other intangible assets, other than licenses thereof in the
ordinary course of business;
(H) any resignation or termination of employment of
any key officer of SportsLine USA Inc.;
(I) any mortgage, pledge, transfer of a security
interest in or other encumbrance of SportsLine USA Inc.'s
material properties or assets, except liens for current taxes
not yet due or payable;
(J) any direct or indirect loans or guarantees made
by SportsLine USA Inc. to or for the benefit of its
shareholders, employees, officers, directors or consultants,
or any members of their immediate families, other than travel
advances and other advances made in the ordinary course of its
business;
(K) any declaration, setting aside or payment of any
dividend or other distribution in respect of any of SportsLine
USA Inc.'s capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock
by SportsLine USA Inc.;
(L) to the best of SportsLine USA Inc.'s knowledge,
any other event or condition of any character that,
individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect;
(M) any disposal of, or agreement to dispose of, any
asset or property, tangible or intangible, except in the
ordinary course of business and which has not had a Material
Adverse Effect, and in each case for a consideration at least
equal to the fair market value of such asset or property, nor
any lease or license to others, or agreement to lease or
license, any property or asset, except in the
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ordinary course of business and which has not had a Material
Adverse Effect;
(N) any purchase or agreement to purchase or
otherwise acquire any debt or equity securities of any
corporation, partnership, joint venture, firm or other entity;
(O) any material expenditure or commitment for the
purchase, acquisition, construction or improvement of a
capital asset;
(P) any material change in, or agreement to change
materially, any employee profit sharing, stock option, stock
purchase, pension, bonus, incentive, retirement, medical
reimbursement, life insurance, deferred compensation or any
other employee benefit plan or arrangement;
(Q) any material change in the contingent obligations
of SportsLine USA Inc. by way of guaranty, endorsement,
indemnity, warranty or otherwise; or
(R) any agreement or commitment by SportsLine USA
Inc. to do any of the things described in this Subsection
(xxvii) hereof.
(xxviii) SportsLine USA Inc. has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in
amount (subject to reasonable deductibles) to allow it to replace any
of its tangible properties that might be damaged or destroyed.
17.2A SportsLine USA, Inc. further warrants and represents that at all
times during the term of this Agreement:
(i) it shall, maintain insurance on its business operations
and property in such amounts as are necessary to insure against risks
usually insured against by persons operating similar businesses or
properties by insurers of recognized responsibility;
(ii) it has sufficient right and authority to grant to CBS
all licenses and rights granted by SportsLine USA Inc. hereunder;
(iii) it owns or controls all right, title, and interest in
and to the SportsLine USA Inc. Site, and all Intellectual Property
Rights therein, including, without limitation, the logo "SportsLine"
necessary to carry out its obligation hereunder and to grant and assign
the rights and licenses granted to CBS herein;
(iv) the CBS SportsLine Site, including the logo "SportsLine"
shall not, infringe or otherwise violate any rights of any third party;
(v) it shall obtain all necessary authorization, releases,
consents, clearances and
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licenses to use any SportsLine USA Inc. Content and all Intellectual
Property Rights therein, on the CBS SportsLine Site, and to otherwise
operate the CBS SportsLine Site as provided in this Agreement; and
(vi) it shall indemnify its directors, including any CBS
designees, and its officers to the fullest extent permitted under
Section 145 of the General Corporation law of the State of Delaware.
17.3 NO OTHER WARRANTIES. THE WARRANTIES SET FORTH IN THIS SECTION 17
ARE THE SOLE AND EXCLUSIVE WARRANTIES MADE BY EACH PARTY HEREUNDER AND ARE IN
LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED) TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY DISCLAIMED.
17.4 The warranties and representations of the parties made pursuant to
paragraph 17 of this Agreement shall survive any investigation made by either
party and shall survive the execution and delivery of this Agreement.
18. INDEMNIFICATION
Each party (the "INDEMNIFYING PARTY") shall indemnify, hold harmless
and defend the other party (collectively, the "INDEMNIFIED PARTY") from and
against any loss, cost, liability or expense (including court costs and
reasonable attorneys' fees) arising out of or resulting from any breach by the
Indemnifying Party of any representation, warranty, covenant or agreement
contained herein, including, without limitation, any breach of any warranty
concerning the "SportsLine" logo or the CBS Logos set forth in paragraph 17
hereof. In the event of any such claim, the Indemnified Party shall: (i)
promptly, but in any no later than twenty (20) days after receiving such claim,
notify the Indemnifying Party of the claim; (ii) allow the Indemnifying Party to
direct the defense and settlement of such claim with counsel of the Indemnifying
Party's choosing; and (iii) provide the Indemnifying Party, at the Indemnifying
Party's expense, with information and assistance that is reasonably necessary
for the defense and settlement of the claim. The Indemnified Party reserves the
right to retain counsel, at the Indemnified Party's sole expense, to participate
in the defense of any such claim. The Indemnifying Party shall not settle any
such claim or alleged claim without first obtaining the Indemnified Party's
prior written consent, which consent shall not be unreasonably withheld, if the
terms of such settlement would adversely affect the lndemnified Party's rights
under this Agreement or otherwise. If the Indemnifying Party assumes the defense
and settlement of the claim as set forth above, then the Indemnifying Party's
only obligation is to satisfy the claim, judgment or approved settlement.
19. TERMINATION
19.1 TERMINATION. CBS shall have the right to terminate this Agreement
upon the
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acquisition of forty (40) percent or more of the voting power of the outstanding
equity securities of SportsLine USA Inc. by a CBS Competitor. SportsLine USA,
Inc. shall have the right to terminate this Agreement as set forth in paragraph
7.2. In addition, either party shall have the right to terminate this Agreement
if:
(i) the other party breaches any material term or condition
of this Agreement that is capable of being cured and fails to cure such
breach within thirty (30) days after written notice from the
non-breaching party; provided, however, that the non-breaching party
shall extend the deadline for curing any breach appropriately if it is
capable of being cured but not reasonably within thirty (30) days;
(ii) the other party becomes insolvent or unable to pay its
debts as they mature or makes an assignment for the benefit of its
creditors;
(iii) the other party is the subject of a voluntary petition
in bankruptcy or any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors,
if such petition or proceeding is not dismissed within sixty (60) days
of filing;
(iv) the other party becomes the subject of any involuntary
petition in bankruptcy or any involuntary proceeding relating to
insolvency, receivership, liquidation, or composition for the benefit
of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing; or
(v) the other party is liquidated or dissolved.
19.2 EFFECT OF TERMINATION.
Upon any termination of this Agreement:
(i) SportsLine USA Inc. shall remove the CBS Sports Content,
CBS Logos and CBS Merchandise from the CBS SportsLine Site as soon as
commercially and technically practicable, given customary Internet
business practices, but in no event shall any such material remain on
the CBS SportsLine Site more than thirty (30) days after CBS's notice
of termination;
(ii) each party shall immediately return to the other party
all Confidential Information of the other party in its possession or
control, and shall provide the other party with an officer's written
certification as to the return of such Confidential Information;
(iii) CBS shall return to SportsLine USA Inc. for cancellation
the stock certificate(s) representing all Content Shares issued to CBS
during the Contract Year in
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<PAGE>
which the Agreement is terminated. Upon such cancellation, SportsLine
USA Inc. shall reissue to CBS a new stock certificate for that number
of Content Shares equal to the product of (i) the original number of
Content Shares issued in such Contract Year times (ii) a fraction, the
numerator of which is the number of whole months elapsed during such
Contract Year and the denominator which is twelve (12) (ten (10) in the
case of the first Contract Year).
(iv) if any Deficit Ad Amount for a Contract Year exists at
the time of the Agreement's termination, CBS shall return to SportsLine
USA Inc. for cancellation the stock certificate(s) representing all Ad
Shares issued to CBS during the Contract Year in which the Agreement is
terminated. Upon such cancellation, SportsLine USA Inc. shall reissue
to CBS a new stock certificate representing the original number of Ad
Shares issued in such Contract Year less the number of Ad Shares
represented by the Deficit Ad Amount for such Contract Year.
19.3 NON-EXCLUSIVE REMEDY. Except as expressly set forth in this
Agreement, the exercise by either party of any remedy under this Agreement shall
be without prejudice to its other remedies under this Agreement or otherwise.
19.4 SURVIVAL. The rights and obligations of the parties under
paragraphs 12, 15, 16, 17, 18, 19.2, 19.3 and 20 shall survive any termination
of this Agreement.
20. GENERAL
20.1 ASSIGNMENT. Neither party may assign this Agreement in whole or in
part without the other party's prior written consent. Any attempt to assign this
Agreement without such consent shall be void and of no effect ab initio.
Notwithstanding the foregoing, CBS may have the right to assign this Agreement
to any entity controlling, controlled by or under common control with, CBS, or
to any entity that acquires CBS by purchase of stock or by merger or otherwise,
or by obtaining substantially all of CBS's assets (a "CBS Assignee"), provided
that any such CBS Assignee, or any division thereof, thereafter performs the
same functions as CBS Sports performed prior to the date of such assignment and
succeeds to all of the rights and is subject to all of the obligations of CBS
under this Agreement.
20.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to or
application of conflicts of-law rules or principles.
20.3 JURISDICTION; VENUE; BENCH TRIAL. Each party irrevocably submits
to the non-exclusive jurisdiction of the United States District Court for the
Southern District of New York for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each party further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above will
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be effective service of process for any action, suit or proceeding in New York
with respect to any matters to which it has submitted to jurisdiction as set
forth above in the immediately preceding sentence. Each party irrevocable and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transaction contemplated
hereby in the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT, ANY RELATED AGREEMENT OR THE SUBJECT MATTER HEREOF IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT, IN TORT OR
OTHERWISE.
20.4 COMPLIANCE WITH LAWS. Each party shall comply in all material
respects with all laws and regulations applicable to its activities under this
Agreement.
20.5 SEVERABILITY. If any provision of this Agreement is found invalid
or unenforceable, that provision shall be enforced to the maximum extent
permissible, and the other provisions of this Agreement shall remain in force.
20.6 NOTICES. All notices under this Agreement shall be deemed given
when delivered personally, sent by confirmed facsimile transmission, or sent by
certified or registered U.S. mail or nationally-recognized express courier,
return receipt requested, to the address shown above or as may otherwise be
specified by either party to the other in accordance with this subparagraph.
Either party may change its address for notices under this Agreement by giving
written notice to the other party by the means specified in this subparagraph:
To SportsLine USA Inc.: To CBS:
SportsLine USA Inc. CBS Sports
6340 NW 5th Way 51 West 52nd Street
Ft. Lauderdale, FL 33309 New York, NY 10019
Attention: President Attention: President
Phone: 954-351-2120 Phone: 212-975-4321
Fax: 954-351-9175 Fax: 212-975-7292
Copy to: General Counsel
CBS Inc.
51 West 52nd Street
New York, NY 10019
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<PAGE>
20.7 INDEPENDENT CONTRACTORS. The parties to this Agreement are
independent contractors. There is no relationship of partnership, joint venture,
employment, franchise, or agency between the parties. Neither party shall have
the power to bind the other or incur obligations on the other's behalf without
the other's prior written consent.
20.8 WAIVER. No failure of either party to exercise or enforce any of
its rights under this Agreement shall act as a waiver of such right.
20.9 ENTIRE AGREEMENT. This Agreement and its Exhibits (all of which
are incorporated herein by reference) are the complete and exclusive agreement
between the parties with respect to the subject matter hereof, superseding and
replacing any and all prior or contemporaneous agreements, communications, and
understandings (both written and oral) regarding such subject matter. This
Agreement may only be modified, or rights under it waived, by a written document
executed by both parties.
20.10 ATTORNEYS FEES. The prevailing party in any action to enforce
this Agreement (including the Stockholder Agreement) shall be entitled to
recover reasonable costs and expenses including, without limitation, reasonable
attorneys' fees.
20.11 COUNTERPARTS. This Agreement may be executed in counterpart, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
SPORTSLINE USA, INC. CBS INC.
By: /s/ MICHAEL LEVY By: /s/ FREDERIC G. REYNOLDS
-------------------------- -------------------------
Name: Michael Levy Name: Frederic G. Reynolds
------------------------ -----------------------
Title: President Title: Executive Vice President, CFO
----------------------- ------------------------------
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<PAGE>
TABLE OF EXHIBITS
Exhibit A -- CBS Sports Content
Exhibit B -- CBS Logos
Exhibit C -- CBS License Guidelines and Restrictions
Exhibit D -- Advertising and Promotion-Placements
Exhibit E -- Ad Guarantees and Shares
Exhibit F -- Signature Events
Exhibit G -- Content Shares
Exhibit H -- Form of Warrant
Exhibit I -- Warrant Shares
Exhibit J -- Stockholder Agreement
Exhibit K -- CBS Sports Internet Commitments
Exhibit L -- New Signature Events
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<PAGE>
EXHIBIT A
CBS SPORTS CONTENT
CBS SPORTS PROGRAM SCHEDULES
CBS SPORTS PRESS RELEASES
CBS SPORTS ON-AIR PROMOTION (VIDEO :10; :20; :30)
CBS SPORTS PRODUCTION RESEARCH MATERIALS DOCUMENTS SUPPLIED ON-
AIR TALENT AND PRODUCERS, DIRECTORS
CBS SPORTS PROGRAM MATERIALS (VIDEO)
A. FEATURE PROGRAMMING PRODUCED FOR HALF TIME AND
PREGAME SHOWS.
B. VIGNETTES (E.G., GOLF TIPS, GOLF RULES).
C. ORIGINAL MATERIAL PRODUCED AT SIGNATURE EVENTS DAYS PRIOR TO
AIR (SUBJECT TO THE PRESSURES OF EVENT PRODUCTION AND
DISTRIBUTION).
D. REPLAYS FROM EVENTS THAT CBS SPORTS CONTROLS "INTERNET"
RIGHTS TO
E. CBS SPORTS IDEAS FOR ORIGINAL "INTERNET" ACTIVITIES THAT
DEVELOP FROM TIME TO TIME.
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<PAGE>
EXHIBIT B
CBS LOGOS
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<PAGE>
EXHIBIT C
CBS LICENSE GUIDELINES AND RESTRICTIONS
1. GENERAL
1. Subject to the terms of the Transition Period (as hereinafter
defined), all information currently included within the "Odds
and Analysis" section of the SportsLine USA, Inc. Site shall
not be included within the CBS SportsLine Site and may be
private labeled; provided, that the CBS SportsLine Site may
include information commonly published in daily newspapers in
the United States, subject to paragraph 7.5 of the Agreement.
a) The home page of the CBS SportsLine Site shall not
have an "Odds and Analysis" button or other
references to gambling.
b) The odds section of the CBS SportsLine Site shall not
display the word "odds" in its main headings or
otherwise in a prominent manner and shall be referred
to as "The Daily Line" or such other title as may be
mutually agreed.
c) Leading up to and during the NCAA basketball
tournaments and the Masters Golf Tournament, the CBS
SportsLine Site home page will prominently feature a
graphic link to the CBS SportsLine Site coverage of
that event. The section(s) of the CBS SportsLine Site
containing such coverage will be devoid of references
to odds or gambling.
d) There shall be no direct cross-links between the
"Daily Line" section and coverage on the CBS
SportsLine Site of amateur or collegiate events. Any
other cross-links with the "Daily Line" section shall
be subject to restrictions imposed by right holders.
e) The CBS SportsLine Site shall not include advertising
from casinos, sports books or other gambling
enterprises, nor shall it "courtesy" any enterprise
or individual for having supplied information to the
CBS SportsLine Site.
f) Analysis of sports events shall not be presented
within the "Daily Line" section.
g) Odds information shall not be presented in the
scoreboard section of the CBS SportsLine Site.
h) During the one-month period following the Effective
Date, or such longer period as may be mutually
agreed, (the "Transition Period"), the CBS SportsLine
Site may include links to the Content private labeled
pursuant to paragraph 1, above; provided, however,
prior to the conclusion of the NCAA Mens Basketball
Tournament, SportsLine USA, Inc. shall not display
any advertisements from any casinos, sportsbooks, or
other
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<PAGE>
gambling related enterprises.
2. The CBS SportsLine Site shall not include Content that: (i) is
sexually explicit, (ii) contains profanity, (iii) is
slanderous or libelous or (iv) that denigrates a particular
group based on gender, race, creed, religion, sexual
preference or handicap. The parties acknowledge that
SportsLine USA Inc. may not be able to prevent such content
from appearing on the CBS SportsLine Site due to the actions
of non-employees, although SportsLine USA, Inc. shall take
such reasonable steps to prevent such action by non-employees
as may be prudent under the circumstances.
3. Each page of the CBS SportsLine Site containing any CBS Sports
Content, CBS Logos or CBS Merchandise shall have the same look
and feel of CBS Sports as CBS Sports shall from time to time
adopt.
II. CBS SPORTS CONTENT
1. Each party shall notify the other of all errors, omissions,
and/or inaccuracies in the CBS Sports Content within
forty-eight (48) hours after it becomes aware thereof.
2. If SportsLine USA, Inc. provides such notice, it shall specify
to CBS what action, if any, it has taken to correct the error,
omission and/or inaccuracy.
3. If CBS provides such a notice, or receives such notice, it may
specify the action to be taken by SportsLine USA Inc. to
correct the error, omission and/or inaccuracy or resubmit such
content.
4. All CBS Sports Content shall be subject to restrictions and
instructions disclosed by CBS at any time.
III. LOGOS
1. SportsLine USA Inc. shall place a trademark notice to be
furnished by CBS on all items or materials utilizing CBS
Logos. CBS shall provide SportsLine USA, Inc. with the manner,
style and placement of such notice, which shall be
incorporated into this Section.
IV. PRIVATE LABELING AND CROSS-LINKS
1. Subsequent to the Transition Period, SportsLine USA, Inc.
shall not establish any links from the CBS SportsLine Site to
any private labeled gambling content.
2. Subsequent to the Transition Period, SportsLine USA Inc. shall
not conduct any cross promotions between the CBS SportsLine
Site and any Internet Site to which any gambling content has
been private labeled.
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<PAGE>
V. OWNERSHIP
1. SportsLine USA Inc. shall place an appropriate copyright
notice to be furnished by CBS on all pages of the CBS
SportsLine Site.
2. SportsLine USA Inc. and CBS shall mutually develop the
procedures for placing any third party copyright notice on any
CBS Content Page.
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<PAGE>
EXHIBIT D
ADVERTISING AND PROMOTION - PLACEMENTS
PLACEMENT OBLIGATIONS
- - CBS will be responsible for the placement of all advertising and promotion of
the CBS SportsLine Site
PLACEMENT POSSIBILITIES
- - CBS Television Network Sports programming
- - Other CBS Television Network programming, e.g. Evening News, Primetime,
Daytime, Late Night
- - Other CBS television programming. e.g. Syndication, CBS EYE ON PEOPLE
- - CBS Owned and Operated Television Stations programming, e.g. sport segments of
local news, local avails
- - CBS Owned and Operated Radio Stations programming, e.g. local news, music,
sports
- - Banner Advertising on CBS Internet Sites
PLACEMENT TYPES
- - 30 second units where available
- - 15 second units where available
- - 10 second units where available
- - URL Scrolls
- - On-air mention
- - Banner ads
- - Credit rolls/sign-offs
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<PAGE>
EXHIBIT E
AD GUARANTEES AND SHARES
SportsLine USA Inc. will pay CBS for the use of CBS advertising and promotion
time pursuant to the following schedule:
TOTAL SHARES OF
YEAR(1) AMOUNT(2) CONVERSION PRICE COMMON STOCK
- --------------------------------------------------------------------------------
First Contract Year $7 million $4.12 1,699,860
Second Contract Year $11 million(3) $6.39 1,722,293
Third Contract Year $11 million $8.52 1,291,720
Fourth Contract Year $14 million $10.65 1,315,194
FIFTH CONTRACT YEAR $14 MILLION $12.77 1,095,933
- -------------------------------------------------------------------------------
TOTAL $57 MILLION $8/SHARE 7,125,000
- --------
(1) Each payment shall be made on the first business day of each
Contract Year commencing in 1997.
(2) Placement costs:
- Regular time units priced at average unit cost for time
period
- URL Scroll, banner ads, priced at 10 second unit
- Credit rolls and signoffs priced at five (5) second unit
- On-air mention at 15 second unit
(3) Includes Winter Olympics in l998
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<PAGE>
EXHIBIT F
SIGNATURE EVENTS
/bullet/ The 1998 Winter Olympics
/bullet/ 1997 - 2000 NCAA Basketball
Final Four Tournament
/bullet/ 1997 - 1998 PGA Golf Championship
and all PGA Tour events
/bullet/ 1997 - 1998 The Masters Golf Tournament
/bullet/ 1997 - 2001 Daytona 500
/bullet/ 1997 - 2000 U.S. Open Tennis
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<PAGE>
EXHIBIT G
CONTENT SHARES
CONTENT CONVERSION SHARES OF
DATE* PAYMENT PRICE COMMON STOCK
- -----------------------------------------------------------------------------
First Contract Year $1 million $4.12 180,823
Second Contract Year $1 million $6.39 117,213
Third Contract Year $1 million $8.52 105,750
Fourth Contract Year $1 million $10.65 103,754
Fifth Contract Year $1 million $12.77 117,460
- -----------------------------------------------------------------------------
TOTAL $5 MILLION $8/SHARE 625,000
* Each payment shall be made on the first business day of each Contract
Year commencing in 1997.
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<PAGE>
EXHIBIT H
FORM OF WARRANT
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<PAGE>
000,000 WARRANTS
THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE
SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
[INSERT DATE- BEGINNING OF CONTRACT YEAR]
SPORTSLINE USA, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, SPORTSLINE USA, INC., a Delaware corporation
("SportsLine" or the "Company"), hereby certifies that CBS INC (the "Holder") is
entitled, subject to the provisions contained herein, to purchase from the
Company 000,000 fully paid and non-assessable shares of Common Stock (as defined
below), subject to adjustment as provided herein, at an exercise price per share
of Common Stock (the "Exercise Price") of $[INSERT EXERCISE PRICE].
The term "Common Stock" means the Common Stock, par value $.01 per
share, of the Company as constituted on the date hereof. The number of shares of
Common Stock to be received upon the exercise of these Warrants may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter referred to as "Warrant Stock." The term "Other Securities" means
any other securities that may be issued by the Company in addition to, or in
substitution for, the Warrant Stock.
References herein to the "Company" are to (i) SportsLine and any
successor thereto, (ii) any successor corporation resulting from the merger or
consolidation of SportsLine, or any successor thereto, with another corporation
or (ii) any corporation to which SportsLine, or any successor thereto, has
transferred its property or assets as an entirety or substantially as an
entirety.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of these Warrants, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date. Any such new
Warrants, upon execution and delivery, shall constitute an additional
contractual obligation on the part of the Company, whether or not these Warrants
so lost, stolen, destroyed or mutilated shall be at any time enforceable by
anyone.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject to, all of the conditions,
limitations and provisions set forth herein, including the following:
1. EXERCISE OF WARRANTS. The Warrants may be exercised, in whole or in
part, at any time prior to December 31, ____ [END OF CONTRACT YEAR]; provided,
however, that the
<PAGE>
exercisability of the Warrants shall be subject to the condition that the
Agreement dated as of March 5, 1997 between SportsLine and the Holder (the
"Principal Agreement"), as amended or modified, shall be in effect, and no
further Warrants shall be exercisable on or after the expiration, nonrenewal or
termination of said agreement. Subject to the foregoing, the Warrants shall be
exercisable by presentation and surrender of these Warrants to the Company at
its principal office (which on the date hereof is 6340 N.W. 5th Way, Fort
Lauderdale, Florida 33309), or at the office of its stock transfer agent (which
on the date hereof is the Company), if any, with the Warrant Exercise Form
attached hereto duly executed and accompanied by payment (either in cash or by
certified or official bank check or checks, payable to the order of the Company)
of the Exercise Price for the number of shares specified in such form. Upon
receipt by the Company of the Warrants, together with the Exercise Price, at its
office, or by the Company's stock transfer agent at its office, in proper form
for exercise, the Holder shall be deemed to be the holder of record of the
Warrant Stock (and Other Securities) issuable upon such exercise,
notwithstanding that the transfer books of the Company shall then be closed or
that certificates representing such Warrant Stock (or Other Securities) shall
not then be actually delivered to the Holder. The Company shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of Warrant Stock (and Other Securities) upon exercise of these
Warrants.
2. RESERVATION OF SHARES AND OTHER SECURITIES. The Company will at all
times reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock and other shares of capital stock of the Company (and
Other Securities) from time to time receivable upon exercise of these Warrants.
All such shares (and Other Securities) shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable and
free and clear of all preemptive rights.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share in lieu of each fraction of a share otherwise issuable upon any
exercise of these Warrants, as determined by the Board of Directors in its
reasonable discretion.
4. EXCHANGE OF WARRANTS. These Warrants are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if any, for other
Warrants of different denominations, entitling the Holder to purchase in the
aggregate the same number of shares of Warrant Stock (and Other Securities)
purchasable hereunder.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights as a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed herein.
6. ANTI-DILUTION PROVISIONS.
6.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time
subdivide its outstanding shares of Common Stock (or Other Securities at the
time receivable upon the exercise of these Warrants) by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its shareholders, the number of
shares of Common Stock (or Other Securities) subject to these Warrants
immediately prior to such subdivision shall be proportionately increased and the
Exercise Price per share shall be proportionately decreased, and if the Company
shall at any time combine the outstanding shares of Common Stock (or Other
Securities) by recapitalization, reclassification or combination thereof, the
number of shares of Common Stock (or Other Securities) subject to these Warrants
immediately prior to such combination shall be proportionately decreased and the
Exercise Price per share shall be proportionately increased.
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<PAGE>
Any such adjustments pursuant to this Section 6.1 shall be effective at the
close of business on the effective date of such subdivision or combination or,
if any adjustment is the result of a stock dividend or distribution, then the
effective date for such adjustment shall be the record date therefor.
6.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. (a) In
case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable upon the exercise of these
Warrants) after the date hereof or in case after such date the Company (or any
such other corporation) shall consolidate with or merge into another corporation
or convey all or substantially all of its assets to another corporation, then,
and in each such case, the Holder, upon the exercise hereof, at any time after
the consummation of such reorganization, consolidation, merger or conveyance,
shall be entitled to receive, in lieu of the securities and property receivable
upon the exercise of these Warrants prior to such consummation, the securities
or property to which the Holder would have been entitled upon such consummation
if the Holder had exercised these Warrants immediately prior thereto (but had
not exercised any rights with respect to such securities or property in
connection with the reorganization, consolidation, merger or conveyance); in
each such case, the terms of these Warrants shall be applicable to the
securities or property receivable upon the exercise of these Warrants after such
consummation.
(b) In any case where the Company shall consolidate with or merge into
another corporation, and shall not be the surviving corporation, or shall convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Company shall, as a condition of the closing of such transaction,
require that the surviving corporation or the corporation that shall have
received substantially all of the Company's assets expressly assume the
obligations of the Company under these Warrants in a form reasonably
satisfactory to the Holder.
6.3 NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, willfully avoid or
seek to avoid the observance or performance of any of the terms of these
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, while these Warrants are
outstanding, the Company (a) will not permit the par value, if any, of the
shares of Warrant Stock to be above the amount payable therefor upon such
exercise and (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue or sell fully paid and
non-assessable shares of Warrant Stock and Other Securities upon the exercise of
these Warrants.
6.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in the
number of shares of Warrant Stock or Other Securities receivable upon the
exercise of these Warrants, the Company at its expense will promptly compute
such adjustment in accordance with the terms of these Warrants and prepare a
certificate executed by an executive officer of the Company setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company will forthwith mail a copy of each such certificate to the Holder.
6.5 NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the holders of its Common Stock
(or Other Securities at the time receivable upon the exercise of these Warrants)
for the purpose of entitling them to receive any dividend (other than a cash
dividend at the same rate as the rate of the last cash dividend theretofore
paid) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities, or
to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock
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<PAGE>
of the Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or substantially all of the assets of the
Company to another corporation; or
(c) of any voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, or
(ii) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding up is to take place, and
the time, if any, to be fixed, as to which the holders of record of Warrant
Stock (or such other securities at the time receivable upon the exercise of
these Warrants) shall be entitled to exchange their shares of Warrant Stock (or
such other securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least 20
days prior to the date therein specified and these Warrants may be exercised
prior to said date during the term of these Warrants.
8. RESTRICTIONS ON TRANSFER OF WARRANTS, WARRANT STOCK AND OTHER
SECURITIES. The Warrant Stock and Other Securities may not be sold, transferred
or otherwise disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant to
available exemptions from such registration, provided that the seller delivers
to the Company an opinion of counsel satisfactory to the Company confirming the
availability of such exemption.
9. LEGEND. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of these Warrants
and the issuance of any of the shares of Warrant Stock or Other Securities, all
certificates representing such securities shall bear on the face thereof
substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION.
10. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not by
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by the Holder to purchase
Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no
enumeration herein of the rights or privileges of the Holder shall cause the
Holder to be a stockholder of the Company for any purpose.
11. AMENDMENT; WAIVER. Any term of the Warrants may be amended and the
observance of any term of the Warrants may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section shall be binding upon the Holder and the
Company.
12. NOTICES. All notices required hereunder shall be in writing and
shall be deemed given when telegraphed, delivered personally or within two days
after mailing when mailed by certified or
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<PAGE>
registered mail, return receipt requested, to the Company at its principal
office, or to the Holder at the address set forth on the record books of the
Company, or at such other address of which the Company or the Holder has been
advised by notice in writing hereunder.
13. ASSIGNMENT. These Warrants, and the rights of the Holder hereunder,
are not assignable by the Holder, except to a CBS Assignee (as defined in the
Principal Agreement). Any attempted assignment in violation of this Section 13
shall be null and void.
14. APPLICABLE LAW. These Warrants shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as of
the day and year first above written.
SPORTSLINE USA, INC.
By:
--------------------------------
Title: President
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<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to purchase
_______________ shares of Common Stock of SportsLine USA, Inc., a Delaware
corporation, and hereby makes payment of $_________ in full satisfaction
therefor.
____________________________________________
Signature
____________________________________________
Signature, if jointly held
____________________________________________
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the Holder of the within Warrants)
Name ___________________________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________________________
________________________________________________________________________________
Social Security or Taxpayer Identification Number ______________________________
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<PAGE>
EXHIBIT I
WARRANT SHARES
WARRANT SHARES OF
GRANT* TOTAL COST PRICE COMMON STOCK
- --------------------------------------------------------------------------------
First Contract Year $ 3,800,000 $4 950,000
Second Contract Year $ 5,700,000 $6 950,000
Third Contract Year $ 7,600,000 $8 950,000
Fourth Contract Year $ 9,500,000 $10 950,000
Fifth Contract Year $11,400,000 $12 950,000
- --------------------------------------------------------------------------------
TOTAL $38,000,000 $8/SHARE 4.75 MILLION
* Each warrant will be granted on the first business day of each Contract
Year commencing in 1997 and is exercisable during the Contract Year in
which it is granted.
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<PAGE>
EXHIBIT J
STOCKHOLDER AGREEMENT
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<PAGE>
CBS/SPORTSLINE STOCKHOLDER AGREEMENT
This CBS/SPORTSLINE STOCKHOLDER AGREEMENT (this "AGREEMENT") is made
and entered into as of March 5, 1997, between SportsLine USA, Inc., a Delaware
corporation (the "COMPANY"), and CBS INC., a New York corporation ("CBS").
R E C I T A L S
A. CBS and the Company have entered into that certain Agreement, dated
as of the date hereof (the "PRINCIPAL AGREEMENT;" capitalized terms used herein
and not otherwise defined shall have the meanings defined in the Principal
Agreement), pursuant to which, among other things, CBS will acquire shares of
Common Stock and Warrants in consideration of the license by CBS of the CBS
Logos and the CBS Content and provision by CBS of certain broadcast advertising
and promotion.
B. CBS and the Company have agreed that the terms and conditions of
this Agreement shall govern CBS's rights with respect to the shares of Common
Stock it acquires pursuant to the Principal Agreement or upon the exercise of
the Warrants.
NOW THEREFORE, in consideration of the above recitals and the mutual
covenants made herein, the parties hereby agree as follows:
1. INFORMATION AND DIRECTOR RIGHTS.
1.1 FINANCIAL AND OTHER INFORMATION. The Company covenants and agrees
that, so long as the CBS Percentage (as defined in Section 1.3 hereof) is at
least ten percent (10%), the Company will furnish to CBS such financial and
other information (including annual, quarterly and monthly reports and an annual
budget) as the Company may from time to time be required to furnish to the
holders of the Company's outstanding Series A, Series B or Series C preferred
stock (the "PREFERRED STOCK HOLDERS") pursuant to the Amended and Restated
Investors' Rights Agreement dated as of September 25, 1996, among the Company,
the holders of the Preferred Stock, The Estate of Burk Zanft and Michael Levy,
as now in effect and as hereinafter amended from time to time in accordance with
the terms thereof (the "INVESTORS' RIGHTS AGREEMENT"). Such financial and other
information shall be provided to CBS by the Company at such time or times and in
the same manner as it is provided to the Preferred Stock Holders in accordance
with the Investors' Rights Agreement. CBS agrees to hold all such financial and
other information received pursuant to this Section 1.1 in confidence, and not
to use or disclose any of such information to any third party (other than to any
regulatory authority to which CBS is subject requesting the same), except to the
extent such information may be made publicly available by the Company.
1.2 CBS DESIGNEES. So long as the CBS Percentage is at least ten
percent (10%), CBS shall have the right to elect (and maintain in office) as
members of the Company's Board of Directors (the "BOARD") a number of
individuals equal to the product of (i) total number of members of the Board,
times (ii) the CBS Percentage (the "CBS DESIGNEES"). The CBS Designees shall be
designated from time to time in writing by CBS. Upon execution of this
Agreement, the Company shall cause two (2) CBS Designees to be appointed to the
Board. The Company further agrees to use its best efforts to cause the
nomination and election from time to time of the CBS Designees, including
obtaining the agreement of the holders of a majority of its outstanding Common
Stock and preferred stock to vote their shares of the Company's capital stock to
cause the election to the Board of any CBS Designees designated for election to
the Board by CBS.
1.3 OBSERVER RIGHTS. If CBS is no longer entitled to appoint CBS
Designees in accordance with Section 1.2, then so long as CBS owns not less than
250,000 shares of Common Stock, CBS, at its own expense, shall be entitled to
have a representative attend all meetings of the Company's Board of Directors in
a nonvoting observer capacity (each, a "CBS REPRESENTATIVE"). If CBS designates
a CBS Representative to the Company, the Company shall concurrently provide the
CBS Representative with copies of all notices, minutes, consents and other
materials it provides to members of the Board of Directors; provided, that the
<PAGE>
CBS Representative shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so provided; and provided
further, that the Company reserves the right to withhold any information and to
exclude any CBS Representative from any meeting or portion thereof if access to
such information or meeting or attendance at such meeting could adversely affect
the attorney-client privilege between the Company and its counsel or would
result in disclosure of trade secrets to any CBS Representative.
1.4 CBS PERCENTAGE. For purposes of this Agreement, the term "CBS
PERCENTAGE" shall mean, at any particular time, that percentage determined by
dividing (a) the sum of (i) the number of shares of Common Stock CBS then holds,
plus (ii) the number of shares of Common Stock which CBS thereafter has the
right to acquire under the Principal Agreement or upon exercise of any Warrants
outstanding or to be granted thereunder, by (b) the sum of (i) the total number
of shares of Common Stock of the Company then outstanding plus (ii) the total
number of shares of Common Stock of the Company into which all then outstanding
shares of preferred stock of the Company are then convertible plus (iii) the
number of shares of Common Stock of the Company reserved for issuance under
stock purchase and stock option plans of the Company and outstanding options and
warrants.
2. RIGHT OF FIRST REFUSAL.
2.1 GENERAL. CBS shall have the right of first refusal to purchase the
CBS Percentage of all (or any part) of any New Securities that the Company may
from time to time issue after the date of this Agreement.
2.2 NEW SECURITIES. "NEW SECURITIES" shall mean any Common Stock or
preferred stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or preferred stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or preferred stock; PROVIDED, HOWEVER, that
the term "New Securities" does not include: (i) shares of the Company's Common
Stock (and/or options or warrants therefor) issued to employees, officers,
directors, contractors, advisors or consultants of the Company pursuant to
incentive agreements or plans unanimously approved by the Board of Directors of
the Company ("EMPLOYEE OPTIONS"); (ii) any securities issuable upon conversion
of or with respect to any then outstanding shares of the Company's Series A,
Series B or Series C preferred stock or Common Stock or other securities
issuable upon conversion thereof; (iii) any securities issuable upon exercise of
any of the options, warrants or rights (other than Employee Options)("WARRANT
SECURITIES") outstanding as of the date hereof, any Warrant Securities hereafter
approved by the Board of Directors of the Company, and any Common Stock or other
securities issuable upon the conversion of any Warrant Securities; (iv) shares
of the Company's Common Stock or preferred stock issued in connection with any
stock split or stock dividend; (v) securities offered by the Company to the
public pursuant to a registration statement filed under the Securities Act; (vi)
up to 50,000 shares of the Company's Common Stock (and/or options or warrants
therefor) issued or issuable to nonaffiliate third parties providing the Company
with equipment leases, real property leases, loans, credit lines, guaranties of
indebtedness, cash price reductions or similar financing, provided that this
exception (vi) shall not apply unless the arrangement is unanimously approved by
the Company's Board of Directors; or (vii) securities issued pursuant to the
acquisition of another corporation or entity by the Company by consolidation,
merger, purchase of all or substantially all of the assets, or other
reorganization in which the Company acquires, in a single transaction or series
of related transactions, all or substantially all of the assets of such other
corporation or entity or fifty percent (50%) or more of the voting power of such
other corporation or entity or fifty percent (50%) or more of the equity
ownership of such other entity.
2.3 PROCEDURES. In the event that the Company proposes to undertake an
issuance of New Securities, it shall give CBS written notice of its intention to
issue New Securities (the "NOTICE"), describing the type of New Securities and
the price and the general terms upon which the Company proposes to issue such
New Securities. CBS shall have fifteen (15) days from the date of mailing of any
such Notice to agree in
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<PAGE>
writing to purchase the CBS Percentage of such New Securities for the price and
upon the general terms specified in the Notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased (not
to exceed the CBS Percentage).
2.4 FAILURE TO EXERCISE. In the event that CBS fails to exercise the
right of first refusal within such fifteen (15) day period, then the Company
shall have 120 days thereafter to sell the New Securities with respect to which
CBS's rights of first refusal hereunder were not exercised, at a price and upon
general terms not materially more favorable to the purchasers thereof than
specified in the Notice. In the event that the Company has not issued and sold
the New Securities within such 120 day period, then the Company shall not
thereafter issue or sell any New Securities without again first offering such
New Securities to CBS pursuant to this Section 2.
3. REGISTRATION RIGHTS.
3.1 DEFINITIONS. For purposes of this Section 3:
(a) REGISTRATION. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and the declaration or ordering of effectiveness of such
registration statement.
(b) REGISTRABLE SECURITIES. The term "REGISTRABLE SECURITIES"
means: all shares of Common Stock (i) issued by the Company to CBS as Content
Shares or Ad Shares pursuant to the Principal Agreement, (ii) issuable upon the
exercise of outstanding and exercisable Warrants granted pursuant to the
Principal Agreement, and (iii) any shares of Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, all such shares of Common Stock
described in clause (i) or (ii) of this Section 3.1(b); EXCLUDING in all cases,
however, any Registrable Securities sold by CBS in a transaction in which rights
under this Section 3 are not assigned in accordance with this Agreement or any
Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.
(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of
shares of "REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the number of
shares of Common Stock which are Registrable Securities and (1) are then issued
and outstanding or (2) are then issuable pursuant to the exercise or conversion
of then outstanding and then exercisable options, warrants or convertible
securities.
(d) FORM S-3. The term "FORM S-3" means such form under the
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(e) SEC. The term "SEC" or "COMMISSION" means the
United States. Securities and Exchange Commission.
3.2 DEMAND REGISTRATION. If the Company shall receive at any time six
months or more after the the effective date of the Company's initial public
offering of its securities pursuant to a registration filed under the Securities
Act a written request from CBS that the Company file a registration statement
under the Securities Act covering the registration of Registrable Securities
pursuant to this Section 3.2, then the Company shall effect, as soon as
practicable and in any event within sixty (60) days of the receipt of such
request, the registration under the Securities Act of all Registrable Securities
which CBS requests to be registered and included in such registration by such
written notice, subject only to the limitations of this
3
<PAGE>
Section 3.2; PROVIDED that the Registrable Securities requested by CBS to be
registered pursuant to such request must have an anticipated aggregate public
offering price (before any underwriting discounts and commissions) of not less
than $5,000,000.
If CBS intends to distribute the Registrable Securities covered by its
request by means of an underwriting, then CBS shall so advise the Company as a
part of its request made pursuant to this Section 3.2. The underwriter shall be
selected by the Company with the consent of CBS, which consent will not
unreasonably be withheld, and CBS shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
3.2, if the underwriter(s) advise(s) the Company in writing that marketing
factors require a limitation of the number of securities to be underwritten then
the Company shall so advise CBS, and the number of Registrable Securities that
may be included in the underwriting shall be reduced as required by the
underwriter(s) and allocated FIRST, to the Company, SECOND, to the Preferred
Stock Holders, if and to the extent such Preferred Stock Holders have exercised
their registration rights granted under the Investors' Rights Agreement, and
THIRD, if and only to the extent that the inclusion of such Registrable
Securities will not reduce the amount of the shares that the Preferred Stock
Holders may include in such registration and underwriting, to CBS; PROVIDED,
HOWEVER, that the managing underwriter(s) shall have the absolute right and
discretion to exclude from a registration and underwriting relating to the
Company's initial public offering any and all of the Registrable Securities. Any
Registrable Securities excluded and withdrawn from such underwriting shall be
withdrawn from the registration.
The Company is obligated to effect only one (1) registration pursuant
to this Section 3.2. The Company shall not be deemed to have effected a
registration pursuant to this Section 3.2 unless a registration statement in
respect thereof shall have been declared effective by the Commission.
Notwithstanding the foregoing, if the Company shall furnish to CBS a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, then the Company shall have the
right to defer such filing for a period of not more than 120 days after receipt
of the request of CBS; PROVIDED, HOWEVER, that the Company may not utilize this
right more than once in any twelve (12) month period.
3.3 PIGGYBACK REGISTRATIONS. The Company shall notify CBS in writing at
least thirty (30) days prior to filing any registration statement under the
Securities Act for purposes of effecting a public offering of securities of the
Company (including registration statements relating to secondary offerings of
securities of the Company but excluding registration statements relating to
offerings of securities pursuant to any employee benefit plan or a corporate
reorganization) and will afford CBS an opportunity to include in such
registration statement all or any part of the Registrable Securities then held
by CBS. If CBS desires to include in any such registration statement all or any
part of the Registrable Securities then held by it, CBS shall, within twenty
(20) days after receipt of the above-described notice from the Company, so
notify the Company in writing, and in such notice shall inform the Company of
the number of Registrable Securities CBS wishes to include in such registration
statement. If CBS decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, CBS shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
If a registration statement under which the Company gives notice under
this Section 3.3 is for an underwritten offering, then the Company shall so
advise CBS. In such event, the right of CBS to have any of its Registrable
Securities included in a registration pursuant to this Section 3.3 shall be
conditioned upon CBS's participation in such underwriting and the inclusion of
CBS's Registrable Securities in the
4
<PAGE>
underwriting to the extent provided herein. CBS and any other stockholders
proposing to distribute their Company securities through such underwriting shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriter(s) selected for such underwriting. Notwithstanding
any other provision of this Agreement, if the managing underwriter determine(s)
in good faith that marketing factors require a limitation of the number of
shares to be underwritten, then the managing underwriter(s) may exclude shares
(including Registrable Securities) from the registration and the underwriting,
and the number of shares that may be included in the registration and the
underwriting shall be allocated, FIRST, to the Company, SECOND, to the Preferred
Stock Holders, if and to the extent such Preferred Stock Holders have exercised
their registration rights granted under the Investors' Rights Agreement, and
THIRD, if and only to the extent that the inclusion of such Registrable
Securities will not reduce the amount of the shares that the Preferred Stock
Holders may include in such registration and underwriting, to CBS; PROVIDED,
HOWEVER, that the managing underwriter(s) shall have the absolute right and
discretion to exclude from a registration and underwriting relating to the
Company's initial public offering any and all of the Registrable Securities. If
CBS disapproves of the terms of any such underwriting, CBS may elect to withdraw
therefrom by written notice to the Company and the underwriter(s), delivered at
least ten (10) business days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration.
3.4 FORM S-3 REGISTRATION. In case the Company shall receive from CBS a
written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities then owned by CBS, then the Company will, as soon as
practicable after receipt of the request, file a Form S-3 registration statement
covering such Registrable Securities and effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of such Registrable Securities, together
with the securities of any holders of securities of the Company (other than CBS)
entitled to inclusion in such registration; PROVIDED, HOWEVER, that the Company
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 3.4:
(i) if the Company is not then eligible for the
use of Form S-3, or if Form S-3 is not available for such offering by CBS;
(ii) if CBS, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $1,000,000;
(iii) if the Company shall furnish to CBS a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period of not
more than 120 days after receipt of the request of CBS under this Section 3.4;
(iv) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected two (2)
registrations on Form S-3 for CBS or other holders of its securities; or
(v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
A Form S-3 registration effected pursuant to this Section 3.4 shall not
be deemed to be demand registration as described in Section 3.3 above.
5
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3.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of CBS,
keep such registration statement effective for up to one hundred twenty (120)
days or until the distribution contemplated in the Registration Statement has
been completed, whichever is earlier; provided, however, that such one hundred
twenty day (120) shall be extended for a period of time equal to the period CBS
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to CBS such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by CBS that
are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by CBS,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. CBS and any
other holders of securities of the Company included in such registration and
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify CBS at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Furnish, at the request of CBS, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to CBS, addressed to
the underwriters, if any, and CBS and any other stockholders requesting
registration of securities in such registration, and (ii) a "comfort" letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to CBS and any other stockholders requesting
registration of securities in such registration, addressed to the underwriters,
if any, and to CBS and such other stockholders.
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<PAGE>
(h) Cause the Registrable Securities registered pursuant
hereto to be listed on each securities exchange or market on which similar
securities issued by the Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
3.6 EXPENSES. All expenses incurred by the Company in connection with a
registration pursuant to Section 3.2, 3.3 or 3.4 (excluding underwriters' and
brokers' discounts and commissions), including, without limitation all federal
and "blue sky" registration and qualification fees, printing expenses, fees and
disbursements of the Company's accountants and counsel, and reasonable fees and
disbursements of one counsel for CBS and all other selling stockholders, shall
be borne by the Company. CBS and each other stockholder participating in a
registration pursuant to Section 3.2, 3.3 or 3.4 shall bear their proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Company) of all discounts and commissions payable to
underwriters or brokers in connection with such offering.
3.7 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 3.2, 3.3 or
3.4 that CBS shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to timely effect the registration of its
Registrable Securities.
3.8 DELAY OF REGISTRATION. CBS shall not have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
3.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 3.2, 3.3 or 3.4:
(a) BY THE COMPANY. To the extent permitted by law, the
Company will indemnify and hold harmless CBS, its officers and directors, any
underwriter (as deemed in the Securities Act) for CBS and each person, if any,
who controls CBS or any such underwriter within the meaning of the Securities
Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"), against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto; (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the 1934 Act, any
federal or state securities law or any rule or regulation promulgated under the
Securities Act, the 1934 Act or any federal or state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse CBS and each such officer or director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them,
as incurred, in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this subsection 3.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
to CBS or any such officer or director, underwriter or controlling person for
any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by CBS or such officer, director or controlling person.
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(b) BY CBS. To the extent permitted by law, CBS will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter and any other
holder selling securities under such registration statement or any of such other
holder's partners, directors or officers or any person who controls such holder
within the meaning of the Securities Act or the 1934 Act, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, controlling person, underwriter or such holder, partner or director,
officer or controlling person of such other holder may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by CBS expressly for use in connection with such
registration; and CBS will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter or other holder, partner, officer, director or controlling person of
such other holder in connection with investigating or defending any such loss,
claim, damage, liability or action, as incurred; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection 3.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of CBS (which consent shall
not be unreasonably withheld); and PROVIDED FURTHER, that the total amounts
payable in indemnity by CBS under this Section 3.9(b) in respect of any
Violation shall not exceed the net proceeds received by CBS in the registered
offering out of which such Violation arises.
(c) NOTICE. Promptly after receipt by an indemnified party
under this Section 3.9 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 3.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 3.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 3.9.
(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing
indemnity agreements of the Company and CBS are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS), such indemnity agreement shall not inure to the benefit of CBS if a
copy of the Final Prospectus was furnished to CBS and was not furnished by CBS
to the person asserting the loss, liability, claim or damage at or prior to the
time such action is required by the Securities Act.
(e) CONTRIBUTION. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) CBS, or any controlling person of CBS, makes a claim for
indemnification pursuant to this Section 3.9 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
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<PAGE>
that this Section 3.9 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of CBS or any
such controlling person in circumstances for which indemnification is provided
under this Section 3.9; then, and in each such case, the Company and CBS will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others and based on equitable
considerations) in such proportion so that CBS is responsible for the portion
represented by the percentage that the public offering price of its Registrable
Securities offered by and sold under the registration statement bears to the
public offering price of all securities offered by and sold under such
registration statement, and the Company and other selling holders are
responsible for the remaining portion; PROVIDED, HOWEVER, that, in any such
case, (A) CBS will not be required to contribute any amount in excess of the net
proceeds received by CBS from the offering pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11 (f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(f) SURVIVAL. The obligations of the Company and CBS under
this Section 3.9 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
(g) CONFLICT WITH UNDERWRITING AGREEMENT. In the event of any
conflict between the indemnity provisions of this Agreement and those of any
underwriting agreement entered into by the Company, CBS and any other holders
with respect to a registration of Registrable Securities, the provisions of the
underwriting agreement shall supersede and control.
3.10 "MARKET STAND-OFF" AGREEMENT. CBS hereby agrees that it shall not,
to the extent requested by the Company or an underwriter of securities of the
Company, sell or otherwise transfer or dispose of any Registrable Securities or
other shares of stock of the Company owned by CBS for up to one hundred eighty
(180) days following the effective date of a registration statement of the
Company filed under the Securities Act; PROVIDED, HOWEVER, that (a) such
agreement shall be applicable only to the first two such registration statements
of the Company which cover securities to be sold on its behalf to the public in
an underwritten offering but not to Registrable Securities sold pursuant to such
registration statement, and (b) all executive officers and directors and, to the
extent finally required by the Company's underwriters, employees of the Company
then holding Common Stock of the Company enter into or become bound by similar
agreements. In order to enforce the foregoing covenant, the Company shall have
the right to place restrictive legends on the certificates representing the
shares subject to this Section and to impose stop transfer instructions with
respect to the Registrable Securities and such other shares of stock of CBS
until the end of such period.
3.11 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, after the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the 1934 Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as CBS owns any Registrable Securities, to furnish
to CBS upon request a written statement by the Company as to its compliance with
the reporting requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities Act and
the 1934 Act (at any time after it
9
<PAGE>
has become subject to the reporting requirements of the 1934 Act), a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents of the Company as CBS may reasonably request in availing itself of
any rule or regulation of the Commission allowing CBS to sell any such
securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
3.12 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have
no obligations pursuant to Sections 3.2 through 3.5 with respect to: (i) any
request or requests for registration made by CBS on a date more than five (5)
years after the closing date of the Company's initial public offering; or (ii)
any Registrable Securities proposed to be sold by CBS in a registration pursuant
to Section 3.2, 3.3 or 3.4 if, in the opinion of counsel to the Company, all
such Registrable Securities proposed to be sold by CBS may be sold in a
three-month period without registration under the Securities Act pursuant to
Rule 144 under the Securities Act.
3.13 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of CBS, enter into any agreement with any holder or prospective holder of any
securities of the Company which would allow such holder or prospective holder to
include such securities in any registration filed under Section 3.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of CBS which are included.
4. ASSIGNMENT; AMENDMENT; TERMINATION OF CERTAIN RIGHTS.
4.1 ASSIGNMENT. Neither party shall assign this Agreement or any of its
rights or obligations hereunder, in whole or in part, without the other party's
prior written consent; provided, that in the event CBS assigns its rights under
the Principal Agreement to a CBS Assignee, such CBS Assignee shall succeed to
all of CBS's rights under this Agreement, subject to CBS's obligations
hereunder.
4.2 AMENDMENT OF RIGHTS. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by a written
instrument executed by the Company and CBS. Any amendment or waiver effected in
accordance with this Section 4.2 shall be binding upon the Company, CBS and each
permitted successor or assignee of each of the foregoing.
4.3 TERMINATION OF CERTAIN RIGHTS. The rights of CBS under Sections
1.1, 1.2, 1.3, 2.1, 2.3 and 2.4 hereof, and the Company's obligations under such
sections, shall terminate (i) immediately upon the closing of the first
underwritten sale of Common Stock of the Company to the public pursuant to a
registration statement filed with, and declared effective by, the SEC under the
Securities Act, covering the offer and sale of Common Stock to the public, or
(ii) upon (a) the acquisition of all or substantially all the assets of the
Company or (b) an acquisition of the Company by another corporation or entity by
consolidation, merger or other reorganization in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) or more of the voting power of the corporation or other entity
surviving such transaction. Notwithstanding clause (i) above, if the Preferred
Stock Holders retain their rights of first refusal to purchase New Securities
after the Company's initial public offering pursuant to the terms of the
Investors' Rights Agreement, then the rights of CBS under Section 2 of this
Agreement shall continue in effect until such time as the rights of first
refusal of the Preferred Stock Holders are terminated.
5. GENERAL PROVISIONS.
5.1 NOTICES. All notices hereunder shall be in writing and shall be
given by (i) certified
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or registered mail, return receipt requested, (ii) hand delivery, or (iii)
nationally recognized overnight courier service; a notice shall be deemed to
have been given (a) when delivered by hand, (b) three days after mailing, in the
case of certified or registered mail, and (c) one business day after being
forwarded to a nationally recognized overnight courier service for overnight
delivery; in each case correctly addressed to such party at its address set
forth below or such other address as such party may specify by notice to the
other parties hereto:
(a) if to the Company, at 6340 N.W. 5th Way, Fort Lauderdale,
Florida 33309, Attention: President; and
(b) if to CBS Sports, at 51 West 52nd Street, New York, New
York 10019, Attention: President.
5.2 ENTIRE AGREEMENT. This Agreement, together with all the Exhibits
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
5.3 GOVERNING LAW. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of Delaware as
applied to agreements among Delaware residents entered into and to be performed
entirely within Delaware, excluding that body of law relating to conflict of
laws and choice of law.
5.4 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
5.5 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
5.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 4.1,
the provisions of this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the parties hereto.
5.7 CAPTIONS. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
5.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5.9 COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
5.10 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Agreement
there is a reference to a specific number of shares of Common Stock of any class
or series, then, upon the occurrence of any subdivision, combination or stock
dividend of such class or series of stock, the specific number of shares so
referenced in this Agreement shall automatically be proportionally adjusted to
reflect the affect on the outstanding shares of such class or series of stock by
such subdivision, combination or stock dividend.
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IN WITNESS WHEREOF, the parties hereto have executed this
CBS/SportsLine Stockholder Agreement as of the date and year first above
written.
SPORTSLINE USA, INC.
By: ______________________________________
Title: President
CBS INC.
By: ______________________________________
Title:
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EXHIBIT K
CBS SPORTS INTERNET COMMITMENTS
College Basketball
Intel: College BB Trivia Quiz (1997)
Pepsi: Virtual Press Room (1997)
Enterprise
Rent-A-Car Pick Sixteen (1997)
Philips: Tournament Challenge (1997)
Golf
Taylor Made: CBS Golf Page Sponsorship
April lst - May 15th, 1997
Cobra: Golf Page Sponsorship
May 19th - June 29th, 1997
Auto Racing
Anheuser-Busch: The exclusive alcoholic beverage and
non-alcoholic malt beverage sponsor of the
CBS NASCAR Page on the CBS Web site for all
current NASCAR races promoted on the World
Wide Web for 1997 & 1998, with the right of
first refusal in 1999. Additionally, CBS has
done a promotion with AB around the Miami
300 each year which has an Internet
component.
EconoLodge: NASCAR participation through 1997 on CBS Web
Page.
Tennis
American Express A presence on the CBS US Open Tennis
Internet Site with credit card exclusivity.
Commitment; four years firm.
-52-
<PAGE>
EXHIBIT L
NEW SIGNATURE EVENTS
1. Indy 500
2. Kentucky Derby
3. Belmont Stakes
4. Preakness Stakes
5. Triple Crown or any
6. World Cup
7. NCAA Football Playoffs or Championship
8. Wimbledon
9. US Open Golf Tournament
10. British Open Golf Tournament
11. Any Professional Sports post-season event
-53-
<PAGE>
EXHIBIT G
CONTENT SHARES
SportsLine USA Inc. will pay CBS for the use of CBS Sports Content pursuant to
the following schedule:
SHARES OF
CONTENT CONVERSION COMMON
DATE* PAYMENT PRICE STOCK
- ------------------------------------------------------------------------------
First Contract Year $744,991 $4.12 180,823
Second Contract Year $748,991 $6.39 117,213
Third Contract Year $900,990 $8.52 105,750
Fourth Contract Year $1,104,980 $10.65 103,754
Fifth Contract Year $1,500,048 $12.77 117,460
- ------------------------------------------------------------------------------
TOTAL $5 MILLION $8/SHARE 625,000
*Each payment shall be made on the first business day of each Contract Year
commencing in 1997.
<PAGE>
AMENDMENT NO 1. TO AGREEMENT
THIS AMENDMENT NO. 1 TO AGREEMENT is entered into as of the ___ day of April,
1997, between SPORTSLINE USA, INC., a Delaware corporation with principal
offices at 6340 N.W. 5th Way, Ft. Lauderdale, FL 33309 and CBS INC., a New York
corporation, with principal offices at 51 West 52nd Street, new York, NY 10019.
RECITALS
A. The parties entered into an Agreement dated Marcy 5, 1997 (the
"Agreement").
B. The parties have deemed it advisable and desire to amend
Exhibit G to the Agreement as contained in this Amendment.
NOW, THEREFORE, the parties hereto, in consideration of the terms and
conditions hereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
do hereby agree as follows:
1. Exhibit G to the Agreement is hereby amended by replacing it
with the revised Exhibit G attached hereto.
2. Except as specifically amended hereby, the Agreement is
ratified and confirmed and shall remain in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
SPORTSLINE USA, INC. CBS INC.
By: /s/ MICHAEL LEVY By: /s/ FREDERIC G. REYNOLDS
-------------------------- -------------------------
Name: Michael Levy Name: Frederic G. Reynolds
------------------------ -----------------------
Title: President Title: Executive Vice President, CFO
----------------------- ------------------------------
EXHIBIT 10.7
SPORTSLINE USA
WEBSITE LINKING AND LICENSING AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C>
DATED AS OF SEPTEMBER 27, 1996 CONTRACT #:
U S WEST INTERACTIVE SERVICES, INC. ("USW") SPORTSLINE USA, Inc. ("SPORTSLINE")
9000 E. Nichols Avenue, Suite 100 6340 N.W. 5th Way
Englewood, CO. 80112 Fort Lauderdale, FL 33309
CONTACT: Tom Cullen CONTACT: Michael Levy
Phone: (303) 705-7667 Phone: (954) 351-2120
</TABLE>
1. PURPOSE: USW is providing, or planning to provide, an entertainment,
education, and information service targeted at a local geographical level
(currently known as DIVE INsm) on numerous sites ("USW SITE(S)") on the World
Wide Web part of the Internet ("WWW"). SportsLine provides a sports news,
information and related information service on the WWW ("SPORTSLINE SITES"). USW
and SportsLine (the "PARTIES") each desire to provide links between their sites
and engage in other activities related to their Internet sites ("SITES") on the
terms and conditions set forth in this Agreement.
2. RESPONSIBILITIES OF THE PARTIES:
2.1. LINKING/HOSTING.
2.1.1. Each Party hereby agrees to establish and maintain
branded hypertext links ("SITE LINKS") from its Site(s) to the other Party's
Site(s).
2.1.2. Each Party grants to the other Party during the term
of this Agreement a non-exclusive, non-transferable, royalty free, worldwide,
right and license to use its trade names, trademarks, service names and service
marks ("MARKS") solely to the extent necessary to establish the Site links
described above and otherwise carry out the provisions of this Agreement.
Subject to each Party's approval rights, in using each other's Marks, each Party
acknowledges and agrees that (a) it will use the other Party's Marks in the
correct manner; b) the other Party's Marks are and shall remain the sole
property of the other Party; (c) nothing in this Agreement shall confer in the
Party any right of ownership in the other Party's Marks; and (d) the Party shall
not now or in the future contest the validity of the other Party's Marks.
2.1.3. SportsLine shall:
(a) produce a co-branded entry page ("SPLASH PAGE") on
the SportsLine Site(s) between SportsLine's local product, "City Pages" which
corresponds to USW's Dive In service for each USW Site(s).
(b) provide a Site link from the Splash Page back to
the USW Site(s) of origin via a "Back Button."
(c) if developed and maintained by SportsLine, list and
provide a Site link from SportsLine's appropriate business alliance index (or
similar link listing index) to the USW Site(s).
2.1.4. USW shall:
(a) produce a co-branded entry page ("SPLASH PAGE") on
the USW Site(s) between the appropriate category on USW's Dive In service, which
corresponds to SportsLine's local product, "City Pages."
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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(b) provide a Site link from the Splash Page back to
the SportsLine's Site(s) of origin via a "Back Button."
(c) If developed and maintained by USW, list and
provide a Site link from USW's appropriate business alliance index (or similar
link listing index) to the SportsLine Site.
2.2. SITE DEVELOPMENT EFFORTS:
(a) USW and SportsLine will work together to
develop original local sports content for USW's DIVE IN service. It is
contemplated that SportsLine will provide summary information (e.g. headlines,
scores, etc.) to be hosted on USW's servers which would link to a series of
co-branded pages on SportsLine's servers with further links through to the
SportsLine Service generally. SportsLine and USW will work in good faith to
develop an appropriate revenue model for this aspect of their business
relationship, including licensing fees and other revenue sharing approaches for
mutual compensation. In no event shall SportsLine be obligated to provide any
information or content contemplated by this Section 2.2(a) in the absence of a
separate written agreement between the parties settling forth their respective
obligation and any agreed upon compensation therefor.
(b) USW and SportsLine will explore the potential of
creating a jointly branded web-site focused on local sports, building on the
activities of both Parties in local markets.
2.3. PROMOTIONAL EFFORTS:
2.3.1. SPECIFIC:
(a) USW and SportsLine will publicly designate and work
with each other as "official partners" for the relevant content category being
pursued by each Party. USW will designate and work with SportsLine as the
official provider of broad, in-depth information covering multiple sports, for
USW's DIVE IN service scheduled for roll-out in the fall of 1996. Similarly,
SportsLine will designate and work with USW as its official partner m the
broadly-based local online services category, providing original local sports
content and branded links to USW's DIVE IN service.
(b) SW will propose SportsLine to U S WEST Media
Group's cable group for possible inclusion of the SportsLine product in cable
modem trials and commercial deployment.
(c) USW and SportsLine will make commercially
reasonable efforts to assist each other in procuring local and national
advertising and sponsorships for their respective Sites and services related
thereto and in sharing information and leads with each other, making
introductions for each other to potential advertisers and sponsors and
exchanging information regarding strategies and tactics.
(d) USW and SportsLine will explore the potential for
joint online and off-line promotions, such as search engine opportunities, media
buys, and event sponsorships.
(e) For any Internet based "yellow page" offering that
SportsLine considers launching during the term of this Agreement utilizing the
services of a third party, SportsLine agrees to provide USW with written notice
describing the terms and conditions under which such "yellow page" offering
would be provided ("PROPOSED ARRANGEMENT") including the identity of the third
party and the geographical territories of the targeted markets of the third
party for which the Proposed Arrangement would apply. USW shall have thirty (30)
days from receipt of SportsLine's notice in which to elect to:
(1) provide a comparable "yellow page" offering on
the SportsLine service on terms and conditions at least as favorable as those
set forth in the Proposed Arrangement; or
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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(2) decline the Proposed Arrangement as to the
geographical territories described in SportsLine's notice, in which case
SportsLine shall have the right to enter into the Proposed Arrangement with the
third party for the geographical territories covered in SportsLine's notice
within six (6) months from the date on which USW elected to decline the Proposed
Arrangement. The failure by USW to respond to SportsLine's notice within thirty
(30) days after receipt thereof shall be deemed an election by USW to decline
the Proposed Arrangement. In the event that SportsLine does not so enter into
such agreement within such six (6) month period, then SportsLine will again make
available any such Proposed Arrangement to USW pursuant to the terms and
conditions of this Section 2.3.1.
2.3.2. GENERAL: In addition to the above specified
promotional activities, the Parties agree to work generally together in
identifying and pursuing promotional activities which will enhance the value of
their respective Sites. 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, and all other promotional materials
related to the Sites that reference the other Party and/or its trade names,
trademarks, and service marks (the "MATERIALS"). Each Party shall solicit and
reasonably consider the views of the other Party in designing and implementing
such Materials. Once approved, the Materials (other than press releases) may be
used by a Party for the purpose of promoting the Sites 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
materials may be depleted. Notwithstanding the foregoing, either Party may issue
press releases and other disclosures as required by law or as reasonably advised
by legal counsel without the consent of the other Party and, in such event,
prompt notice thereof shall be provided to the Party.
2.4. MISCELLANEOUS:
2.4.1. Each party shall be solely responsible for supplying
and managing its Sites at its own expense and neither party shall have any
obligations whatsoever with respect thereto. Each Party shall manage, review,
delete, edit, create, update and otherwise manage all content and services
available on or through their respective Sites. Each Party acknowledges that
neither Party has any obligation to pre-screen content posted by users of the
Sites.
2.4.2. Each Party shall (a) provide each other with
specified graphic files and Site link addresses and notify each other in advance
of any changes in their respective URLs; and (b) use reasonable commercial
efforts to provide monthly usage and demographic data regarding use of the Sites
in relevant categories.
2.4.3. Each Party shall promptly inform the other of: (a)
any information related to the Sites that could reasonably lead to a claim,
demand, or liability of or against the other Party by any third party; and (b)
any changes in their Sites which would substantially change the content m any
area to which the other Party has linked.
2.4.4. Each Party retains the right, in its sole discretion,
to immediately cease linking to the other Parties' Site if, in such Parties
opinion, the other Parties' Site infringes on or violates any applicable law or
regulation, any proprietary right of any third party or is defamatory, obscene,
offensive or controversial.
2.4.5. Unless otherwise specified herein, the obligations
and responsibilities of the Parties will not be on an exclusive basis, provided,
however, the Parties agree that during the term of this Agreement, the
obligations and responsibilities of each Party will be extended to the other
party on terms which are no less favorable than those offered to any other
person for similar services and quantities.
2.4.6. The Parties agree to work together under the terms of
this Agreement on a limited noncompete basis. Each Party agrees not to solicit,
or provide services comparable to those described in this Agreement to certain
competitors of the other party's service, as identified in the Non-compete
Schedule attached hereto, without the consent of the other party. However, in
the event that SportsLine is solicited by any competitor of
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
3
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USW's DIVE IN service listed on the Non-compete Schedule with an opportunity
that would significantly benefit SportsLine's business, then this opportunity
shall first be discussed with USW. If USW does not give its consent, SportsLine
may, nevertheless present the opportunity to SportsLine's Board of Directors for
consideration. If a majority of SportsLine's Board of Directors agrees, then
SportsLine shall be entitled to pursue the opportunity with the competitor
concerned. In such case, USW shall be relieved of its limited non-compete
obligations and shall be free to form any relationship of any type with any
competitor of SportsLine, including those identified in the Non-compete
Schedule.
In the event that USW is solicited by any competitor of SportsLine's service
listed on the Non-compete Schedule with an opportunity that would significantly
benefit USW's DIVE IN business, then this opportunity shall first be discussed
with SportsLine. If SportsLine does not give its consent USW may nevertheless
elect, at its sole discretion, to pursue the opportunity. In such case,
SportsLine shall be relieved of its limited non-compete obligations and shall be
free to form any relationship of any type with any competitor of USW, including
those identified in the Non-compete Schedule.
3. FEES/PAYMENT:
3.1. The Parties agree to pay the Fees/Payments set forth in the
Fee/Payments Schedule attached hereto.
3.2. Payment of all amounts due under this Agreement shall be made by
the responsible Party within thirty 30 days of the end of each quarter (March
31, June 30, September 30, and December 31) and reports containing sufficient
information for the calculation of such amounts will be provided to the Party
receiving payment. In the event there is a dispute regarding the amount due,
upon reasonable request, a Party will provide copies of all records or other
documentation relevant to the calculation of such amounts. Other than for
payments of fixed amounts, the Parties agree to maintain records supporting fees
payable by either party for a period of 3 years following the date that the
payment was made. The relevant portion of such records and accounts shall be
available for inspection and audit by an auditing Party or its representative
(but not more than once in any twelve (12) month period) during regular business
hours and upon reasonable advance written notice.
3.3. Each Party agrees to pay directly to the appropriate taxing
authority, before delinquency, and file all tax returns and reports with respect
to any and all federal, state and local taxes, assessment and public charges
levied, assessed or imposed by any governmental authority by reason of the
transactions contemplated herein, excluding any taxes on the income of the other
Party.
4. TERM/TERMINATION:
4.1. The term of this Agreement shall begin on the public launch date
of the first USW Site as determined by USW, and continue for two (2) years
("Initial Term"). USW shall provide written confirmation to SportsLine of the
launch date once determined by USW. This Agreement shall be automatically
extended for successive one (1) year periods (each a "Renewal Term") unless the
Agreement has been terminated in accordance with this Paragraph 4.1. Either
Party may terminate this Agreement (a) at any time in the event of a material
breach by the other Party which remains uncured after fifteen (15) days written
notice thereof; or (b) at any time for any reason on thirty (30) days prior
written notice, which such termination shall not be effective until the
commencement of the next Renewal Term hereof. Upon termination of this
Agreement, each party shall terminate the links established pursuant to this
Agreement and all other licenses granted herein shall terminate.
4.2. This Agreement may be terminated immediately by SportsLine,
without liability to USW, upon written notice to USW if SportsLine terminates or
cancels the SportsLine Sites or any component thereof necessary to offer the
Site links as contemplated hereby. This Agreement may be terminated immediately
by USW, without liability to SportsLine, upon written notice to SportsLine, if
USW terminates the USW Site(s) or any component thereof necessary to offer the
Site links as contemplated hereby.
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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4.3. Upon termination or expiration of this Agreement, each party
shall (i) terminate the links established pursuant to this Agreement, and all
licenses granted herein shall terminate; (ii) promptly return all Confidential
Information and other information, documents, manuals, equipment and other
materials belonging to the other party; and (iii) each party shall immediately
cease using all Materials of the other party in any form.
5. CONFIDENTIALITY: Each Party acknowledges and agrees that any and all
information emanating from the other Party's business and not publicly known,
including, without limitation, the contents of this Agreement, technical
processes and formulas, source codes, names, addresses and information about
subscribers, product designs, customer lists, sales, costs and other unpublished
financial information, product plans, and marketing data is confidential and
proprietary information. Each Party agrees that it shall take reasonable steps,
at least substantially equivalent to the steps as it takes to protect its own
proprietary information, during the term of this Agreement, and for a period of
one (1) year following expiration of termination of this Agreement, to prevent
the duplication or disclosure of any such confidential and proprietary
information, other than by or to its employees or agents who must have access to
such information to perform such Party's obligations hereunder, who shall each
treat such information as provided herein, and as may be required by either of
the parties for public or private financing. If such information is publicly
known, already known by, or in the possession of the non-disclosing Party; is
independently developed by the non-disclosing Party; is thereafter rightly
obtained by the non-disclosing Party from a source other than the disclosing
Party; or is required to be disclosed by law, regulation, or court order; then
there shall be no restriction of the use of such information.
6. INTELLECTUAL PROPERTY RIGHTS:
6.1. SportsLine shall be the sole and exclusive owner of all rights
of any kind or nature in the SportsLine Sites (including, without limitation,
all rights of copyright including compilation copyrights and any extension or
renewals thereof,) and any modifications, upgrades, updates, enhancements, and
related documentation, in perpetuity throughout the universe in all media now
known or hereafter devised in and to any content, materials, screens, digital
environments, user interfaces, sounds, images, titles, text, graphics, Site
architecture, street scenes, buildings, other environments, other elements and
characters created or developed by or for SportsLine.
6.2. USW shall be the sole and exclusive owner of all rights of any
kind or nature used, created or developed in connection with the USW Site(s)
(including, without limitation, all rights of copyright including compilation
copyrights and any extension or renewals thereof) and any modifications,
upgrades, updates, enhancements, and related documentation, in perpetuity
throughout the universe in all media now known or hereafter devised in and to
any content, materials, screens, digital environments, user interfaces, sounds,
images, titles, text, graphics, Site architecture, street scenes, buildings,
other environments, other elements and characters created or developed by or for
USW.
6.3. If USW and SportsLine, pursuant to prior written agreement,
jointly create any proprietary content as a part of this Agreement, the
copyrights for any such jointly created proprietary content shall be jointly
owned and controlled by both parties, and shall not be licensed to any third
party without their joint approval.
7. REPRESENTATIONS AND WARRANTIES:
7.1. USW. USW represents and warrants to SportsLine that (a) the USW
Site(s) are or will be functional internet sites accessible to subscribers and
users of the internet; (b) the USW Site(s) do not and will not contain any
content, materials, advertising or services that infringe on or violate any
applicable law or regulation, any proprietary right of any third party or which
is defamatory, obscene or offensive; (c) it has the right to grant the USW
License and that the grant of the USW License does not and will not infringe on
or violate any U.S. patent or any other proprietary right of any third party. In
the event of an error, delay, defect, breakdown or failure of the USW Site(s),
USW's obligation shall be limited to the use of reasonable diligence under the
circumstances to restore USW Site operations.
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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7.2. SPORTSLINE. SportsLine represents and warrants to USW that (a)
the SportsLine Sites are or will be functional internet sites accessible to
subscribers and users of the internet; (b) the SportsLine Sites do not and will
not contain any content, materials, advertising or services that infringe on or
violate any applicable law or regulation, any proprietary right of any third
party or which is defamatory, obscene or offensive; (c) it has the right to
grant the SportsLine License and that the grant of the SportsLine License does
not and will not infringe on or violate any U.S. patent or any other proprietary
right of any third party. In the event of an error, delay, defect, breakdown or
failure of the SportsLine Sites, SportsLine's obligation shall be limited to the
use of reasonable diligence under the circumstances to restore SportsLine Sites
operations.
8. LIMITATION OF LIABILITY; DISCLAIMER; INDEMNIFICATION.
8.1. LIABILITY. EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS
SPECIFICALLY SET FORTH IN THIS AGREEMENT OR DAMAGES FROM PERSONAL INJURY OR
PROPERTY DAMAGE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR (1) DIRECT
DAMAGES IN EXCESS OF $ $100,000; OR (II) INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES), ARISING FROM THE USE OR INABILITY TO USE THE SITES
OR ANY OTHER PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS, EXCEPT THAT EITHER PARTY SHALL
BE ENTITLED TO RECEIVE CONSEQUENTIAL DAMAGES FOR A BREACH OF SECTIONS 5
(CONFIDENTIAUTY) OR BREACH OF ANY LICENSES TO MARKS GRANTED UNDER THIS AGREEMENT
IN AN AMOUNT NOT TO EXCEED $100,000.
8.2. NO ADDITIONAL WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFCALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE SITES INCLUDING
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.
8.3. 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 breach of any material duty, representation, or warranty contained in
this Agreement, except there shall be no obligation to indemnify, defend, save
and hold harmless where Liabilities result from the gross negligence or knowing
and willful misconduct of the other Party .
8.4. CLAIMS. Each Party agrees to (a) promptly notify the other Party
in writing of any indemnifiable claim and (b) give the other Party the
opportunity to defend or negotiate a settlement of any such claim at such other
Party's expense, and cooperate fully with the other Party, at that other Party's
expense, in defending or settling such claim. USW reserves the right, at its own
expense, to assume the exclusive defense and control of any matter otherwise
subject to indemnification by SportsLine hereunder, and in such event,
SportsLine shall have no further obligation to provide indemnification for such
matter hereunder.
9. GENERAL PROVISIONS:
9.1. AFFILIATES. USW's rights and obligations under this agreement
shall extend to any Affiliate of USW which owns or operates the USW Sites
currently known as DIVE IN. Any such Affiliate shall be deemed a third party
beneficiary under this Agreement. For purposes of this Agreement, the term
("AFFILIATE") means any entity which, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
a party.
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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9.2. AMENDMENT. No change, amendment or modification of any provision
of this Agreement shall be valid unless set forth in a written instrument signed
by both Parties. This Agreement sets forth the entire agreement and supersedes
any and all prior agreements, written or oral, of the Parties with respect to
the transactions set forth herein.
9.3. ASSIGNMENT. Neither this Agreement, nor any rights hereunder in
whole or in part, shall be assignable or otherwise transferable by either Party;
provided, that either Party may assign or transfer this Agreement and rights and
obligations hereunder to any current or future Affiliate or successor, provided,
such assignee carries on the business of the Sites contemplated in this
Agreement and agrees in writing to the terms and conditions herein.
9.4. COMPLIANCE WITH LAWS. This Agreement and the Parties' actions
under this Agreement shall comply with all applicable federal, state, and local
laws, rules, regulations, court orders, and governmental or regulatory agency
orders including, but not limited to, consumer protection, truth in advertising
and privacy laws or regulations.
9.5. CONSTRUCTION. 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, 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 the remainder of this Agreement shall remain in full force
and effect. There shall be no presumption for or against any Party as a result
of such Party being the principle drafter of this Agreement.
9.6. DISPUTE RESOLUTION. Any claim, controversy or dispute between
the parties, the parties' Affiliates, their agents, employees, officers,
directors ("DISPUTE") shall be resolved by arbitration conducted by a single
arbitrator engaged in the practice of law and familiar with the Internet and
commercial online services, under the then current rules of the American
Arbitration Association ("AAA"). The Federal Arbitration Act, 9 U.S.C. Secs.
1-16, not state law, shall govern the arbitrability of all Disputes. The
arbitrator shall have authority to award compensatory damages only. The
arbitrator's award shall be final and binding and may be entered in any court
having jurisdiction thereof. Each Party shall bear its own costs and attorneys'
fees, and shall share equally in the fees and expenses of the arbitrator. The
arbitration shall occur in the City and State of the party against whom the
arbitration is brought and the laws of such state shall govern the construction
and interpretation of the Agreement. It is expressly agreed that the Arbitrator
shall be authorized to issue injunctive relief pending an award in arbitration
and either Party may seek relief in an appropriate court of law to enforce such
determination by an arbitrator.
9.7. 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.
9.8. 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 m that or any other instance; rather, the same shall be
and remain in full force and effect.
9.9. NOTICE. Any notice, approval, request, authorization, direction
or other communication under this Agreement shall be given in writing and shall
be deemed to have been delivered and given for all purposes (a) on the delivery
date if delivered by electronic mail; (b) on the delivery date if delivered
personally to the Party to whom the same is directed; (c) one (1) business day
after deposit with a commercial overnight carrier, with written verification of
receipt; or (d) five (5) business days after the mailing date whether or not
actually received, if sent by
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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U.S. mail, return receipt requested, postage and charges prepaid, or any other
means of rapid mail delivery for which a receipt is available, to the Contact at
the address of the Party to whom the same is directed.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
US WEST INTERACTIVE SERVICES, INC. SPORTSLINE USA, INC.
/s/ JOHN O'FARRELL /s/ MICHAEL LEVY
- ----------------------------------- -----------------------
John O'Farrell Michael Levy
President President
September 25, 1996 September 25, 1996
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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FEE/PAYMENT SCHEDULE
TO USW:
During the term of this Agreement and any extensions thereof, SportsLine shall
pay USW, on a quarterly basis, for each customer referred from the USW Site(s)
who purchases SportsLine's General Admission or Box Seat subscription services a
one time fee and monthly royalty as follows:
NUMBER OF NEW MEMBERS FEES PAYABLE
--------------------- ------------
(1) First25,000 $4 fee and$.10/month
(2) Next 25,000 (25,001 to 50,000) $6 fee and $.15/month
(3) Next 25,000 (50,001 to 75,000) $8 fee and $.20/month
(4) above 75,000 $10 fee and $.25/month
The one time and monthly royalty fees shall only be applicable to a new paying
member who has been on the service for a minimum of three (3) consecutive
months. The monthly royalty shall be payable for up to twelve (12) months of
consecutive service following the initial three month period regardless of
whether this Agreement has been terminated.
TO SPORTSLINE:
In the event USW develops a subscription based service, it will negotiate
reciprocal fee/payment arrangements with SportsLine similar to those provided by
SportsLine to USW.
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
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LIMITED NON-COMPETE SCHEDULE
FOR USW:
(a) America Online
(b) Microsoft's "Cityscape" and MSNBC or equivalent services.
(c) Pacific Telesis's "At Hand" or equivalent service
(d) "CitySearch"
(e) AT&T's "Hometown Network" or equivalent service.
FOR SPORTSLINE:
(a) ESPN's "Sportszone"
(b) America Online
(c) MSNBC Sports
(d) Fox
(e) CBS
CONFIDENTIAL and PROPRIETARY
The contents of this document are confidential and proprietary and many not be
disclosed to any persons who do not have a need to know the contents hereof.
10
Exhibit 10.8
MARKETING AGREEMENT
Agreement dated March 12, 1996 by and between REUTERS NEWMEDIA INC., with its
principal office located at 1700 Broadway, New York, New York 10019 ("Reuters"),
and Sportsline USA, Inc. with its principal office at 6340 N.W. 5th Way, Fort
Lauderdale, Florida 33309 ("Sportsline").
1. DEFINITIONS
1.1. "Affiliate" means, with respect to any given Person, any other
Person directly or indirectly Controlling, Controlled by, or
under common Control with, such Person.
1.2. "AGREEMENT" means this agreement, as it may be amended from
time to time in accordance with Section 15.6.
1.3. "BUSINESS DAY" means a day that banks are open for business in
New York City.
1.4. "CONTENT" means text, information, data, images (still and
moving) and sound recordings.
1.5. "CONTROL" over a Person means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of such Person, whether through
the ownership of voting securities or other equity interest,
representation on its board of directors or body performing
similar functions, by contract or otherwise. The terms
"Controlling" and "Controlled" will have corollary meanings.
1.6. "CUSTOMIZED SITE" means a version of the Sportsline Service
that is only available to a Reuters Subscriber accessing the
Sportsline Site from a Reuters Product.
1.7. "DAMAGES" means liabilities, damages, awards, settlements,
losses, claims and expenses, including reasonable attorney's
fees and expenses and costs of investigation.
1.8. "FOREIGN SPORTS SERVICE" means (a) any Internet service,
including a site on the World Wide Web (other than the
Internet services currently provided by Sportsline), (b) any
wireless service, or (c) any proprietary on-line service, in
each case only to the extent that such service provides sports
news and/or information targeted at, and is primarily marketed
and sold to persons located in, a specific country or region
outside the United States.
1.9. "INCLUDING" means including but not limited to.
1.10. "Intellectual PROPERTY RIGHTS" means any patent, design right,
copyright, trademark, service mark (and any application or
registration respecting the foregoing), database right, trade
secret, know-how and/or other present or future intellectual
property right of any type, wherever in the world enjoyable.
1.11. "Laws " means applicable laws, regulations, rules or orders of
any government, administrative authority or court.
<PAGE>
1.12. "Mirror Site " shall mean an Internet site which contains the
exact form and Content (including identical pages) of a parent
Internet site which (i) is located at a geographic location
distinct from such parent Internet site and (ii) is created
for the purpose of improving performance and accessibility to
such parent Internet site PROVIDED, that the term "Mirror
Site" shall not include any Intemet site which is licensed to
or otherwise controlled by an on-line service provider.
1.13. "Person" means any individual, corporation, limited-liability
company, partnership. firm, joint venture, association,
joint-stock company, trust, or other entity or organization,
including a government or political subdivision or an agency
or instrumentality thereof.
1.14. "Reuters Competitor" means Dow Jones, Inc., Bloomberg,
Knight-Ridder, Agence France Presse, The Associated Press,
United Press International, Inc., Telerate, Inc., Global
Financial Information Corp., Individual, Inc. or M.A.I.D, and
any entity that is engaged as a significant part of its
business in the provision of financial news and data.
1.15. "Reuters Product" means any Reuters product or service,
including the Reuters RT.
1.16. "Reuters Subscriber " means any Person that receives any
Reuters Product.
1.17. "Sportsline Content" means all Content created by Sportsline
employees and owned exclusively by Sportline, and all Content
provided to Sportsline by third parties that Sportsline is
allowed to redistribute through Reuters without additional
cost or expense to Sportsline for granting such redistribution
rights.
1.18. "Sportsline Site " means the Sportsline World Wide Web site
that provides sports news, information and related services
located at URL http://www.sportsline.com and any existing or
future Mirror Sites to such site.
2. TERM
2.1. This Agreement will take effect on March 12, 1996, and, unless
terminated earlier pursuant to Section 14, will terminate on
March 12, 2001 (the "Term").
3. FOREIGN SPORTS SERVICE
3.1. For each Foreign Sports Service that Sportsline considers
launching during the Term, it shall provide Reuters with a 60
day exclusive negotiation period, during which Sportsline
shall negotiate only with Reuters with respect to: (a) the
provision of non-United States sports news and information to
be included in such a Service; (b) the branding of such a
Service; and (c) an investment in such a Service, PROVIDED
that Sportsline may also negotiate with other parties approved
by Reuters, which approval shall not be unreasonably withheld.
All such negotiations shall be conducted in good faith between
the parties.
3.2. In the event that the parties are unable to reach an agreement
with respect to the Foreign Sports Service, Sportsline may
not, in any event, enter into an agreement with
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another Person on terms that are equivalent to, or less
favorable to Sportsline than, the terms offered by Reuters,
unless Sportsline has offered Reuters a reasonable opportunity
to agree to those terms.
4. CUSTOMIZED SITE
4.1. The parties shall negotiate in good faith an agreement
pursuant to which Sportsline will develop the Customized Site
such that if a Reuters Subscriber accesses the Sportsline
Site, the Customized Site will be displayed. This agreement
shall contain provisions under which Reuters is paid a share
of the revenue from such Customized Site. Sportsline's
obligations are subject to the technological feasibility of
providing the Customized Site.
4.2. If Sportsline develops the Customized Site as provided herein,
Sportsline shall not, during the Term, configure the
Sportsline Site to provide a service similar to the Customized
Site to any Reuters Competitor.
5. USE OF SPORTSLINE CONTENT
5.1. Sportsline agrees that it will grant Reuters the exclusive
right to redistribute Sportsline Content within a Reuters
Product as part of a sports news service. The parties shall
negotiate in good faith an agreement setting forth, among
other things, the royalty to be paid by Reuters to Sportsline
for inclusion of the Sportsline Content in a Reuters product
or service. The grant of rights will not prohibit Sportsline
from providing Sportsline Content to the Sportsline Site or
from licensing Sportsline Content to any Web Site or online
services, PROVIDED that such other Web Site or online services
is not owned or operated by a Reuters Competitor, and PROVIDED
further that such Content is not provided by Sportsline as
part of a general sports news service.
5.2. Sportsline shall use its best efforts to enter into agreements
with third Person Content providers that permit Sportsline to
grant Reuters the rights of redistribution set forth in
Section 5.1.
6. SUPPLY OF REUTERS CONTENT
6.1. In the event that Sportsline seeks to license Content
specifically related to sports outside the United States for
use in the Sportsline Site or for use in any other Sportsline
venture in the United States, then PROVIDED such Content is
already owned, licensed or produced by Reuters, Sportline
shall provide Reuters with reasonable notice thereof and an
opportunity to make a proposal for the provision of such
Content. Sportsline agrees that if the Reuters proposal is
equivalent to, or better than, a proposal received from a
third Person, Sportsline shall license such Content from
Reuters. Nothing herein shall prohibit Sportsline from
obtaining any content covered by this Section 6.1 from any
third Person to the extent such content is already available
to Sportsline under agreements with such third parties.
7. LIMITATION OF LIABILITY
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7.1. Neither party will be liable for any failure to perform any
obligation hereunder, or from any delay in the performance
thereof, due to causes beyond its control, including
industrial disputes of whatever nature, acts of God, public
enemy, acts of government, failure of telecommunications, fire
or other casualty.
7.2. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO
WARRANTIES, CONDITIONS, GUARANTIES OR REPRESENTATIONS AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHER
WARRANTIES, CONDITIONS, GUARANTIES OR REPRESENTATIONS, WHETHER
EXPRESS OR IMPLIED, IN LAW OR IN FACT, ORAL OR IN WRITING.
EACH PARTY HEREBY ACKNOWLEDGES THAT IT HAS NOT RELIED UPON ANY
WARRANTY, CONDITION, GUARANTY OR REPRESENTATION MADE BY THE
OTHER.
7.3. Under no circumstances will either party, its Affiliates or
their respective officers, directors, employees be liable for
any indirect, incidental, special or consequential damages
with respect to each party's obligations under this Agreement,
regardless of whether such damages could have been foreseen or
prevented.
8. REPRESENTATIONS AND WARRANTIES
8.1. Sportsline represents and warrants to Reuters as of the date
hereof that:
(a) The execution, delivery and performance by Sportsline
of this Agreement do not and will not (i) violate the
organizational documents of Sportsline, (ii) violate
any applicable law, rule, regulation, judgment,
injunction, order or decree, or (iii) require any
notice or consent or other action by any Person
under, constitute a default under, or give rise to
any right of termination, cancellation or
acceleration of any right or obligation of Sportsline
or to a loss of any benefit to which Sportsline is
entitled under, any agreement or other instrument
binding upon Sportsline or any license, franchise,
permit or other similar authorization held by
Sportsline.
(b) To the best of Sportsline's knowledge, the Sportsline
Content to be provided to Reuters hereunder does not
violate the Intellectual Property Rights of any third
Person.
8.2. Reuters hereby represents and warrants to Sportsline as of the
date hereof that:
(a) The execution, delivery and performance by Reuters of
this Agreement do not and will not (i) violate the
organizational documents of Reuters, (ii) violate any
applicable law, rule, regulation, judgment,
injunction, order or decree, or (iii) require any
notice or consent or other action by any Person
under, constitute a default under, or give rise to
any right of termination, cancellation or
acceleration of any right or obligation of Reuters or
to a loss of any benefit to which Reuters is entitled
under, any agreement or other instrument binding upon
Reuters or any license, franchise, permit or other
similar authorization held by Reuters.
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(b) To the best of Reuters knowledge, any Reuters content to be
provided to Sportline hereunder does not violate the
Intellectual Property Rights of any third person.
9. INDEMNIFICATION
9.1. Sportsline will indemnify and hold the Reuters Group and
officers, directors and employees harmless from and against
any and all Damages resulting from or arising out of (a) the
Sportsline Site or any other activities of Sportsline,
including infringement by any Sportsline Content of any third
Person Intellectual Property Rights; (b) any misrepresentation
or breach of representation or warranty of Sportsline
contained herein; or (c) any breach of any covenant or
agreement to be performed by Sportsline hereunder.
9.2. Reuters will indemnify and hold Sportsline and its Affliates
and their respective officers, directors and employees
harmless from and against any and all Damages resulting from
or arising out of (a) the Reuters Products or any activities
of Reuters, including infringement by any Reuters Content of
any third Person Intellectual Property Rights, (b) any
misrepresentation or breach of representation or warranty of
Reuters contained herein; or (c) any breach of any covenant or
agreement to be performed by Reuters hereunder.
10. TERMINATION
10.1. In addition to any other remedy available at law or in equity,
either party may terminate this Agreement immediately, in
whole or in part, without further obligation to the other
party in the event of:
(a) any breach of this Agreement by the other party that
is not remedied within 30 days notice of such breach
in writing; or
(b) the other party's making an assignment for the
benefit of its creditors, the filing of a voluntary
or involuntary petition under any bankruptcy or
insolvency law, under the reorganization or
arrangement provisions of the United States
Bankruptcy Code, or under the provisions of any law
of like import in connection with the other party, or
the appointment of a trustee or receiver for the
other party or its property.
11. GENERAL
11.1. Nothing will be deemed to limit or restrict Reuters from
entering into agreements with any other Person covering
services similar to the Sportsline Site or from offering such
similar services itself, PROVIDED, that Sportsline shall be
relieved from its obligations hereunder to the extent Reuters
enters into an agreement with a competitor of Sportline with
respect to the subject matter of this Agreement or in the
event Reuters offers a service that is competitive with the
Sportsline Site.
11.2. Neither party will make or issue any external press statement
regarding the terms of this
5
<PAGE>
Agreement unless (a) it has received the express written
consent of the other party, which will not be unreasonably
withheld or (b) it is required to do so by Law or REGULATION.
11.3. This AGREEMENT AND ANY AND ALL ADDENDA, schedules or exhibits
attached hereto represent the entire agreement of the parties
regarding the subject matter hereof. There are no other oral
or written collateral representations, agreements, or
understandings regarding the subject matter hereof.
11.4. This Agreement will be deemed to have been executed and
delivered in the State of New York and it will be governed by
and construed in accordance with the laws of New York.
11.5. All notices, requests and other communications to any party
hereunder will be in writing (including facsimile transmission
or similar writing) and will be given to such party at its
address or telecopy number set forth below or at such other
address or telecopy number as such party may hereafter specify
for such purposes. Each such notice, request or other
communication will be effective (i) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified
in this Section and confirmation of receipt is obtained or
(ii) if given by any other means, when received at the address
specified below.
To Reuters:
Reuters NewMedia Inc.
I 700 Broadway
New York, New York 10019
(212) (Facsimile)
Attn: Senior Vice President
With a copy to:
Reuters America Inc.
I 700 Broadway
New York, New York 10019
(212) 307-9175 (Facsimile)
Attn: General Counsel
To Sportsline:
Sportsline USA, Inc.
N.W. 5th Way
Fort Lauderdale, Florida 33309
Attn: President
(954) 351-2170 (Facsimile)
11.6. This Agreement will be binding upon and inure to the benefit
of the parties, their respective heirs, personal
representatives, successors and assigns. Neither party may
assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the other,
PROVIDED that either party may assign this Agreement to any
Affiliate without the necessity of obtaining consent from the
other party.
6
<PAGE>
11.7. There is no joint venture, partnership, agency or fiduciary
relationship existing between the parties and the parties do
not intend to create any such relationship by this Agreement.
11.8. This Agreement may not be amended, modified or superseded, nor
may any of its terms or conditions be waived unless expressly
agreed to in writing by both parties. The failure of either
party at any time or times to require full performance of any
provision hereof will in no manner affect the right of such
party at a later time to enforce the same.
11.9. If any provision or term of this Agreement, not being of a
fundamental nature, is held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of
the remainder of this Agreement will not be affected.
11.10. The provisions of Section 8 and any and all disclaimers and
indemnities contained herein or in any schedules to this
Agreement will survive the termination of this Agreement.
REUTERS NEWMEDIA INC. SPORTSLINE USA, INC.
By: By: /s/ MICHAEL LEVY
---------------------- ------------------
Title: Executive Vice President Title: President
Date: 3/11/96 Date: 3/11/96
7
EXHIBIT 10.9
COMMERCIAL GUARANTY
Borrower: Sportsline U.S.A., Inc. Lender: Silicon Valley Bank, A
6340 N.W. 5th Way California chartered bank with
Fort Lauderdale, FL 33309 a Loan Production Office
located at 40 William Street
Wellesley, MA 02181
Guarantor: Kleiner Perkins Caulfield & Byers VII, L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
AMOUNT OF GUARANTY. The principal amount of this Guaranty is One Million Five
Hundred Thousand & 00/100 Dollars ($1,500,000.00).
CONTINUING GUARANTY. For good and valuable consideration, Kleiner Perkins
Caufield & Byers VII, LP. ("Guarantor") absolutely and unconditionally
guarantees and promises to pay to Silicon Valley Bank ("Lender") or its order,
in legal tender of the United States of America, the indebtedness (as that term
is defined below) of SPORTSLINE USA, INC. ("Borrower") to Lender on the terms
and conditions set forth in this Guaranty. The obligations of Guarantor under
this Guaranty are continuing.
DEFINITIONS. The following words shall have the following meanings when used
in this Guaranty.
Borrower. The word "Borrower" means SPORTSLINE USA, INC.
Guarantor. The word "Guarantor" means Kleiner Perkins Caufield & Byers
VII, LP.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of lender dated December 13, 1995.
Indebtedness. The word "Indebtedness" shall mean and refer to the
obligations of Borrower under that certain Promissory Note, dated December
13, 1995, in the original principal amount of One Million Five Hundred
Thousand and 00/100 Dollars ($1,500,000.00, together with all renewals,
extensions and modifications thereof; provided, however that any renewal
extension, or change (other than by reason of acceleration after an event
of default) in the time that payment of the indebtedness is due or any
change in the interest rate shall have been consented to in writing by
Guarantor.
Lender. The word "Lender" means Silicon Valley Bank a California chartered
bank, its successors and assigns.
Related Documents. The words "Related Documents" mean and include without
imitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgage, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the indebtedness of
this Guaranty.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $1,500,000.00,
plus all interest thereon, plus any costs and expenses (including attorneys'
fees) awarded to a prevailing party in litigation in connection with the
enforcement of the indebtedness of this Guaranty.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties. The liability
of Guarantor will be the aggregate liability of Guarantor under the terms of
this Guaranty and any such other unterminated guaranties.
<PAGE>
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all indebtedness
within the limits set forth in the preceding section of this Guaranty.
Accordingly, no payments made upon the indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the indebtedness or any of the indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or nay notice to Guarantor or
to Borrower, and will continue in full force until all indebtedness incurred or
contracted before receipt by lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be delivered to Lender at the address of Lender listed
above or such other place as Lender may designate in writing. Written revocation
of this Guaranty will apply only to advances or new indebtedness created after
actual receipt by lender of Guarantor's written revocation. For this purpose and
without limitation, the term "now indebtedness' does not include indebtedness
which at the time of notice of revocation is contingent, unliquidated,
undetermined or not due and which later becomes absolute, liquidated, determined
or due. This Guaranty will continue to bind Guarantor for all indebtedness
incurred by Borrower or committed by lender prior to receipt of Guarantor's
written notice of revocation, including any substitutions or modifications of
the indebtedness, and, provided that the same has been consented to in writing
by Guarantor, any renewal, extension of change in the time that payment of the
indebtedness is due or change in the interest rate. All renewals, extensions,
substitutions, and modifications of the indebtedness granted after Guarantor's
revocation, are contemplated under this Guaranty and, specifically will not be
considered to be new indebtedness. Release of any other guarantor or termination
of any other guaranty of the indebtedness shall not affect the liability of
Guarantor under this Guaranty. It is anticipated that fluctuations may occur in
the aggregate amount of indebtedness covered by this Guaranty, and it is
specifically acknowledged and agreed by Guarantor that reductions in the amount
of indebtedness, even to zero dollars ($0.00), prior to written revocation of
this Guaranty by Guarantor shall not constitute a termination of this Guaranty.
This Guaranty is binding upon Guarantor and Guarantor's heirs, successors and
assigns so long as any of the guaranteed indebtedness remains unpaid and even
though the indebtedness guaranteed may from time to time be zero dollars
($0.00).
GUARANTORS AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to modify the terms of
the indebtedness as Lender deems appropriate (c) to take and hold security for
the payment of the indebtedness, and exchange, enforce, waive, subordinate, fail
or decide not to perfect, and release any such security, with or without the
substitution of new collateral; (d) to release, substitute, agree not to sue, or
deal with any one or more of Borrower's sureties, endorsers, or other guarantors
on any terms or in any manner lender may choose; (e) to determine how, when and
what application of payments and credits shall be made on the indebtedness; (f)
to apply such security and direct the order or manner of sale thereof, including
without limitation, any non judicial sale permitted by the terms of the
controlling security agreement of deed of trust, as Lender in its discretion may
determine; (g) to sell, transfer, assign, or grant participation in all or any
part of the indebtedness; and (h) to assign or transfer this Guaranty in whole
or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representation or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Lender has made no representation to Guarantor as to the
creditworthiness of Borrower, and (d) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding
Borrower's financial condition. Guarantor agrees to keep adequately informed
from such means of any facts, events, or circumstances which might in any way
affect Guarantor's risks under this Guaranty, and Guarantor further agrees that,
absent a request for information, lender shall have no obligation to disclose to
Guarantor any information or documents acquired by Lender in the course of its
relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law. Guarantor waives
any right to require Lender to (a) make any presentment, protest, demand, or
notice of any kind, including notice of change of any terms of repayment of the
indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, lender, or any other guarantor or surety of
Borrower, or the creation of new or additional indebtedness; (b) proceed against
any person, including Borrower, before proceedings against Guarantor; (c) apply
any payments or proceeds received against the indebtedness in any order; (d)
give notice of the terms, time, and place of any sale of the collateral pursuant
to the Uniform Commercial Code or any other law governing such sale; (e)
disclose any information about the indebtedness, the Borrower, the collateral,
or any other guarantor or surety, or about any action or nonaction of Lender; or
(f) pursue any remedy or course of
<PAGE>
action in lender's power whatsoever.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any disability or other defense of Borrower, any other guarantor or surety or
any other person; (b) the cessation from any cause whatsoever, otters than
payment in full, of the indebtedness; (c) the application of proceeds of the
indebtedness by Borrower for purposes other than the purposes understood and
intended by Guarantor and Lender; (d) any act or omission or commission by
lender which directly or indirectly results in or contributes to the discharge
of Borrower or any other guarantor or surety, or the indebtedness, or the loss
or release of any collateral by operation of law or otherwise; or (e) any
modification or change in terms of the indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in the
time and that payment of the indebtedness is due and any change in the interest
rate; provided, however, that any renewal, extension, or change (other than by
reason of an acceleration after an occurrence of an event of default) in the
time that payment of the indebtedness is due and any change in the interest rate
shall have been consented to in writing by Guarantor, and including any such
modification or change in terms after revocation of this Guaranty on
indebtedness incurred prior to such revocation. Until all indebtedness is paid
in full, Guarantor waives all rights and nay defenses Guarantor may have arising
our of any election of remedies by Lender even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and reimbursement
against Borrower or any other guarantor or surety.
Guarantor further waives any right to enforce any remedy Lender may have against
Borrower or any other guarantor, surety, or other person, and further, Guarantor
waives any right to participate in any collateral for the Indebtedness now or
hereafter held by Lender.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set froth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
wavier shall be effective only to the extent permitted by law or public policy.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
indebtedness of Borrower to Lender, whether now existing or hereafter crated,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower relating to the indebtedness. In the event of insolvency and consequent
liquidation of the assets of Borrower, through bankruptcy, by an assignment for
the benefit of creditors, by voluntary liquidation, or otherwise, the assets of
Borrower applicable to the payment of the claims or both Lender and Guarantor
shall be paid to Lender and shall be first applied by Lender to the indebtedness
of Borrower to Lender. Guarantor does hereby assign to Lender all claims which
it may have or acquire against Borrower or against any assignee or trustee in
bankruptcy of Borrower, provided however, that such assignment shall be
effective only for the purpose of assuring to lender full payment in legal
tender of the indebtedness. If Lender so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of Borrower to
Guarantor shall be marked with a legend that the same are subject to this
Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender hereby
is authorized, in the name of Guarantor, from time to time to execute and the
financing statements and continuation statements and to execute such other
documents and to take such other actions as Lender deems necessary or
appropriate to perfect, preserve and enforce its rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
Applicable Law. This Guaranty has been delivered to Lender and accepted by
lender in the State of California. If there is a lawsuit, Guarantor agrees
upon lender's request to submit to the jurisdiction of the courts of Santa
Clara County, State of California. Lender and Guarantor hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought
by either Lender or Guarantor against the other. (Initial Here
______________) This Guaranty shall be governed by and construed in
accordance with the laws of the State of California.
Expenses. Guarantor agrees that the prevailing party in any litigation
shall be entitled to recover any and all expenses (including attorneys'
fees) incurred by it in enforcing this Guaranty.
Notices. All notices required to be given by either party to the other
under this Guaranty shall be in writing, may be sent by telefacsimile,
and, except for revocation notices by Guarantor, shall be effective when
actually delivered or when deposited with a nationally recognized
overnight courier, or when deposited in the United States mail, first
class postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above or to such other addresses as either
party may designate to the other in writing. All revocation notices by
Guarantor shall be in
<PAGE>
writing and shall be effective only upon delivery to lender as provided
above in the section titled "DURATION OF GUARANTY." If there is more than
one Guarantor, notice to any Guarantor will constitute notice to all
Guarantors. For notice purposes, Guarantor agrees to keep Lender informed
at all times of Guarantor's current address.
Interpretation. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require: and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one
or more of them. The words "Guarantor," "Borrower," and "Lender" include
the heirs, successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this guaranty. If a court
of competent jurisdiction finds an8y provision of this Guaranty to be
invalid or unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not
necessary for lender to inquire into the powers of Borrower or Guarantor
or of the officers, directors, partners, or agents acting or purporting to
act on their behalf, and any indebtedness made or created in reliance upon
the professed exercise of such powers shall be guaranteed under this
Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A wavier by lender
of a provision of this Guaranty shall not prejudice or constitute a wavier
of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty. No prior waiver by
Lender, nor any course of delaying between Lender and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Guaranty, the granting of such consent by Lender in
any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole reasonable discretion of Lender.
REVIVAL OF GUARANTY. Guarantor's liability under this Guaranty shall be
reinstated and revived with respect to any amount paid by any party on account
of the indebtedness which shall thereafter be required to be restored or
returned by lender as a result of bankruptcy, or reorganization of such party or
for any other reason all as though such amount had never been paid.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THE GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED DECEMBER 13, 1995.
GUARANTOR:
Kleiner Perkins Caufield & Byers VII, LP.
By: KPCB VII Associates, LP., its General Partner
By: /s/ JOSEPH S. LACOB
---------------------
Name: Joseph S. Lacob General Partner
<PAGE>
PARTNERSHIP CERTIFICATE TO
GUARANTEE / SUBORDINATE
Borrower: SPORTSLINE USA, INC. Bank: Silicon Valley Bank a California
chartered bank
6340 NW5th Way doing business as "Silicon
Valley East"
Fort Lauderdale, FL 33309 40 William Street, Suite 350
Wellesley,MA 02181
Partnership: Kleiner Perkins Caufield & Byers VII,
L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
In consideration of the proposed Promissory Note of even date herewith, in the
original principal amount of $1,500,000.00 (the "Bridge Note") between
SportsLine USA, Inc. ("Borrower") and Silicon Valley Bank ("Bank"), the persons
signing below on behalf of KPCB VII Founders Fund, L.P. (the "Partnership")
jointly and severally represent and certify to Bank and agree with Bank that
they are the sole general partners of the Partnership that the Partnership name
shown above is the complete and correct name of the Partnership.
PARTNERSHIP EXISTENCE. The Partnership is duly organized, existing and in good
standing under the laws of the State of California. In addition. the Partnership
is qualified and has filed or obtained all necessary filings. governmental
licenses and approvals from each state in which the Partnership is doing
business.
PARTNERSHIP AGREEMENTS. All the general partners of the Partnership have met to
consider the matters set forth below and agree with Bank that ANY ONE (1) of the
undersigned general partners of the Partnership acting for and on behalf of the
Partnership and as its act and deed be and he or she hereby is. authorized and
empowered in the name of the Partnership:
GUARANTY. To guarantee the Bridge Note (the "Guaranty").
EXECUTE THE GUARANTY AGREEMENT. To execute and deliver to Bank the form of
Commercial Guaranty Agreement.
SUBORDINATE INDEBTEDNESS. To execute and deliver to Bank the form of
subordination agreement. subordinated note and any other related documents
which may be submitted by or approved by Bank, and which shall evidence
the terms and conditions under and pursuant to which such subordinations,
are given and also to execute and deliver to Bank any other written
instruments, of any kind or nature. which may be necessary or proper in
connection with or pertaining to the giving of subordinations
FURTHER ACTS. To do and perform such other acts and things and to execute
and deliver such other documents and agreements as he or she may in his or
her discretion deem reasonably necessary or proper in order to carry into
effect the provisions of this Certificate.
<PAGE>
PARTNERSHIP CERTIFICATE TO
GUARANTEE / SUBORDINATE
Page 2
RATIFICATION. The Partnership hereby ratifies and confirms the acts of its
partners. agents or employees in heretofore entering into any agreement related
to the Bridge Note in favor of Bank together with any act performed in relation
thereto.
CONTINUING VALIDITY. These agreements shall remain in full force and effect
until written notice of their revocation shall have been delivered to and
received by Bank. Any such notice shall not affect any of the Partnership's
agreements or commitments in effect at the time notice is given.
IN WITNESS WHEREOF, we each have read all the provisions of this
Partnership Certificate to Guarantee/Subordinate, and we each jointly and
severally and on behalf of the Partnership certify and agree to its terms and
attest that the signatures set opposite the names listed below are their genuine
signatures. This certificate is dated December 13, 1995.
CERTIFIED TO AND ATTESTED BY:
Kleiner Perkins Caufield & Byers Vll, L.P.
By: KPCB VII Associates, L.P.
By: /s/ JOSEPH S. LACOB
-------------------
Joseph S. Lacob, General Partner
By: /s/ BROOK M. BYERS
------------------
Brook M. Byers, General Partner
<PAGE>
CERTIFICATE FOR USE WITH A PARTNERSHIP WHICH
IS A PARTNER IN A PARTNERSHIP COMPANY GUARANTOR/ SUBORDINATOR
Borrower: SPORTSLINE USA, INC. Bank: Silicon Valley Bank a California
chartered bank
6340 NW5th Way doing business as "Silicon
Valley East"
Fort Lauderdale, FL 33309 40 William Street, Suite 350
Wellesley, MA 02181
Partnership: Kleiner Perkins Caufield & Byers VII,
L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
The undersigned hereby certify to Silicon Valley Bank ("Bank '):
That they are the sole General Partners of KPCB Vll ASSOCIATES L.P. (the
Partnership') duly organized and existing under the laws of the State of
California.
That the Partnership is a partner in Kleiner Perkins Caufield & Byers VII,
L.P. ("Company").
That any and all fictitious name filings and related publications required
for the Partnership by law have been made.
That the Partnership deems it is in the best interest of Company to
guarantee or grant collateral to support the obligations of Sportsline USA. Inc.
("Borrower") under that certain Promissory Note dated December 13, 1995 in the
original principal amount of $1,500,000.00 (the "Bridge Note") to Silicon Valley
Bank a California charted bank doing business as "Silicon Valley East" ("Bank")
or to subordinate indebtedness owing by Borrower to Company to Borrower's
obligations to Bank.
That all the general partners of the Partnership have met to consider the
matters set forth below and agree with Bank that ANY ONE (1) of the undersigned
general partners of the Partnership acting for and on behalf of the Partnership
and as its act and deed be and he or she hereby is, authorized and empowered in
the name of the Partnership:
(a) To execute Bank's standard form partnership certificate to
guarantee/subordinate executed in connection with the obligations of
Borrower to Bank with such changes as may appear appropriate as a partner
in Company; and
(b) To perform or cause to be performed all further acts and execute and
deliver all further instruments which Bank may deem necessary to carry out
the purposes of this certificate.
That the Partnership hereby ratifies and confirms the acts of its
partners, agents. or employees on behalf of the Partnership in its status as a
partner in Company.
<PAGE>
CERTIFICATE FOR USE WITH A PARTNERSHIP WHICH
IS A PARTNER IN A PARTNERSHIP COMPANY / GRANTOR / SUBORDINATOR
Page 2
This certificate shall remain in full force and effect until written
notice of their revocation shall have been delivered to and received by Bank.
Any such notice shall not affect any of the Partnership's agreements or
commitments in effect at the time notice is given.
IN WITNESS WHEREOF, we each have read all the provisions of this
certificate for use with a partnership which is a partner in a partnership
guarantor/grantor/subordinator, and we each jointly and severally and on behalf
of the Partnership certify and agree to its terms and attest that the signatures
set opposite the names listed below are their genuine signatures.
This certificate is dated December 13' 1995.
CERTIFIED TO AND ATTESTED BY:
KPCB VII Associates, L.P. _________________________________
_________________________________
General Partner
By: /s/ JOSEPH S. LACOB
-------------------------------
General Partner JOSEPH S. LACOB
_________________________________
_________________________________
By: /s/ BROOK M. BYERS
------------------ General Partner
General Partner
EXHIBIT 10.10
September 1, 1994
Mr. Michael Levy
President
SportsLine USA, Inc.
800 Corporate Drive
Suite 108
Ft. Lauderdale, Florida 33334
Dear Mike:
It has been productive and exciting to meet with you to discuss your
visionary plan for the future of SportsLine USA, Inc. I am intrigued by the
prospect for ultimate success and am interested in working with you and your
process. Therefore, based on earlier conversations, this will confirm that Rick
Horrow/Horrow Sports Ventures ("RH") work with SportsLine USA Inc. ("SL"), or
its appropriate assignees, in all appropriate strategic areas, including, but
not limited to, the following:
I. SCOPE OF SERVICES
1. Provide access to key personnel at union representative offices in
football, baseball, basketball, hockey, and other sports.
2. Assist in providing access to key sports representatives and agents in
all major sports.
3. Assist in providing access and attend meetings with league
representatives including the Offices of the Commissioners of the National
Hockey League, National Basketball Association, Arena Football League, Canadian
Football League, LPGA, and PGA.
4. Assist in providing access and attend meetings with appropriate
representatives of collegiate sports, including National Association of College
Directors of Athletics. NCAA, and others.
5. Assist in providing access and attend meetings with appropriate
television networks with distribution potential, including ESPN,
Prime/NewSport/Sports Channel, and the like.
6. Assist in developing strategic plans and attend meetings concerning
sponsorship solicitation and corporate participation. These meetings could
include representatives of sports marketing firms as well as corporations with
compatible demographic needs.
7. Assist in creating strategic plans concerning golf and tennis,
including programming, travel package development, mail order/merchandising
packages, and the like.
<PAGE>
Mr. Michael Levy
September 1, 1994
Page - 2
8. Assist in the development of a strategic plan for access to teams,
stadiums, and arenas and other public spectator facilities. This could include
programming potential as well as joint venture opportunities with management,
marketing, and concessions/novelty/merchandising firms.
9. Assist in the development of promotional and marketing plans, including
the identification of personalities and sports spokesmen in key markets.
10. Provide editorial direction concerning sports business/sports law
issues.
11. Assist in identifying and soliciting key SL personnel, including
business development and marketing executives.
12. Assist in identifying key members for potential celebrity affliations,
including memberships on a future Advisory Committee.
II. TERMS AND CONDITIONS
1. SL will retain RH as Development Consultant and as a Member of the
Board of Directors.
2. Commencing on September 1, 1994, SL will compensate RH at a rate of
$3,000 per month. plus approved expenses, payable on the first day of each
month.
3. At the point of commitment of appropriate additional funding of SL (as
determined by Michael Levy, in his reasonable discretion), RH shall receive a
bonus of $12,000 payable on receipt of said additional funding. Additionally, at
that point, SL will increase its compensation to RH to a rate of $5,000 per
month, effective March 1, 1995.
4. RH shall receive options to purchase 25,000 shares in SL at an initial
offering price of $2, subject to the terms and conditions outlined in
appropriate agreements. These options shall be vested immediately.
5. RH will devote sufficient time and effort to accomplishing the tasks in
the context of other compatible sports development arrangements that RH/HSV is
currently involved in. RH would be available for all appropriate meetings and
events, and would be regularly available on the telephone and otherwise.
6. Either party could terminate this Agreement effective February 28,
l995, with 30 days notice. The Agreement could also be terminated at any time by
mutual consent, or by either party for cause. If the Agreement is terminated,
however, RH shall be entitled to a fee as a Member of the Board of Directors (at
a rate of $500 per month, or increased to $1,000 per month
<PAGE>
Mr. Michael Levy
September 1, 1994
Page - 3
if there has been a commitment for additional funding of SL). This termination
provision shall not affect the stock option plan outlined in paragraph 4 above.
7. RTI shall operate under the specific authority of Mike Levy or his
designee(s) as to the consulting services. RH also agrees to refrain from public
statements or to conduct meetings except as otherwise requested by SL. RH also
agrees to hold all information in confidence unless directed otherwise by SL.
Hopefully, this will provide the framework of a mutually beneficial and
productive relationship. I look forward to working with you as soon as possible.
Most sincerely,
/s/ RICHARD B. HORROW
---------------------
Richard B. Horrow
President
RH/bvc
READ, AGREED TO, AND ACCEPTED:
SPORTSLINE USA, INC.
By:/s/ MICHAEL LEVY
-----------------------
Michael Levy, President
<PAGE>
25,000 WARRANTS
THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS.
THE WARRANT SHARFS MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AVAILABLE EXEMPTIONS FRONI SUCH REGISTRATION, PROVIDED THAT THE
SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
CONFIRMING THE AVAILABILITY OF SUCH EXMPI'ION. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE F1NANCLAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
August 31, 1994
SPORTSLINE USA, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, SPORTSLINE USA, INC., a Delaware corporation
("SportsLine" or the "Company"), hereby certifies that RICHARD MORROW or his
registered assigns (the "Holder") is entitled, subject to the provisions
contained herein, to purchase from the Company 25,000 fully paid and
non-assessable shares of Common Stock (as defined below), subject to adjustment
as provided herein, at an exercise price per share of Common Stock (the
"Exercise Price") of $2.00.
The term "Common Stock" means the Common Stock, par value $.01 per share,
of the Company as constituted on the date hereof. The number of shares of Common
Stock to be received upon the exercise of these Warrants may be adjusted from
time to time as hereinafter set forth. The shares of Common Stock deliverable
upon such exercise, and as adjusted from time to time, are hereinafter referred
to as "Warrant Stock." The term "Other Securities" means any other securities
that may be issued by the Company in addition to, or in substitution for, the
Warrant Stock.
References herein to the "Company" are to (i) SportsLine and any
successor thereto, (ii) any successor corporation resulting from the merger or
consolidation of SportsLine, or any successor thereto, with another corporation
or (ii) any corporation to which SportsLine, or any successor thereto, has
transferred its property or assets as an entirety or substantially as an
entirety.
<PAGE>
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
shall execute and deliver new Warrants of like tenor and date. Any such new
Warrants, upon execution and delivery, shall constitute an additional
contractual obligation on the part of the Company, whether or not these Warrants
so lost, stolen, destroyed or mutilated shall be at any time enforceable by
anyone.
The Holder agrees with the Company that these Warrants are issued, and
all the rights hereunder shall be held subject to, all of the conditions,
limitations and provisions set forth herein, including the following:
1. EXERCISE OF WARRANTS. These Warrants may be exercised, in whole or in
part, at any time, or from time to time during the period commencing on the date
hereof and expiring August 31, 1999 [five years after the issue date] by
presentation and surrender of these Warrants to the Company at its principal
office (which on the date hereof is 800 Corporate Drive, Suite 108, Ft.
Lauderdale, Florida 33334), or at the office of its stock transfer agent (which
on the date hereof is the Company), if any, with the Warrant Exercise Form
attached hereto duly executed and accompanied by payment (either in cash or by
certified or official bank check or checks, payable to the order of the Company)
of the Exercise Price for the number of shares specified in such form. If these
Warrants are exercised in part only, the Company shall, upon surrender of these
Warrants for cancellation, execute and deliver new Warrants evidencing the
rights of the Holder thereof to purchase the balance of Warrant Stock (and Other
Securities) purchasable hereunder. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the Company's
stock transfer agent at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the Warrant Stock (and Other
Securities) issuable upon such exercise, notwithstanding that the transfer books
of the Company shall then be closed or that certificates representing such
Warrant Stock (or Other Securities) shall not then be actually delivered to the
Holder. The Company shall pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of Warrant Stock (and
Other Securities) upon exercise of these Warrants.
2. RESERVATION OF SHARES AND OTHER SECURITIES. The Company will at all
times reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock and other shares of capital stock of the Company (and
Other Securities) from time to time receivable upon exercise of these Warrants.
All such shares (and Other Securities) shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable and
free and clear of all preemptive rights.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share in lieu of each fraction of a share otherwise
2
<PAGE>
issuable upon any exercise of these Warrants, as determined by the Board of
Directors in its reasonable discretion.
4. EXCHANGE OF WARRANTS. These Warrants are exchangeable, without expense,
at the option of the Holder, upon presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any, for other Warrants
of different denominations, entitling the Holder hereof to purchase in the
aggregate the same number of shares of Warrant Stock (and Other Securities)
purchasable hereunder.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights as a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed herein.
6. ANTI-DILUTION PROVISIONS.
6.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time
subdivide its outstanding shares of Common Stock (or Other Securities at the
time receivable upon the exercise of these Warrants) by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its shareholders, the number of
shares of Common Stock (or Other Securities) subject to these Warrants
immediately prior to such subdivision shall be proportionately increased and the
Exercise Price per share shall be proportionately decreased, and if the Company
shall at any time combine the outstanding shares of Common Stock (or Other
Securities) by recapitalization, reclassification or combination thereof, the
number of shares of Common Stock (or Other Securities) subject to these Warrants
immediately prior to such combination shall be proportionately decreased and the
Exercise Price per share shall be proportionately increased. Any such
adjustments pursuant to this Section 6.1 shall be effective at the close of
business on the effective date of such subdivision or combination or, if any
adjustment is the result of a stock dividend or distribution, then the effective
date for such adjustment shall be the record date therefor.
6.2 ADJUSTMENT FOR REORGANIZATION. CONSOLIDATION. MERGER. ETC. (a) In
case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable upon the exercise of these
Warrants) after the date hereof or in case after such date the Company (or any
such other corporation) shall consolidate with or merge into another corporation
or convey all or substantially all of its assets to another corporation, then,
and in each such case, the Holder of these Warrants, upon the exercise hereof,
at any time after the consummation of such reorganization, consolidation, merger
or conveyance, shall be entitled to receive, in lieu of the securities and
property receivable upon the exercise of these Warrants prior to such
consummation, the securities or property to which such Holder would have been
entitled upon such consummation if such Holder had exercised these Warrants
immediately prior thereto (but had not exercised any rights with respect to such
securities or property in connection with the reorganization, consolidation,
merger or conveyance); in each such case, the terms of these
3
<PAGE>
Warrants shall be applicable to the securities or property receivable upon the
exercise of these Warrants after such consummation.
(b) In any case where the Company shall consolidate with or merge into
another corporation, and shall not be the surviving corporation, or shall convey
all or substantially all of its assets to another corporation, then, and in each
such case, the surviving corporation or the corporation that shall have received
substantially all of the Company's assets shall expressly assume the obligations
of the Company under these Warrants in a form reasonably satisfactory to the
Holder hereof.
6.3 NO DILUTION. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of these Warrants, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of these Warrants against dilution or other impairment.
Without limiting the generality of the foregoing, while these Warrants are
outstanding, the Company (a) will not permit the par value, if any, of the
shares of Warrant Stock to be above the amount payable therefor upon such
exercise and (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue or sell fully paid and
non-assessable shares of Warrant Stock and Other Securities upon the exercise of
these Warrants.
6.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in the
number of shares of Warrant Stock or Other Securities receivable upon the
exercise of these Warrants, the Company at its expense will promptly compute
such adjustment in accordance with the terms of these Warrants and prepare a
certificate executed by an executive officer of the Company setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company will forthwith mail a copy of each such certificate to the Holder.
6.5 NOTICES OF RECORD DATE. ETC. In case:
(a) the Company shall take a record of the holders of its Common Stock (or
Other Securities at the time receivable upon the exercise of these Warrants) for
the purpose of entitling them to receive any dividend (other than a cash
dividend at the same rate as the rate of the last cash dividend theretofore
paid) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities, or
to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation, or any conveyance of all or substantially all
of the assets of the Company to another corporation; or
4
<PAGE>
(c) of any voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then, and in each such case, the Company shall mail or cause to be mailed to
each Holder of a Warrant at the time outstanding a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place, and the time, if any,
to be fixed, as to which the holders of record of Warrant Stock (or such other
securities at the time receivable upon the exercise of these Warrants) shall be
entitled to exchange their shares of Warrant Stock (or such other securities)
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up. Such notice shall be mailed at least 20 days prior to the date
therein specified and these Warrants may be exercised prior to said date during
the term of these Warrants.
7. RESTRICTIONS ON TRANSFER OF WARRANTS. WARRANT STOCK AND OTHER
SECURITIES. The Warrant Stock and Other Securities may not be sold, transferred
or otherwise disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant to
available exemptions from such registration, provided that the seller delivers
to the Company an opinion of counsel satisfactory to the Company confirming the
availability of such exemption.
8. LEGEND. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of these Warrants
and the issuance of any of the shares of Warrant Stock or Other Securities, all
certificates representing such securities shall bear on the face thereof
substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER
DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
9. NOTICES. All notices required hereunder shall be in writing and shall
be deemed given when telegraphed, delivered personally or within two days after
mailing when mailed by
5
<PAGE>
certified or registered mail, return receipt requested, to the Company at its
principal office, or to the Holder at the address set forth on the record books
of the Company, or at such other address of which the Company or the Holder has
been advised by notice in writing hereunder.
10. APPLICABLE LAW. These Warrants shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
conflicts of law principles.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
SPORTSLINE USA, INC.
By:
------------------------
Title: President
7
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to purchase ____
shares of Common Stock of SportsLine USA, Inc., a Florida corporation, and
hereby makes payment of $__________ in full satisfaction therefor.
--------------------------------
Signature
--------------------------------
Signature, if Jointly held
--------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the Holder of the within Warrants)
Name
----------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Social Security or Taxpayer Identification Number
-------------------------------
8
EXHIBIT 10.11
CONSULTING AGREEMENT
This Consulting Agreement ("AGREEMENT") dated as of June 14, 1996, between
Michael P. Schulhof (the "CONSULTANT") and SportsLine USA, Inc. ("SPORTSLINE").
SportsLine desires to retain Consultant to render certain consulting
services with respect to its business, Consultant is willing to render such
services as hereinafter provided. In consideration of the mutual agreements and
covenants set forth in this Agreement, the parties agree as follows:
1. ENGAGEMENT OF CONSULTANT. SportsLine hereby engages and retains
Consultant to render the consulting services described in Section 2 hereof (the
"SERVICES") for a period of two years, commencing on the date hereof (the
"AGREEMENT PERIOD").
2. DESCRIPTION OF SERVICES. During the Agreement Period, Consultant shall
consult with and advise SportsLine from time to time at SportsLine's request and
Consultant's reasonable convenience with respect to corporate, business and
marketing strategy. Consultant shall not be required to devote any particular
amount of time toward the performance of his duties hereunder; provided, that
Consultant shall use his reasonable efforts, and devote sufficient time, to
become familiar with and knowledgeable about SportsLine's products, services and
plans. Consultant acknowledges that he has been nominated to become a director
of the Company, effective immediately following the closing of the Company's
initial public offering, and Consultant consents to disclosure of such proposed
directorship.
3. PAYMENT FOR SERVICES. In full consideration for the Services, SportsLine
shall issue Consultant options (the "OPTIONS"), to purchase an aggregate of
50,000 shares of SportsLine's Common Stock at an exercise price of $4.00 per
share, pursuant to a Stock Option Agreement in the form of Exhibit A attached
hereto.
4. NONEXCLUSIVITY OF THIS AGREEMENT. SportsLine understands and agrees
that, except as set forth in the next sentence, Consultant shall not be
prevented or barred from rendering services of any nature for or on behalf of
any other person, firm, corporation or entity, subject to Consultant's
obligation to maintain confidentiality of SportsLine's confidential information
pursuant to Section 6. Notwithstanding the foregoing, during the Agreement
Period Consultant shall not be employed by, act as a consultant to or otherwise
render services of any nature for or on behalf of any person, firm, corporation
or entity engaged with respect to the business of providing a sports-oriented
computer online subscription or advertising-based service (regardless of whether
such service is accessed through the Internet, a commercial on-line service or
otherwise). Consultant understands and agrees that SportsLine shall not be
prevented or barred from retaining other persons or entities to provide services
of the same nature or similar nature as those described herein or of any nature
whatsoever.
5. TERMINATION. This Agreement may be terminated by either Consultant or
SportsLine upon written notice specifying the effective date of termination;
provided, that such written notice shall be given at least 60 days prior to the
date of termination. Notwithstanding anything herein or in the Options to the
contrary, if this Agreement is terminated prior to the time
1
<PAGE>
Consultant becomes a director of the Company, Consultant shall forfeit to
SportsLine Options with respect to (x) all of the 50,000 shares of stock subject
to the Options if either (i) Consultant terminates this Agreement prior to the
nine month anniversary hereof, or (ii) this Agreement is terminated in
connection with Consultant's declining to serve as a director of SportsLine
without good reason, or (y) in all other cases, 25,000 shares of Common Stock.
Upon any such other termination described in the preceding clause (y),
SportsLine shall promptly deliver to Consultant a replacement Stock Option with
respect to 25,000 (rather than 50,000) shares, which agreement shall be in the
form attached hereto as Exhibit A except that Sections 2 and 3 thereof shall be
amended to the effect that the Option will be exercisable at any time from June
14, 1997 through the earlier to occur of (i) June 14, 2001, and (ii) one year
after the date of Consultant's death.
6. CONFIDENTIALITY. Consultant will not disclose to any other person, firm,
or corporation, nor use for his own benefit, during or after the term of this
Agreement, any trade secrets or other confidential information of SportsLine
which is acquired by Consultant in the course of performing services hereunder.
For purposes of this Agreement, a "trade secret" is information not generally
known to the public which gives SportsLine an advantage over its competitors,
including products or services under development, production methods and
processes, subscriber or customer lists and marketing plans. Any information,
which (i) at or prior to the time of disclosure by SportsLine to Consultant was
generally available to the public through no breach of this Agreement, (ii) was
available to the public on a nonconfidential basis prior to its disclosure by
SportsLine to Consultant or (iii) was made available to Consultant from a third
party (provided that Consultant did not know that such party obtained or
disseminated such information in breach of any legal obligation to SportsLine)
shall not be deemed confidential information of SportsLine for purposes hereof.
7. AMENDMENT; WAIVER. No amendment to this Agreement shall be valid unless
such amendment is in writing and is signed by both of the parties to this
Agreement. Any of the terms and conditions of this Agreement may be waived at
any time in writing by the party entitled to the benefit thereof, but a waiver
in one instance shall not be deemed to constitute a waiver in any other
instance. A failure to enforce any provision of this Agreement shall not operate
as a waiver of the provision or of any other provision hereof.
8. SEVERABILITY. In the event that any provision of this Agreement shall be
held to be invalid, illegal or unenforceable in any circumstances, the remaining
provisions shall nevertheless remain in full force and effect and shall be
construed as if the unenforceable portion or portions were deleted.
9. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida.
10. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns: provided,
however, that the duties of Consultant hereunder shall not be assignable or
delegable by Consultant.
2
<PAGE>
11. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the
parties in counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
IN WITNESS WHEREOF, each of the parties has executed this Consulting
Agreement as of the date first written above.
SPORTSLINE USA, INC.
By: /s/ MICHAEL LEVY
---------------------------------
Michael Levy, President
By: /s/ MICHAEL P. SCHULHOF
---------------------------------
Michael P. Schulhof
3
<PAGE>
AMENDMENT TO CONSULTING AND OPTION AGREEMENTS
This AMENDMENT TO CONSULTING AND OPTION AGREEMENTS dated as of September
27, 1996 (the "AMENDMENT"), is entered into between SPORTSLINE USA, INC.
("SPORTSLINE") and Michael P. Schulhof (the "CONSULTANT").
SportLine and Consultants are parties to (1) that certain Consulting
Agreement dates as of June 14, 1996 (the "CONSULTING AGREEMENT") and (2) that
certain Option Agreement dated as of June 14, 1996 (the "OPTION AGREEMENT"). At
a meeting held on September 27, 1996, SportsLine's Board of Directors
unanimously approved modifications to the Consulting Agreement and the Option
Agreement, and SportsLine and Consultant desire to enter into this Amendment to
evidence such modifications.
In consideration of the premises, SportsLine and Consultant hereby agree as
follows:
1. AMENDMENTS TO CONSULTING AGREEMENT.
(a) Section 3 of the Consulting Agreement is hereby amended by deleting
such section in its entirety and substituting in its place the following:
"3. PAYMENT FOR SERVICES. In full consideration for the Services,
SportsLine shall issue Consultant options (the "OPTION") to purchase an
aggregate of 100,000 shares of SportsLine's Common Stock at an exercise
price of $2.00 per share, pursuant to a Stock Option Agreement in the
form of Exhibit A attached hereto."
(b) The second and third sentences for Section 5 of the Consulting
Agreement are hereby amended by deleting such sentences in their entirety and
substituting in their place the following:
Notwithstanding anything herein or in the Option to the contrary, if
this Agreement is terminated prior to the time Consultant becomes
director of the Company, Consultant shall forfeit to SportsLine Options
with respect to (x) all of the 100,000 shares of stock subject to the
Options if either (i) Consultant terminates this Agreement prior to the
nine month anniversary hereof, or (ii) this Agreement is terminated in
connection with Consultant's declining to serve as a director of
SportsLine without good reason, or (y) in all other cases, 50,000 shares
of Common Stock. Upon any such other termination described in the
preceding clause (y), SportsLine shall promptly deliver to Consultant a
replacement Stock Option with respect to 50,000 (rather than 100,000)
shares, which agreement shall be in the form attached hereto as Exhibit
A except that Sections 2 and 3 thereof shall be amended to the effect
that the Option will be exercisable at any time from June 14, 1997
through the earlier to occur of (i) June 14, 2001, and (ii) one year
after the date of Consultant's death.
2. AMENDMENTS TO OPTION AGREEMENT.
(a) Section 1 of the Option Agreement is hereby amended by deleting such
section in its entirety and substituting in its place the following:
<PAGE>
"1. GRANT OF OPTION. The Company hereby grants to Optionee options
(the "OPTIONS") to purchase up to 100,000 shares of Common Stock (the
"OPTION SHARES"), upon the terms and subject to the conditions set forth
in this Agreement."
(b) Section 4 of the Option Agreement is hereby amended by deleting such
section in its entirety and substituting in its place the following:
"4. EXERCISE PRICE. The exercise price of the Options shall be
$2.00 per Option Share (the "EXERCISE PRICE"), subject to adjustment
pursuant to Section 7 hereof."
3. NO FURTHER AMENDMENTS. Except as expressly modified by this Amendment,
all of the terms and conditions of the Consulting Agreement and the Option
Agreement shall remain unchanged and in full force and effect.
4. EFFECTIVENESS; COUNTERPARTS. This Amendment shall become binding and
effective upon execution by SportsLine and Consultant. This Amendment may be
executed in counterparts, each of which will be deemed to be an original and all
of which together will be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
SPORTSLINE USA, INC.
By:---------------------------
Michael Levy, President
by:---------------------------
Michael P. Schulhof
2
<PAGE>
OPTION AGREEMENT
This Option Agreement ("AGREEMENT") dated as of June 14, 1996, between
SPORTSLINE USA, INC., a Delaware corporation (the "COMPANY"), and MICHAEL P.
SCHULHOF (the "OPTIONEE").
W I T N E S S E T H
WHEREAS, pursuant to the Consulting Agreement dated as of the date hereof
between the Company and Optionee, the Company has agreed to issue to Optionee
options to purchase 50,000 shares of the Company's Common Stock, $0.01 par value
(the "COMMON STOCK");
WHEREAS, the Company and Optionee desire to execute this Agreement to
evidence the grant of such options and the terms and conditions thereof;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee options (the
"OPTIONS") to purchase up to 50,000 shares of Common Stock (the "OPTION
SHARES"), upon the terms and subject to the conditions set forth in this
Agreement.
2. EXERCISABILITY OF OPTIONS. The Options shall become exercisable in full
from and after the close of business on the date of the first annual meeting of
the Company's stockholders at which directors are elected occurring after the
Company's initial public offering ("IPO"). The Options have been issued in
connection with that certain Consulting Agreement between the Company and
Optionee, dated as of the date hereof, and shall be forfeited as provided in
Section 5 thereof.
3. EXPIRATION. The unexercised portion of the Options shall become null and
void (a) on June 14, 2006, if the Optionee is a director of the Company on that
date or ceased to be a director prior to that date by reason of his retirement
or the failure of the Optionee to be re-nominated for election as a director of
the Company's stockholders, (b) immediately in the event of the Optionee ceases
to be a director of the Company by reason of his removal for cause, or (c) one
year after the Optionee ceases to be a Director by reason of his disability, and
(d) twelve months after the date of the Optionee's death in the event that such
death occurs prior to the time the Option otherwise would become null and void
pursuant to this sentence (the earliest of such dates, the "EXPIRATION DATE").
Any part of the Options that have not been duly exercised by Optionee on or
before the close of business on the Expiration Date shall expire and be of no
further force or effect on such date, and Optionee shall thereafter have no
further right hereunder with respect thereto.
4. EXERCISE PRICE. The exercise price of the Options shall be $4.00 per
Option Share (the "EXERCISE PRICE"), subject to adjustment pursuant to Section 6
hereof.
<PAGE>
5. METHOD OF EXERCISE OF OPTIONS. If Optionee desires to exercise the
Options in whole or in part, Optionee shall provide the Company a written Notice
of Exercise in the form of Exhibit A attached hereto, accompanied by a bank or
cashier's check payable to the order of the Company for the full Exercise Price
of the Option Shares to be purchased upon such exercise. As soon as practicable
after the receipt of the Notice of Exercise accompanied by payment for the full
Exercise Price of the Option Shares to be purchased, the Company shall issue and
deliver (or cause its transfer agent to deliver) to Optionee a certificate or
certificates evidencing the Option Shares purchased. If the Options are
exercised as to fewer than all the Option Shares covered thereby, the Options
shall remain outstanding as to the remaining Option Shares until the earlier of
the exercise in full of the Options or the Expiration Date.
6. OPTIONS AND OPTION SHARES AS INVESTMENT. Optionee represents and
warrants to the Company that Optionee is acquiring the Options and the Option
Shares issuable upon the exercise thereof for its own account and not with a
view to or for resale in connection with any distribution thereof. The Company
will use its best efforts to register the distribution of the Option Shares
under Federal securities laws promptly after the termination of any applicable
underwriters' lock-up period imposed in connection with the IPO.
7. ANTI-DILUTION PROVISIONS.
(a) ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time
subdivide its outstanding shares of Common Stock by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its stockholders, the number of
Option Shares then subject to the Options immediately prior to such subdivision
shall be proportionately increased and the Exercise Price shall be
proportionately decreased; and if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification or
combination thereof, the number of Option Shares then subject to the Options
immediately prior to such combination shall be proportionately decreased and the
exercise price shall be proportionately increased. Any such adjustments pursuant
to this Section 6(a) shall be effective at the close of business on the
effective date of such subdivision or combination or if any adjustment is the
result of a stock dividend or distribution then the effective date for such
adjustment based thereon shall be the record date therefor.
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case
of any reorganization of the Company or in case the Company shall consolidate
with or merge into another corporation or convey all or substantially all of its
assets to another corporation, then, and in each such case, Optionee upon the
exercise of the Options at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the Option Shares issuable upon the exercise of the Options
prior to such consummation, the securities or property to which the Optionee
would have been entitled upon such consummation if the Optionee had exercised
the Options immediately prior thereto; in each such case, the terms of the
Options shall be applicable to the securities or property receivable upon the
exercise of the Options after such consummation.
8. PAYMENT OF TAXES AND EXPENSES. All shares of Common Stock issuable upon
exercise of the Options shall be validly issued, fully paid and nonassessable,
and the Company shall pay all expenses in connection with, and all taxes and
other governmental charges that may be imposed in respect of the issuance or
delivery thereof (other than federal, state or local income tax
2
<PAGE>
or other tax based upon gross or net income, owed by the Optionee on account of
such issuance or delivery).
9. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a stockholder
in respect to any Option Shares as to which the Option shall not have been
exercised and full payment of the Exercise Price made as herein provided.
10. ISSUANCE OF SHARES. As a condition of the issuance of Option Shares,
the Company may require the Optionee to enter into such agreements or
undertakings, if any, as counsel to the Company may deem necessary to assure
compliance with any law or regulation then in effect, including, but not limited
to (i) a representation and warranty by the Optionee that he is acquiring the
Option Shares to be issued for investment and not with a view to, or for resale
in connection with, the distribution thereof, and (ii) a representation,
warranty and/or agreement to be bound by any legends that are, in the opinion of
counsel to the Company, necessary to comply with the provisions of any
securities law applicable to the issuance of the Option Shares.
11. NONTRANSFERABILITY. The Options shall not be transferable by the
Optionee otherwise than by will or the laws of descent and distribution and
during the lifetime of the Optionee are exercisable only by the Optionee.
12. NOTICES. Any notice under this Agreement shall be in writing and shall
be given, in the case of the Company, to the Company's Secretary at its
principal executive offices and, in the case of the Optionee, to the Optionee's
last permanent address as shown on the Company's records, subject to the right
of either party to designate some other address at any time hereafter in a
notice satisfying the requirements of this Section.
13. LAW GOVERNING. This Agreement shall be governed in accordance with and
governed by the laws of the State of Delaware.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties hereto with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SPORTSLINE USA, INC.
By:-------------------------------
Title:
By:-------------------------------
Michael P. Schulhof
3
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EXHIBIT A
NOTICE OF EXERCISE
To: SPORTSLINE USA, INC.
Pursuant to the terms of the Option Agreement dated as of June 14, 1996
(the "Option Agreement;" terms used herein and not otherwise defined have the
meanings set forth in the Option Agreement), between SPORTSLINE USA, INC. and
MICHAEL P. SCHULHOF ("Optionee"), Optionee hereby exercises the Options to the
extent of___________Option Shares and encloses a bank or cashier's check in the
amount of $_________in full payment for the Exercise Price of such Option
Shares in accordance with the terms of the Option Agreement.
Dated:__________________,____
-------------------------------
Michael P. Schulhof
EXHIBIT 10.12
LICENSE AND CONSULTING AGREEMENT
LICENSE AND CONSULTING AGREEMENT, dated the _____ day of August, 1994, by
and between PLANNED LICENSING, INC., a New York corporation and a wholly owned
subsidiary of Namanco Productions, Inc. having offices at c/o James C. Walsh,
Esq., 7 Audubon Place, New Orleans, Louisiana 70118 ("Licensor") and SportsLine
USA, Inc., a Delaware corporation having offices at 800 Corporate Drive, Suite
108, Fort Lauderdale, Florida 33334 ("Licensee").
W I T N E S S E T H:
WHEREAS, Licensor owns the rights to the services of JOSEPH W. NAMATH
(hereinafter referred to as "NAMATH") and the rights to the utilization of the
Name and Character, as hereinafter defined, and will continue to have such
rights during the period of this Agreement; and
WHEREAS, Licensee is a development stage company that plans to establish a
comprehensive, on-line computer service for sports enthusiasts and wagerers and
desires to retain Licensor (i) to consult in the development, funding, marketing
and promotional activities of Licensee and (ii) to provide the services of
NAMATH as a performer to advertise and promote its products, and as a spokesman
for its products; and
WHEREAS, Licensee further desires the right to exclusively utilize the Name
and Character upon and in connection with certain articles and services, as
hereinafter described, including the manufacture, advertising, promotion, sale
and distribution thereof.
NOW, THEREFORE, in consideration of the promises set forth
<PAGE>
below, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following respective meanings:
a. "Name and Character" shall individually or collectively mean the
name of Joseph W. Namath (hereinafter referred to as "NAMATH"), his initials,
character, likeness, visual and vocal representations, including television and
film representations generated hereunder, autographs, photographs, reproductions
thereof, biographical data, and in association with the marketing of products
licensed hereunder, any trademark used to convey to the public any of the
foregoing aspects of representations of NAMATH.
b. "Endorsed Products" shall mean the on-line sports information computer
service ("SportsLine") and other related products to be developed or marketed by
Licensee in connection with the operation of SportsLine.
c. A company shall be deemed a subsidiary of Licensee if at least
thirty-five percent (35%) of all the voting securities thereof are owned by
Licensee.
d. "Territory" shall mean worldwide.
e. "Contract Year" shall mean a consecutive 12 month period beginning July
1, 1994 and each July 1 thereafter during the term thereof.
2. SERVICES OF NAMATH AND LICENSOR.
a. On condition that Licensee shall comply with its
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obligations under this Agreement, NAMATH will, during the term of this
Agreement, render the following services:
(i) Make personal appearances on behalf of Licensee to promote the
marketing and sale of the Endorsed Products. All personal appearances shall be
at the reasonable discretion and subject to the availability of NAMATH, provided
that NAMATH shall use his best efforts to make himself available for functions
or appearances designated by Licensee as significant, such as attempting to
establish significant business relationships;
(ii) Make personal endorsements of Endorsed Products in advertisements
in all media, including without limitation, newspapers, magazines and
publications of every kind and nature;
(iii) Perform or appear, at Licensee's request, in television and radio
"infomercials," commercials and videos (including "openings", "closings",
"lead-ins", and "lead-outs") involving Endorsed Products and to make personal
endorsements therein of Endorsed Products;
(iv) Make recordings and tapes regarding Endorsed Products; and
(v) Sit for still photographs to be used for packaging, print and/or
point of sale advertising and consumer and trade publicity of Endorsed Products.
b. Each time that Licensee requires the personal appearance services of
NAMATH under subdivision (ii) through (v) of subparagraph 2(a) above, Licensee
(or its duly appointed
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agency) shall give to Licensor at least thirty (30) days written notice of such
performance requirements. Licensor shall then, within seven (7) days of
receiving notice, advise Licensee and its duly appointed agency as to NAMATH's
availability for such performance require ments. NAMATH shall use his reasonable
efforts to be available at the times requested by Licensee. In the event NAMATH
is unavail able for such performance requirements, the Licensee may supply
alternate dates and thereafter Licensee and Licensor shall agree upon
satisfactory performance dates. Once mutually agreeable date or dates are
established, NAMATH shall not enter into conflicting commitments, except in the
case of unanticipated circumstances beyond NAMATH's reasonable control. Such
services will be rendered in a competent manner, to the best of NAMATH's
ability, and all his services will be subject to Licensee's approval, direction
and control at all times. NAMATH promptly will comply with whatever reasonable
instructions Licensee may give him in connection with the rendition of such
services. In the event of an emergency or special promotional opportunity,
NAMATH shall use reasonable efforts to make himself available notwithstanding
Licensee's failure to give notice as aforesaid.
c. Licensor will make NAMATH available to Licensee for not fewer than six
1-day sessions each Contract Year for the purpose of making television
commercials. Subject to paragraph 8, Approvals, Licensee may use adaptations,
variations and lifts from
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<PAGE>
such commercials when and as it sees fit.
d. If Licensee requires NAMATH's services at a location other than that at
which NAMATH is then located, Licensee shall provide Licensor with first-class
air and ground transportation and accommodations for NAMATH and up to two
associates to and from the location at which NAMATH's services are required,
plus reimbursement of their reasonable out-of-pocket expenses.
e. Licensor reserves the right to approve, which approval will not be
unreasonably withheld, the photographer to be used during any photography
sessions using NAMATH, and the director to be used in television commercials
using NAMATH.
f. If Licensee uses the services of NAMATH hereunder for television
broadcast commercials, its agency or producer shall either be signatories to or
submit to the jurisdiction of the Screen Actors Guild (SAG) or the American
Federation of Television and Radio Artists (AFTRA). Licensee shall make all
required applicable pension and welfare payments to SAG or AFTRA to the extent
applicable on account of such services as are furnished by the Licensor
hereunder. All applicable residual fees on account of services shall be computed
at the applicable union minimum scales; provided, however, that Licensee shall
not be obligated to make any such residual payments to NAMATH unless and to the
extent that such residual payments payable hereunder in any Contract Year exceed
the consideration payable hereunder for that year. Any such required excess
payments shall be made to NAMATH on the
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<PAGE>
thirtieth day of the Contract Year following the year in which the obligation to
make such payment accrues (and shall be refunded in any future years hereunder
in which consideration payable hereunder exceeds the minimum residual payments
payable). NAMATH shall be paid at minimum union scale for all performances, and
allocations shall be as set forth in paragraph 31 hereof.
g. All statements, testimonials and endorsements made by NAMATH in
connection with his services hereunder will be true representations and to the
extent that said services purport to reflect NAMATH's opinion and experience,
they will reflect his true opinion and experience. Licensee agrees that NAMATH
will not be required to make any statement, testimonial or endorsement, in
connection with his services hereunder, unless said statement, testimonial or
endorsement is true. It is expressly understood between the parties that NAMATH
is familiar with Endorsed Products now intended to be marketed, sold or
distributed. Licensor represents to Licensee that NAMATH has considered the
products and services to be provided by Licensee and has concluded that said
products and services appear to be of the highest quality of which he is aware
and that he has used or is prepared to use those products and has recommended
and/or is prepared to recommend the use of all said products to others.
h. Licensor will assist Licensee in developing an advertising, marketing
and promotional strategy, in order to make optimum use of the Name and
Character.
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i. Licensor will advise and consult with Licensee from time to time at
Licensor's reasonable convenience with respect to corporate, business and
marketing strategy.
j. Licensor and NAMATH will use their best efforts, at the request of
Licensee, to arrange meetings with appropriate representatives of NFL Films, NFL
Properties and other similar sports governing bodies and marketing
organizations, as well as with potential strategic partners such as casinos,
retailers, infomercial marketing companies, television networks and other
organizations.
k. Whenever Licensor is requested to provide services hereunder pursuant to
subparagraphs h, i and j, Licensor will provide the services of James Walsh.
3. GRANT OF LICENSE. During the term of this Agreement, Licensor hereby
grants to Licensee, and Licensee hereby accepts, a non-transferable,
non-assignable, and non-sublicensable right to use the Name and Character solely
within the Territory and solely on and in connection with the manufacture,
advertising, promotion, sale and distribution of Endorsed Products. Licensee
shall make no use of the Name and Character in association with goods other than
Endorsed Products.
4. TERM. The term of this Agreement shall commence on July 1, 1994 and
continue for five years (the "Initial Term"). Thereafter, Licensee shall have
the right, at its option, to renew this Agreement for up to three (3) additional
five-year terms
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<PAGE>
(each, a "Renewal Term"). Licensee shall notify Licensor of its intention to
renew the Agreement not later than sixty (60) days prior to the expiration of
the Initial Term or the then current Renewal Term, as the case may be.
5. CONSIDERATION. In full consideration for the rights, licenses and
privileges herein granted to Licensee, and the mutual promises set forth herein,
Licensee shall pay to Licensor royalty payments from paid subscriptions to the
SportsLine service, as follows:
a. For the Initial Term, Licensee shall pay Licensor fifteen cents ($0.15)
per month from the subscription fee of each paid subscriber to SportsLine;
b. For each Renewal Term, Licensee shall pay Licensor fifteen cents ($0.15)
per month from the paid subscription fee of each new paid subscriber to
SportsLine who enrolls during such Renewal Term during the period of the
subscriber's enrollment, or, if Licensor has received not less than Five Hundred
Thousand Dollars in payments from Licensee during the Calendar Year prior to the
then current Renewal Term, five cents ($0.05) per month for each such
subscriber;
c. If the Agreement is not renewed, Licensor shall nevertheless be entitled
to receive payment in respect of monthly subscription fees for subscribers who
enrolled during the Initial Term or any Renewal Term (during the period of their
continued enrollment) at the applicable royalty rate in effect during the
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<PAGE>
applicable period, i.e., fifteen cents ($0.15) per month per paid subscriber in
respect of subscribers initially enrolled during the Initial Term and fifteen
cent ($0.15) or five cents ($0.05) (as the case may be) per month per paid
subscriber in respect of subscribers initially enrolled during a Renewal Term.
Such payments shall continue in respect of subscription fees received from
active enrollments of such subscribers prior to the twentieth anniversary
hereof. Notwithstanding anything to the contrary set forth above, Licensor shall
not be entitled to any payment in respect of subscription payments from
subscribers who enroll during any period that the Agreement is no longer in
effect.
d. Royalties earned hereunder shall be paid quarterly, concurrently with
the delivery of the periodic statements required by subparagraph (e) hereof
e. Licensee shall keep complete and accurate separate records of all paid
subscriptions, in sufficient detail to disclose the initial enrollment date and
current status of subscribers. The said records, and all underlying documents
and other documents relating to the Endorsed Products, shall be open to
inspection by Licensor or its designated representative at all reasonable times
during business hours up to four (4) times per Contract Year and shall be
maintained and preserved by Licensee until two (2) years after the expiration or
termination of this Agreement. Licensee agrees not to cause or permit any
interference with Licensor or Licensor's representative in the
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reasonable performance of their duties of inspection and audit. The exercise by
Licensor in whole or in part, or at any time or times of the right to audit
records and accounts or of any other right herein granted, the acceptance by
Licensor of any statement or statements or the receipt and deposit by Licensor
of any payment tendered by or on behalf of Licensee shall be without prejudice
to any rights or remedies of Licensor and shall not stop or prevent Licensor
from thereafter disputing the accuracy of any such statement or payment.
f. No later than the thirtieth day after each calendar quarter, Licensee
shall transmit to Licensor a complete and accurate statement certified to be
accurate by an officer of Licensee, covering the immediately preceding calendar
quarter. Such report shall set forth the number of paid subscriptions in effect
during the preceding quarter, and the applicable royalty pertaining thereto. In
the event that any inconsistencies or mistakes are discovered in such statements
or payments, they shall immediately be rectified and the appropriate payment or
deduction from future payments shall be made. Upon demand by Licensor, Licensee
shall at Licensor's expense (such expense to be deducted from royalties payable
to Licensor hereunder), but no more than once in any twelve (12) month period,
furnish to Licensor a detailed statement by an independent certified public
accountant computing amounts due to Licensor hereunder as of the date of
Licensor's demand. If the certified audit discloses that
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royalties were understated by more than ten percent (10%) per Contract Year,
then Licensee shall pay for such audit.
g. If Licensee shall fail to make any payment or deliver any of the
required statements referred to above, or to give access to the premises and/or
records pursuant to the provisions hereof to Licensor's authorized
representatives for the purposes permitted hereunder, same shall be an Event of
Default hereunder.
6. PAYMENT. All payments due under this Agreement shall be made by check,
drawn upon a United States bank, payable to the order of Licensor. Interest on
any overdue payment under this Agreement shall be at the rate of two percentage
(2%) points over the prime rate, as announced from time to time by Citibank,
N.A., from ten (10) days after notification of non-payment by Licensor to the
date of their payment, irrespective of whether payment be made before or after
judgment. Payment of interest as described hereunder shall cure and excuse
Licensee's default in making payments when due.
7. RESERVATION OF RIGHTS. Licensor retains all rights not expressly or
exclusively conveyed to Licensee hereunder, and Licensor may grant licenses to
others to use the Name and Character in connection with products other than (and
not competitive) Endorsed Products.
8. APPROVALS. Licensor has previously approved the concept of SportsLine,
as set forth in the Business Plan provided to Licensor. Licensor understands and
acknowledges that
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SportsLine intends to carry gaming information, including odds, point spreads,
over/under and other similar information and agrees that, so long as the
provision of such information and other related services complies with
applicable laws and regulations, such activities are acceptable to NAMATH and
Licensor. Subject to the foregoing, Licensor shall have the right to approve the
nature and quality of all Endorsed Products, which approval shall not be
unreasonably withheld. Licensor shall not be required to approve any Endorsed
Product which in Licensor's reasonable judgment would, due to the nature of the
product, reflect adversely on the image or reputation of NAMATH. For each
service to be provided or item to be manu factured for and sold by Licensee that
is outside the general categories of services contemplated by the Business Plan,
the following procedures shall apply:
a. Licensee shall submit to Licensor for approval, which shall not be
unreasonably withheld, fair and representative description of services or
reproduction samples of all items together with a written request for approval;
b. In the event Licensor does not disapprove of the use of the Name and
Character within seven (7) business days from its receipt of such description or
samples, the description or samples shall be deemed to have been approved. In
the event Licensor disapproves, it shall specify the basis for such disapproval.
After removing the basis for objection, Licensee shall resubmit that item for
approval in accordance with the terms of this
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section 8;
c. In the event of changes being made at any time in the use of the Name
and Character, such changed products shall be considered new items and shall be
submitted for approval as specified above; and
d. Licensee shall not use the Name and Character, or any colorable
imitation of it in connection with any services or product that had not been
approved by or which had been disapproved by Licensor.
9. GOOD WILL. Licensee recognizes the value of the publicity and good will
associated with the Name and Character and, in such connection, acknowledges
that such good will belongs exclusively to Licensor and that the Name and
Character have acquired a secondary meaning in the mind of the purchasing
public. Licensee further recognizes and acknowledges that a material breach by
it of any of its covenants, agreements or undertakings hereunder will cause
Licensor irreparable damage, which cannot be readily remedied in damages in an
action at law, and may, in addition thereto, constitute an infringement of
Licensor's rights in the Name and Character, thereby entitling Licensor to
equitable remedies, costs and reasonable attorney's fees. Similarly, Licensor
recognizes that a material breach by it of any of its covenants, agreements or
undertakings hereunder will cause Licensee irreparable damage, which can not be
readily remedied in damages in an action at law, and Licensor therefore agrees
that
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Licensee will be entitled to equitable remedies, costs and reasonable attorneys'
fees.
10. LICENSOR'S WARRANTIES, REPRESENTATIONS AND COVENANTS. Licensor
warrants, represents and agrees that:
a. It has, and will have throughout the term of this Agreement, the right
to license the Name and Character in accordance with the terms and provisions of
this Agreement;
b. The making of this Agreement by Licensor does not violate any
agreements, rights or obligations existing between the Licensor and any other
person, firm or corporation;
c. During the Initial Term, any Renewal Term and any period during which
Licensor is entitled to receive payment hereunder, Licensor and NAMATH will not
own, assist, be employed by, or render services to, any competitive enterprise,
including without limitation, any business providing sports-related information
to subscribers; and,
d. NAMATH is, and shall remain, at his sole cost and expense, a member in
good standing of SAG and/or AFTRA.
The foregoing subparagraphs shall not be construed to limit the right of
NAMATH to appear in any of the entertainment fields and to grant customary
advertising and exploitation rights in connection with such appearances, except
that he may not appear in commercials for or endorse for other products similar
to the Endorsed Products or other articles or services which are competitive
with or substantially similar to Endorsed Products.
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11. DISTRIBUTION, SUB-LICENSE MANUFACTURE. Licensee shall not be entitled
to sub-license any of its rights under this Agreement except that Licensee
shall, subject to the prior written approval of Licensor (which approval shall
not be unreasonably withheld), be entitled to utilize third parties in
connection with the manufacture, production and dissemination of SportsLine. In
no event shall any such sub-license agreement include the right to grant any
further sub-licenses.
12. SPECIFIC UNDERTAKINGS OF LICENSEE. During the term, Licensee agrees
that:
a. It will not attack the title of Licensor in and to the Name and
Character or any copyright or trademark pertaining thereto, nor will it attack
the validity of the License granted hereunder;
b. It will not harm, misuse or bring into disrepute the Name and Character.
c. It will sell and distribute the Endorsed Products in an ethical manner
and in accordance with the terms and intent of this Agreement;
d. It will not create any expenses chargeable to Licensor without the prior
written approval of Licensor;
e. It will protect to the best of its ability its right to sell and
distribute the Endorsed Products; and
f. It will comply with all laws and regulations relating or pertaining to
the operation of the Endorsed Products, shall
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maintain the highest quality and standards, and shall comply with regulations of
any governmental or regulatory agencies which shall have jurisdiction over the
Endorsed Products.
13. INDEMNIFICATIONS.
a. Licensor and NAMATH hereby indemnify Licensee and shall hold it harmless
from any loss, liability, damage, cost or expense (including reasonable counsel
fees), arising out of any claims or suits, whether groundless or not, which may
be brought or made against it by reason of the breach by Licensor or NAMATH of
their warranties, representations or covenants herein, provided that Licensee
shall give prompt written notice, cooperation and assistance to Licensor and
NAMATH relative to any such claim or suit, and provided, further, that Licensor
and NAMATH shall have the option to undertake and conduct the defense of any
suit so brought with counsel reasonably satisfactory to Licensee.
b. Licensee hereby indemnifies and agrees to hold Licensor and NAMATH
harmless from any loss, liability, damage, cost or expense (including reasonable
counsel fees), arising out of any claim or suits, whether groundless or not,
which may be brought or made against Licensor or NAMATH by reason of any
unauthorized use by Licensee in connection with the Endorsed Products of the
Name and Character covered by this Agreement.
c. Licensee hereby indemnifies and agrees to hold Licensor and NAMATH
harmless from and against any loss, liability, damage, cost or expense
(including reasonable counsel fees), arising out
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of any claims or suits (whether groundless or not), which may be brought or made
against Licensor or NAMATH arising out of the offer, sale, advertising or
promotion of the Endorsed Products (other than that arising from Licensor's or
NAMATH's negligence or willful misconduct), as well as any alleged defects or
inherent damage in the Endorsed Products, provided that the Licensor and NAMATH
give prompt written notice, cooperation and assistance to it relative to any
such suit or claim, and provided further that Licensee shall have the option to
undertake and conduct the defense of any suit so brought with counsel reasonably
satisfactory to Licensor.
14. EVENTS OF DEFAULT. The following conditions and occurrences all
constitute "Events of Default" by Licensee:
a. If Licensee materially defaults in the performance of any of its
obligations provided for in this Agreement; or
b. If Licensee shall fail to make any payment due hereunder on the date
due; or
c. If Licensee shall be unable to pay its debts when due, or shall make any
assignment for the benefit of creditors, or shall file any petition under the
bankruptcy or insolvency laws of any jurisdiction, or shall have or suffer a
receiver or trustee to be appointed for its business or property, or be
adjudicated a bankrupt or an insolvent.
15. TERMINATION. Without limiting Licensor's rights, upon the occurrence of
any Event of Default under paragraph 14,
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Licensor shall have the option to terminate this Agreement at its will by
sending written notice to Licensee. If the default set forth in such notice is
not cured within thirty (30) days of receipt of such notice (or within such
further period as Licensor may allow), then at the end of such period
termination shall automatically occur without further notice and without
prejudice to any other rights of Licensor, including the right to damages and/or
equitable relief. In the event that after the date of automatic termination
Licensor allows a further period to cure the default, termination will
automatically occur without further notice if the default is not cured within
such further period.
16. FINAL STATEMENT UPON TERMINATION OR EXPIRATION. Licensee shall deliver
to Licensor, as soon as practicable following expiration or termination pursuant
to Section 15, a statement indicating the number of subscribers then enrolled in
SportsLine. Following expiration or termination, Licensee may not utilize the
Name and Character except in connection with previously printed or committed
advertising, and then only for a period not to exceed six (6) months following
such termination or expiration.
17. DEFAULT BY LICENSOR AND NAMATH.
a. In the event NAMATH neglects or refuses to perform the services and
obligations hereunder at times and in the manner specified, or if NAMATH or
Licensor in any manner breaches this Agreement (hereinafter "a breach"), the
Licensee shall have the
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right to cancel and terminate this Agreement. Prior to terminating this
Agreement, it must give written notice to Licensor of the breach. If the breach
set forth in such notice is not cured within ten (10) days after such notice or
a reasonable time under the circumstances (or within such further period as
Licensee may allow), then at the end of such period, termination shall
automatically occur without further notice to Licensor.
b. The Licensee shall also have the right to terminate this Agreement: (i)
in the event of the conviction of a felony committed by NAMATH; or (ii) in the
event the Licensee reasonably concludes that NAMATH's conduct or reputation
reflected so seriously on NAMATH's public perception as to prejudice
substantially Licensee's business interests if this Agreement were to continue.
As a condition to such termination, the Licensee must give written notice to
Licensor at any time prior to the thirtieth (30th) day following the date on
which the commission of such act or such conduct shall have become known to it.
Licensor shall then have the right to discuss said conduct with the Licensee
prior to its decision, which decision shall not be made until fifteen (15) days
after it gives Licensor notice of its intention to act pursuant to this
provision. Any action by it shall be taken only after due consideration.
c. In the event any express representation, warranty or undertaking by
Licensor or NAMATH is at any time during the term of this Agreement found to be
untrue or is breached, the Licensee
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<PAGE>
shall have the right to cancel and terminate this Agreement and to pursue all
other legal remedies. Prior to terminating this Agreement, it must give written
notice to Licensor of the express representation, warranty or undertaking
claimed to be untrue or breached. If the untrue express representation, warranty
or undertaking or breach thereof set forth in such notice is not cured within
ten (10) days of its mailing or a reasonable time under the circumstances (or
within such further period as it may allow), then at the end of such period,
termination shall automatically occur without further notice to Licensor.
d. The services to be rendered by NAMATH hereunder are of a special,
unique, extraordinary and intellectual character, which gives them a peculiar
value impossible of replacement and for the loss of which the Licensee may not
be reasonable or adequately compensated in damages, and a breach by Licensor or
NAMATH of the provisions of this Agreement may cause it irreparable injury and
damage and Licensor and NAMATH therefore expressly agree that Licensee shall be
entitled to injunctive and other equitable relief to prevent a breach of this
Agreement, or any part thereof, and to secure its enforcement.
e. In the event that the Licensee terminates this Agreement pursuant to
this paragraph 17, Licensor will not be entitled to any compensation accruing
after the date of termination.
18. SURVIVOR. The provisions of paragraph 13, Licensee's
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obligation to make payment under paragraphs 5 and 6 and paragraph 16 shall
survive the expiration or termination of this Agreement.
19. TRADEMARK. After termination of this Agreement, Licensee shall give up
all rights to the use of the Name and Character.
20. ACCEPTANCE BY LICENSOR. This instrument, when signed by Licensee shall
be deemed an application for a license, and not a binding agreement, unless and
until accepted by Licensor, by signature of a duly authorized officer, and
delivery of such signed coy to the other parties.
21. ASSIGNMENT. This Agreement shall bind and inure to the benefit of
Licensor, its successors and assigns. This Agreement is personal to Licensee and
it shall not sub-license or franchise (except as set forth in paragraph 11
hereof), and neither this Agreement nor any of the rights hereunder shall be
sold, transferred or assigned by Licensee and no rights hereunder shall devolve
by operation of law or otherwise upon any receiver, liquidator, trustee or other
party.
22. NO JOINT VENTURE. Nothing herein contained shall be construed to place
the parties in the relationship of employer- employees, partners or joint
venturers and neither party shall have the power to obligate or bind the other
in any manner whatsoever.
23. NO WAIVER. No waiver or modification of any of the terms of this
Agreement shall be valid unless in writing. No
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waiver by either party of a breach hereof or a default hereunder shall be deemed
a waiver by such party of a subsequent breach or default of like or similar
nature.
24. NOTICES. Any notice required or permitted to be given under the
Agreement by either of the parties hereto shall be given by over-night courier,
registered or certified mail, return receipt requested, postage prepaid,
addressed to the parties to be notified at the following addresses:
IF TO LICENSOR: PLANNED LICENSING, INC.
c/o James C. Walsh, Esq.
7 Audubon Place
New Orleans, Louisiana 70118
WITH A COPY TO: CARL R. SLOAN, ESQ.
Penzer and Sloan
250 Park Avenue
New York, New York 10177-0077
IF TO LICENSEE: SPORTSLINE USA, Inc.
800 Corporate Drive, Suite 108
Fort Lauderdale, Florida 33334
Attention: Michael Levy
WITH A COPY TO: KENNETH C. HOFFMAN, ESQ.
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
1. CONSTRUCTION. This Agreement shall be construed in accordance with the
laws of the State of New York.
2. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties. There are no representations, warranties, promises, covenants or
undertakings other than those hereinabove contained.
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<PAGE>
3. RESOLUTIONS OF CONTROVERSIES. Any controversy arising out of this
Agreement or because of any duty created thereby, shall be resolved without a
jury in a court located in Broward County, Florida. The parties consent to
jurisdiction in such courts, waive objection to such venue, waive trial by jury,
and agree that service of the summons to such proceeding (and of any papers
which accompany it), shall be deemed sufficient if made by certified or
registered mail, postage prepaid, addressed to the parties' addresses as
designated in or hereafter changed under paragraph 24. The parties stipulate and
agree that any judgment relating to this Agreement, which is entered in a court
located within Broward County, Florida, shall be binding throughout the world
and may be sued upon, docketed, entered and/or enforced, without challenge or
opposition on their part and without re-trial of any of the issues which give
rise to such judgment in any state, county, province, commonwealth, or territory
having jurisdiction over their respective persons or properties. The parties
recognize that the above agreement to submit all controversies to
forever-binding adjudication by a court located within the City of New York does
not constitute a confession of judgment on anybody's part, but is simply an
agreement, similar to an arbitration agreement, to have particular controversies
resolved, once and for all, by a specified tribunal. All parties agree that
equitable relief, including injunctive and specific performance, may be
necessary and proper to enforce their
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<PAGE>
obligations and commitments under this paragraph and under paragraphs 2, 5, 8,
11, 13, 14, and 16 of this Agreement.
4. PROVISIONS UNENFORCEABLE. In the event any provision of this Agreement
shall be held invalid or unenforceable, it shall be deemed modified only to the
extent necessary to make it lawful. To effect such modification, the said
provision shall be deemed deleted, added to and/or rewritten, whichever shall
most fully preserve the intention of the parties as originally expressed herein.
5. LEGAL FEES. The prevailing party in any litigation between the parties
shall recover from the other party its reasonable legal fees and expenses.
6. INSURANCE. Licensee is hereby granted the right to obtain a life
insurance policy and/or disability insurance policy on NAMATH at its own cost
and expense in an amount up to $5,000,000 and to designate itself as owner of
the policy and beneficiary for all purposes. It is the intention of the parties
that in the event of the death, disability or disfigurement of NAMATH, the
consider ation due hereunder shall continue to be paid throughout the term of
this Agreement, provided that NAMATH is insurable and cooperates with the
procurement of said insurance and further provided that said policy cost does
not exceed $25,000.
7. ALLOCATION OF CONSIDERATION. The parties hereto agree that for the
purposes of any pension and welfare payments required
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to be made pursuant to paragraph 2(f), the value of the services rendered by
NAMATH for the television commercials during each year of the contract shall be
$5,000 in the aggregate. The balance of the consideration paid to Licensor
during each Contract Year shall be for other services rendered by Licensor
and/or NAMATH pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
PLANNED LICENSING, INC.
(LICENSOR)
By: /s/ JAMES WALSH
-----------------------
SPORTSLINE USA, INC.
(LICENSEE)
By: /s/ MICHAEL LEVY
-----------------------
Each of the undersigned hereby acknowledges and agrees that as and when
Licensor is required to provide his services under the foregoing License and
Consulting Agreement he will make such services available in accordance with the
provisions of such Agreement.
/s/ JAMES WALSH
-------------------------
James Walsh
/s/ JOSEPH W. NAMATH
-------------------------
Joseph W. Namath
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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
1st day of September, 1997 (the "Effective Date"), by and between SPORTSLINE
USA, INC., a Delaware corporation (hereinafter called the "Company"), and
KENNETH W. SANDERS (hereinafter called the "Executive").
RECITALS
A. The Company desires to obtain the personal services of the Executive as
Chief Financial Officer of the Company from and after the Effective Date;
B. The Executive is willing to make his services available to the Company
on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 EMPLOYMENT AND TERM. The Company hereby agrees to employ the Executive
and the Executive hereby agrees to serve the Company, on the terms and
conditions set forth herein, for the period of three (3) years commencing on the
Effective Date (the "Term"). The Term may be renewed by mutual written agreement
of the Executive and the Company.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as the Chief Financial
Officer of the Company shall have and exercise responsibility for overseeing and
actively participating in all aspects of the Company's financial affairs,
including, without limitation (a) the establishment and implementation of
financial policy, (b) negotiation of the terms of debt and equity financings for
the Company, (c) the supervision of the Company's auditors, (d) directing the
preparation of financial statements, budgets, forecasts and any required SEC
filings, (e) participating in discussions, meetings and other communications
with security analysts, investment bankers, lenders and other members of the
financial community, (f) the supervision of the Company's human resources
department and personnel, and (g) such other similar or related duties
customarily performed by a chief financial officer as may be assigned to the
Executive from time to time by the Chairman of the Board, President or Chief
Executive Officer of the Company or the Board of Directors of the Company (the
"Board"). The Executive shall devote substantially all his working time and
attention to the business and affairs of the Company (excluding any vacation and
sick leave to which the Executive is entitled), render such services to the best
of his ability, and use his best efforts to promote the interests of the
Company; provided, that it shall not be a violation of this Agreement for the
Executive to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures or fulfill speaking engagements or (iii) manage personal
investments, so long as such activities do not interfere with the performance of
the Executive's responsibilities as an employee of the Company in accordance
with this Agreement. For purposes of this Agreement, references to the "Board"
include any authorized committee of the Board.
<PAGE>
1.3 PLACE OF PERFORMANCE. In connection with his employment by the Company,
the Executive shall be based at the Company's principal executive offices except
for travel reasonably necessary in connection with the Company's business.
2. COMPENSATION.
2.1 BASE SALARY. Commencing on the Effective Date of this Agreement, the
Executive shall receive a base salary at the annual rate of Two Hundred Ten
Thousand Dollars ($210,000) (the "Base Salary") during the Term, payable in
installments consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary shall be reviewed, at
least annually, for merit increases and may, by action and in the discretion of
the Board, be increased from time to time.
2.2 INCENTIVE COMPENSATION. The Executive shall be entitled to receive such
bonus payments or incentive compensation as may be determined at any time or
from time to time by the Board in its discretion.
2.3 STOCK OPTIONS.
(a) In connection with the Executive's agreement to serve as the
Company's Chief Financial Officer pursuant to the terms hereof, on the Effective
Date the Company will grant to the Executive pursuant to the Company's 1995
Stock Option Plan, as amended (the "Plan") non-qualified stock options (the
"Options") to purchase 200,000 shares of the Company's common stock, par value
$.01 per share ("Common Stock"), at an exercise price equal to $4.00 per share.
(b) The Options shall be granted pursuant to and subject to the terms
and conditions of the Company's 1995 Stock Option Plan (the "Plan"); provided,
that notwithstanding anything in the Plan or the forms of agreements evidencing
the Options to the contrary: (i) the Options shall have a term expiring on
December 31, 2001 (the "Option Expiration Date"); (ii) subject to termination of
the Options prior to vesting as provided in clause (iii) below, the Options
shall vest and become exercisable (A) to the extent of the first 25% of the
Options, on the date that the Company's Registration Statement No. 333-25259 in
respect of its initial public offering of shares of Common Stock is declared
effective by the Securities and Exchange Commission, (B) to the extent of an
additional 25% of the Options, one year after the Effective Date, and (C) with
respect to the remaining 50% of the Options, pro rata on a monthly basis, at the
end of each month during the two-year period commencing one year after the
Effective Date (I.E., at the rate of 1/24th of the Options per month); provided,
that upon termination of the Executive's employment hereunder pursuant to
Section 4.4 hereof, all unvested Options that would have vested at any time
during the six-month period following the date of termination had the
Executive's employment hereunder not been terminated shall immediately vest and
become exercisable; and (iii) to the extent not previously vested and exercised
pursuant to their terms, the Options shall terminate upon the earlier to occur
of: (A) one year after the termination of the Executive's employment hereunder
pursuant to Section 4.3 hereof by reason of his death, (B) six months after the
termination of the Executive's employment hereunder pursuant to Section 4.2
hereof by reason of the Executive's Disability or pursuant to Section 4.4 hereof
by the Company without Cause or by the Executive for Good Reason, (C) on the
date the Executive's employment hereunder is terminated pursuant to Section 4.1
by the Company for Cause, or by the Executive other than for a Good Reason, and
(D) the Option Expiration Date.
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<PAGE>
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
3.1 EXPENSE REIMBURSEMENT. During the Term, the Company, in accordance with
its expense reimbursement policies and procedures in effect for senior
management employees from time to time, shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive in the course of
and pursuant to the business of the Company.
3.2 OTHER BENEFITS. During the Term, the Company shall make available to
the Executive such benefits and perquisites as are generally provided by the
Company to its other senior management employees, including but not limited to
eligibility for participation in any group life, medical, health, dental,
disability or accident insurance, pension plan, 401(k) savings and investment
plan, profit-sharing plan, employee stock purchase plan, incentive compensation
plan or other such benefit plan or policy, if any, which may presently be in
effect or which may hereafter be adopted by the Company for the benefit of its
employees generally, in each case subject to and on a basis consistent with the
terms, conditions and overall administration of such plan or arrangement. The
Company shall also provide the Executive such coverage under any directors and
officers liability policies it maintains as is provided to its other senior
management employees and shall enter into an indemnification agreement with the
Executive on terms and conditions as similar agreements entered into with other
senior management employees.
3.3 VACATION. During the Term, the Executive shall be entitled to paid
vacation in accordance with the policies, programs and practices of the Company
generally applicable to its other senior management employees, but in no event
shall the Executive be entitled to fewer than two weeks paid vacation per year.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything contained to the
contrary in this Agreement, this Agreement and the Executive's employment
hereunder may be terminated by the Company for Cause. As used in this Agreement,
"Cause" shall mean (i i) subject to the following sentences, any action or
omission of the Executive which constitutes (A) a willful breach of this
Agreement, (B) a breach by the Executive of his fiduciary duties and obligations
to the Company, or (C) the failure or refusal to follow any lawful directive of
the Chairman, the Chief Executive Officer, the President or the Board, in each
case which act or omission is not cured (if capable of being cured) within
thirty (30) days after written notice of same from the Company to the Executive,
or (ii) conduct constituting fraud, embezzlement, misappropriation or gross
dishonesty by the Executive in connection with the performance of his duties
under this Agreement, or a formal charge or indictment of the Executive for, or
conviction of the Executive of, a felony (other than a traffic violation) or, if
it shall damage or bring into disrepute the business, reputation or goodwill of
the Company or impair the Executive's ability to perform his duties with the
Company, any crime involving moral turpitude. Upon any determination by the
Board that Cause exists under clause (i) of the preceding sentence, the Company
shall cause a special meeting of the Board to be called and held at a time
mutually convenient to the Board and the Executive, but in no event later than
ten (10) business days after Executive's receipt of the notice contemplated by
clause (i). The Executive shall have the right to appear before such special
meeting with legal counsel of his choosing to refute any determination of Cause
specified in such notice, and any termination of the Executive's employment by
reason of such Cause determination shall not be effective until Executive is
afforded such opportunity to appear. Any termination for Cause pursuant to this
Section 4.1 shall be made in writing to Executive, which notice shall set forth
in reasonable detail all acts or omissions upon which the
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<PAGE>
Company is relying for such termination. Upon any termination pursuant to this
Section 4.1, the Executive shall be entitled to be paid his Base Salary through
the date of termination. Upon making such payment, the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination.
4.2 DISABILITY. Notwithstanding anything contained in this Agreement to the
contrary, the Company, by written notice to the Executive, shall at all times
have the right to terminate this Agreement and the Executive's employment
hereunder if the Executive shall, as the result of mental or physical
incapacity, illness or disability, fail or be unable to perform his duties and
responsibilities provided for herein for a period of more than one hundred
twenty (120) consecutive days in any 12-month period. Upon any termination
pursuant to this Section 4.2, the Executive shall be entitled to be paid his
Base Salary to the date of termination and, upon making such payment, the
Company shall have no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date of termination);
provided, that the Executive shall be entitled to receive any amounts then
payable pursuant to any pension or employee benefit plan, life insurance policy
or other plan, program or policy then maintained or provided by the Company to
the Executive in accordance with the terms thereof.
4.3 DEATH. In the event of the death of the Executive during the term of
his employment hereunder, the Company shall pay to the estate of the deceased
any unpaid amounts of his Base Salary to the date of his death. Upon making such
payment, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of the
Executive's death); provided, that the Executive's spouse, beneficiaries or
estate, as the case may be, shall be entitled to receive any amounts then
payable pursuant to any pension or employee benefit plan, life insurance policy
or other plan, program or policy then maintained or provided by the Company to
the Executive in accordance with the terms thereof.
4.4 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON.
(a) At any time the Company shall have the right to terminate this
Agreement and the Executive's employment hereunder by written notice to the
Executive; provided, that (i) within thirty (30) days after the date of
termination, the Company shall pay the Executive any unpaid amounts of his Base
Salary accrued prior to the date of termination, (ii) in lieu of any further
Base Salary, incentive compensation or other payments to the Executive for
periods subsequent to the date of termination, and as a severance benefit to the
Executive, the Company shall continue to pay the Executive for a period of six
months following the date of termination an amount equal to the installments of
his Base Salary (at the rate in effect at the date of termination) that would
have been paid to him had this Agreement and his employment hereunder not been
terminated, and (iii) if this Agreement and the Executive's employment hereunder
is terminated pursuant to this Section 4.4(a) at any time following the
expiration of six months after the Effective Date, the Company shall pay the
Executive the Additional Amount, if any, determined and payable in accordance
with Section 4.4(c) hereof. Upon making such payment, the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination); provided, that the
Executive shall be entitled to receive any amounts then payable pursuant to any
pension or employee benefit plan, life insurance policy or other plan, program
or policy then maintained or provided by the Company to the Executive in
accordance with the terms thereof. The Company shall be deemed to have
terminated the Executive's employment pursuant to this Section 4.4 if such
employment is terminated by the Company without Cause or by reason of the
Executive's death or disability, or by the Executive for Good Reason (as defined
in Section 4.4(b) hereof).
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(b) For purposes of this Agreement, "Good Reason" means a material
breach by the Company of this Agreement, including any material reduction in the
Executive's authority, duties or responsibilities as contemplated by Section 1.2
of this Agreement, in each case which is not cured (if capable of being cured)
by the Company within thirty (30) days after written notice of same from the
Executive to the Company. Any termination by the Executive for Good Reason
pursuant to this Section 4.4 shall be made in writing to the Company, which
notice shall set forth in reasonable detail the breach or breaches upon which
the Executive is relying for such termination.
(c) If the Option Value (as hereinafter defined) does not equal or
exceed $105,000 at any time during the six-month period following the date of
termination of this Agreement and the Executive's employment hereunder pursuant
to Section 4.4(a), then the Company shall pay the Executive, within thirty (30)
days following the end of such six-month period, an amount (the "Additional
Amount") equal to the difference between (i) $105,000 MINUS (ii) the Option
Value on the date six months following such date of termination. For purposes of
this Section 4.4(c), the term "Option Value" means, as of any date of
determination, the sum of (A) with respect to unexercised vested Options held by
the Executive, the difference between the Closing Price (as hereinafter defined)
of the shares of Common Stock or other securities subject to such vested Options
LESS the exercise price of such Options, PLUS (B) with respect to Options
previously exercised by the Executive, if the shares of Common Stock or other
securities issued upon exercise of the Option are then held by the Executive,
the difference between the Closing Price of such shares of Common Stock or other
securities LESS the exercise price of such Options, PLUS (C) with respect to
shares of Common Stock or other securities issued to the Executive upon exercise
of the Option that are sold by the Executive after the date of termination, the
difference between the price at which the Executive sold such shares LESS the
exercise price of such Options. For purposes of this Section 4.4(c), the term
"Closing Price" means the closing sales price of the Common Stock or other
securities issuable or issued upon exercise of the Options on the date of
determination, as reported by Nasdaq or any similar system of automated
dissemination of quotations of securities prices then in common use or, if the
Common Stock or other securities issuable or issued upon exercise of the Options
are not publicly traded at the time any determination of Closing Price is to be
made hereunder, the Closing Price of the Common Stock or other securities shall
be the amount determined in good faith by the Board. For purposes of
illustration, if on the determination date of Option Value (1) the Executive
held Options to purchase 10,000 shares of Common Stock at an exercise price of
$4.00 per share, (2) the Executive had previously exercised Options to purchase
40,000 shares of Common Stock at an exercised price of $4.00 per share, sold
20,000 of such shares after the date of termination for $8.00 per share and
continued to hold 20,000 of such shares, and (3) the Closing Price on the
determination date was $6.00 per share, then for purposes of this Section 4.4(c)
the Option Value on such date would be $130,000, calculated as follows:
Unexercised Vested Options = [10,000 X ($6.00 - $4.00)] = $ 10,000
Exercised Options:
Shares Held = [20,000 X ($6.00 - $4.00)] = 40,000
Shares Sold = [20,000 X ($8.00 - $4.00)] = 80,000
-------
Option Value................................ = $ 130,000
=======
4.5 VOLUNTARY RESIGNATION. In the event the Executive resigns as an
employee of the Company other than as a result of a termination for Good Reason,
he shall be entitled to receive only such payment(s) as he would have received
had he been terminated pursuant to Section 4.1 hereof.
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5. RESTRICTIVE COVENANTS.
5.1 NONDISCLOSURE. Contemporaneous herewith, the Executive shall execute
the Company's standard form of Employee Invention Assignment and Confidentiality
Agreement. Without limiting in any manner the Executive's obligations under such
agreement, the Executive agrees that he shall not divulge, communicate, use to
the detriment of the Company or for the benefit of any other person or persons,
or misuse in any way, any Confidential Information (as hereinafter defined)
pertaining to the business of the Company. Any Confidential Information or data
now or hereafter acquired by the Executive with respect to the business of the
Company (which shall include, but not be limited to, information concerning the
Company's financial condition, prospects, technology, customers, methods of
doing business and marketing and promotion of the Company's services) shall be
deemed a valuable, special and unique asset of the Company that is received by
the Executive in confidence and as a fiduciary, and the Executive shall remain a
fiduciary to the Company with respect to all of such information. For purposes
of this Agreement, "Confidential Information" means information disclosed to the
Executive or known by the Executive as a consequence of or through his
employment by the Company (including information conceived, originated,
discovered or developed by the Executive), and not generally known or available,
about the Company or its business. Notwithstanding the foregoing, nothing herein
shall be deemed to restrict the Executive from disclosing Confidential
Information to the extent required by law.
5.2 NONSOLICITATION OF EMPLOYEES. While employed by the Company and for a
period of twenty-four (24) months thereafter, Executive shall not directly or
indirectly, for himself or for any other person, firm, corporation, partnership,
association or other entity, attempt to employ or enter into any contractual
arrangement with any employee or former employee of the Company, unless such
employee or former employee has not been employed by the Company for a period of
more than twelve (12) months.
5.3 NONCOMPETITION. While employed by the Company and for a period of
twenty-four (24) months thereafter, the Executive shall not, directly or
indirectly, engage in, operate, have any investment or interest or otherwise
participate in any manner (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) in any sole
proprietorship, partnership, corporation or business or any other person or
entity that engages, directly or indirectly, in a Competing Business; provided,
that the Executive may continue to hold Company securities and/or acquire,
solely as an investment, shares of capital stock or other equity securities of
any company which are publicly traded, so long as the Executive does not
control, acquire a controlling interest in, or become a member of a group which
exercises direct or indirect control of, more than five percent (5%) of any
class of capital stock of such corporation. For purposes of this Agreement, the
term "Competing Business" means any sole proprietorship, partnership,
corporation or business or any other person or entity that owns, operates,
manages or distributes an on-line service that provides sports news, information
and content, whether such service is accessed through the Internet, a commercial
on-line service or otherwise.
5.4 INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 5.1, 5.2 or 5.3 of this Agreement will cause irreparable harm and damage
to the Company, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Section 5 of this Agreement by the Executive or any of
his affiliates, associates, partners or agents,
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either directly or indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other remedies the Company may possess.
6. NO CONFLICTS WITH EXISTING ARRANGEMENTS. The Executive represents and
warrants to the Company that he has reviewed any existing employment or
non-competition covenants with his prior employer, and that his employment by
the Company hereunder does not and will not conflict with or constitute a breach
or default under any of the terms or provisions thereof.
7. NOTICES: Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: SportsLine USA, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attention: Chief Executive Officer
If to the Executive: Kenneth W. Sanders
1500 Coryell Court
Southlake, Texas 76092
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
8. SUCCESSORS AND ASSIGNS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets which assumes and agrees to perform this Agreement by
operation of law or otherwise.
9. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or
7
<PAGE>
both, the otherwise invalid provision will be considered to be reduced to a
period or area which would cure such invalidity.
10. WAIVERS. The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
11. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement, except that the payment required to be made by
the Company to the Executive pursuant to Section 4.4 shall be the Executive's
exclusive remedy for any termination of this Agreement pursuant to such section.
12. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
SPORTSLINE USA, INC.
By:/s/ MICHAEL LEVY,
------------------------------------
Michael Levy,
Chairman and Chief Executive Officer
By:/s/ KENNETH W. SANDERS
----------------------------
Kenneth W. Sanders
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our report on the financial statements of SportsLine USA, Inc. dated January
31, 1997 and to all references to our Firm included in this registration
statement.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
September 15, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-28-1997
<PERIOD-END> DEC-28-1996 JUN-28-1997
<CASH> 13,993,785 13,634,466
<SECURITIES> 138,601 138,601
<RECEIVABLES> 583,435 876,260
<ALLOWANCES> 22,045 44,945
<INVENTORY> 0 0
<CURRENT-ASSETS> 14,946,561 21,017,569
<PP&E> 3,100,409 4,103,784
<DEPRECIATION> (858,779) (1,459,218)
<TOTAL-ASSETS> 17,849,742 24,910,268
<CURRENT-LIABILITIES> 3,167,605 3,966,005
<BONDS> 408,732 211,892
0 0
144,961 144,961
<COMMON> 65,047 107,981
<OTHER-SE> 14,063,397 20,479,429
<TOTAL-LIABILITY-AND-EQUITY> 17,849,742 24,910,268
<SALES> 0 0
<TOTAL-REVENUES> 2,436,690 2,802,510
<CGS> 0 0
<TOTAL-COSTS> 3,319,291 2,788,655
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 22,045 22,900
<INTEREST-EXPENSE> 136,309 30,785
<INCOME-PRETAX> (12,855,374) (11,115,914)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (12,855,374) (11,115,914)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,855,374) (11,115,914)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
EXHIBIT 28.1
CONSENT OF DIRECTOR NOMINEE
The undersigned, a nominee for director of SportsLine USA, Inc., a
Delaware corporation (the "Company"), hereby (i) consents to being nominated
for the position of director of the Company and to serve as such if elected,
and (ii) consents to being named as a director nominee in the Company's
Registration Statement on Form S-1 relating to the Company's initial public
offering of its common stock, and in the Prospectus contained therein proposed
to be circulated in connection with such offering, and all amendments thereto.
Executed this 10th day of April, 1997.
/s/ MICHAEL P. SCHULHOF
------------------------
Michael P. Schulhof
