SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 29, 1998
SPORTSLINE USA, INC
-------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-23337 65-0470894
--------------- ------------ --------------
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION
INCORPORATION) NO.)
SPORTSLINE USA, INC.
6340 N.W. 5TH WAY
FORT LAUDERDALE, FLORIDA 33309
- --------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(954) 351-2120
----------------------------------------------------
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
-------------------------------------------------------------
(Former name or former address, if changed since last report)
Page 1 of 12 Pages
Exhibit Index at Page 12
<PAGE>
ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS.
Pursuant to an Agreement and Plan of Merger dated as of January 15, 1998
(the "Merger Agreement") among SportsLine USA, Inc., a Delaware corporation
("SportsLine"), GolfWeb.Com, Inc., a Delaware corporation and a wholly-owned
subsidiary of SportsLine ("Merger Sub"), and GolfWeb, a California corporation
("GolfWeb"), on January 29, 1998 (the "Effective Date"), Merger Sub merged with
and into GolfWeb and GolfWeb became a wholly owned subsidiary of SportsLine (the
"Merger"). As a result, SportsLine acquired all of the outstanding capital stock
of GolfWeb.
In consideration for all of the capital stock of GolfWeb outstanding on
the Effective Date, SportsLine will issue an aggregate of 860,345 shares of
SportsLine Common Stock (including 12,541 shares subject to GolfWeb stock
options that were vested on the Effective Date and 3,314 shares subject to
GolfWeb warrants that were exercisable on the Effective Date). Each holder of
GolfWeb Stock who would otherwise be entitled to receive a fractional share of
SportsLine Common Stock (after taking into account all of a holder's
certificates representing shares of GolfWeb stock) will be entitled to receive
cash, without interest, in lieu thereof. The aggregate amount of such cash
payment is expected to be approximately $200. In addition, SportsLine will
assume all of the stock options and warrants to purchase capital stock of
GolfWeb outstanding on the Effective Date, which may be converted into options
and warrants to purchase an aggregate of 53,292 shares (consisting of 12,541
shares subject to vested stock options and 40,751 shares subject to unvested
stock options) and 3,314 shares of SportsLine Common Stock, respectively. The
terms on which the outstanding capital stock of GolfWeb and the outstanding
stock options and warrants of GolfWeb will be converted into SportsLine Common
Stock and options and warrants to purchase SportsLine Common Stock are set forth
in the Merger Agreement. The Company intends to account for this transaction
using the pooling-of-interests method of accounting.
The purchase price, as well as the other terms and conditions of the
Merger Agreement, were determined as a result of arm's-length negotiations among
representatives of the parties to the Merger Agreement.
The foregoing summary of the Merger is qualified in its entirety by
reference to the text of the Merger Agreement and Amendment No. 1 to the Merger
Agreement and SportsLine's Press Releases dated January 15, 1998 and January 30,
1998, which are attached hereto as Exhibit 2.1, 2.2 and 99.1, respectively, and
are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of businesses acquired
The financial statements of GolfWeb required by Rule 3-05(b) of
Regulation S-X are included as Exhibit 99.2.
2
<PAGE>
(b) Pro forma financial information
The following unaudited pro forma consolidated condensed financial
information is furnished in accordance with Article 11 of Regulation
S-X:
Introduction to unaudited pro forma information (page 4);
Unaudited pro forma balance sheet as of September 30, 1997 (page
5); and
Unaudited pro forma statements of operations for the nine months
ended September 30, 1997 (page 7) and for the years ended December
31, 1995 and 1996 (page 8 and 9).
(c) Exhibits
The following Exhibits are provided in accordance with the provisions
of Item 601 of Regulation S-K and are filed herewith unless otherwise
noted.
2.1 Agreement and Plan of Merger dated as of January 15, 1998,
among SportsLine, Merger Sub and GolfWeb (excluding Exhibits
thereto)
2.2 Amendment No. 1 to the Merger Agreement dated of January 29,
1998, among SportsLine, Merger Sub and GolfWeb
99.1 Press Releases of SportsLine dated January 15, 1998 and
January 30, 1998.
99.2 Audited Financial Statements of GolfWeb for the period from
Inception through December 31, 1995 and for the year ended
December 31, 1996.
99.3 Unaudited Financial Statement of GolfWeb for the nine months
ended September 30, 1997.
3
<PAGE>
SPORTSLINE USA, INC.
INTRODUCTION TO UNAUDITED PRO FORMA INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1997 and the Unaudited Pro Forma Statements of Operations for the nine months
ended September 30, 1997 and the years ended December 31, 1996 and 1995 reflect
adjustments to the historical financial statements of SportsLine USA, Inc.
("SportsLine") and GolfWeb to give effect to the consummation of the Agreement
and Plan of Merger dated January 15, 1998 as if such transaction had been
consummated at the beginning of the periods presented.
In consideration for all of the capital stock of GolfWeb outstanding on the
Effective Date, SportsLine will issue an aggregate of 860,345 shares of
SportsLine Common Stock (including 12,541 shares subject to GolfWeb stock
options that were vested on the Effective Date and 3,314 shares subject to
GolfWeb warrants that were exercisable on the Effective Date). In addition,
SportsLine will assume all of the stock options and warrants to purchase capital
stock of GolfWeb outstanding on the Effective Date, which may be converted into
options and warrants to purchase an aggregate of 53,292 shares (consisting of
12,541 shares subject to vested stock options and 40,751 shares subject to
unvested stock options) and 3,314 shares of SportsLine Common Stock,
respectively. Pro forma weighted average common and common equivalent shares
outstanding for the periods presented were determined by applying the exchange
ratio, adjusted for certain preferred stock conversions which occurred
immediately prior to the Merger, to the weighted average GolfWeb common and
preferred shares outstanding for each period. The Company intends to account for
this transaction using the pooling-of-interests method of accounting.
4
<PAGE>
<TABLE>
<CAPTION>
SPORTSLINE USA, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
PRO FORMA PRO FORMA
SPORTSLINE GOLFWEB ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $8,114,722 $1,420,808 $ - $9,535,530
Deferred advertising and content costs 2,445,433 891,666 - 3,337,099
Accounts receivable 1,507,907 197,457 - 1,705,364
Prepaid expenses and other current assets 2,186,610 85,016 - 2,271,626
---------- ---------- ---------- ----------
Total current assets 14,254,672 2,594,947 - 16,849,619
RESTRICTED CERTIFICATES OF DEPOSIT 138,601 - - 138,601
PROPERTY AND EQUIPMENT 3,213,787 827,553 - 4,041,340
OTHER ASSETS 1,153,570 51,976 - 1,205,546
---------- ---------- ---------- ----------
$18,760,630 $3,474,476 $ - $22,235,106
=========== ========== ========== ===========
</TABLE>
(Continued)
5
<PAGE>
<TABLE>
<CAPTION>
SPORTSLINE USA, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
PRO FORMA PRO FORMA
SPORTSLINE GOLFWEB ADJUSTMENTS COMBINED
---------- ------- ----------- --------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $1,024,058 $ 175,467 $ - $1,199,525
Accrued liabilities 2,103,692 415,659 - 2,519,351
Current portion of long-term borrowings 224,522 126,188 - 350,710
Current portion of capital lease obligations 305,896 163,469 - 469,365
Deferred revenue 1,317,727 148,557 - 1,466,284
---------- ---------- ---------- ----------
Total current liabilities 4,975,895 1,029,340 - 6,005,235
LONG-TERM BORROWINGS, net of current maturities 112,261 256,706 - 368,967
CAPITAL LEASE OBLIGATIONS, net of current maturities 278,149 108,134 - 386,283
---------- ---------- ---------- ----------
Total liabilities 5,366,305 1,394,180 - 6,760,485
---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY:
Series A convertible preferred stock 30,000 1,627,930 (1,627,930)(a) 30,000
Series B convertible preferred stock 61,628 3,521,600 (3,521,600)(a) 61,628
Series C convertible preferred stock 53,333 5,993,795 (5,993,795)(a) 53,333
Common stock 43,341 25,181 (16,736)(a)(b) 51,786
Additional paid-in capital 50,785,249 20,100 11,160,061 (b) 61,965,410
Accumulated deficit (37,579,226) (9,108,310) - (46,687,536)
----------- ---------- ---------- -----------
Total shareholders' equity 13,394,325 2,080,296 - 15,474,621
---------- ---------- ---------- ----------
$18,760,630 $3,474,476 $ - $22,235,106
=========== ========== ========== ===========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SPORTSLINE USA, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
PRO FORMA PRO FORMA
SPORTSLINE GOLFWEB ADJUSTMENTS COMBINED
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 5,867,071 $1,230,893 $ - $ 7,097,964
COST OF REVENUE 4,858,100 2,143,405 - 7,001,505
----------- ---------- --------- -----------
GROSS MARGIN (DEFICIT) 1,008,971 (912,512) - 96,459
----------- ---------- --------- -----------
OPERATING EXPENSES:
Product development 940,538 1,041,517 - 1,982,055
Sales and marketing 6,956,053 2,437,090 - 9,393,143
General and administrative 5,163,511 424,419 - 5,587,930
Depreciation and amortization 7,435,908 282,453 - 7,718,361
----------- ---------- --------- -----------
Total operating expenses 20,496,010 4,185,479 - 24,681,489
----------- ---------- --------- -----------
LOSS FROM OPERATIONS (19,487,039) (5,097,991) - (24,585,030)
INTEREST EXPENSE (51,206) (57,845) - (109,051)
INTEREST AND OTHER INCOME 548,107 73,329 - 621,436
----------- ---------- --------- -----------
Net loss $(18,990,138) $(5,082,507) $ - $(24,072,645)
============ =========== ========= ============
Net loss per share $ (1.92) $ (2.30)
============ ============
Weighted average common and common equivalent
shares outstanding 9,867,677 586,397 (c) 10,454,074
=========== ========= ===========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SPORTSLINE USA, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
PRO FORMA PRO FORMA
SPORTSLINE GOLFWEB ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 2,436,690 $ 621,726 $ - $ 3,058,416
COST OF REVENUE 3,395,291 837,571 - 4,232,862
----------- ---------- --------- -----------
GROSS MARGIN (DEFICIT) (958,601) (215,845) - (1,174,446)
----------- ---------- --------- -----------
OPERATING EXPENSES:
Product development 939,463 505,013 - 1,444,476
Sales and marketing 5,568,550 1,546,656 - 7,115,206
General and administrative 4,794,118 849,918 - 5,644,036
Depreciation and amortization 823,653 169,727 - 993,380
----------- ---------- --------- -----------
Total operating expenses 12,125,784 3,071,314 - 15,197,098
----------- ---------- --------- -----------
LOSS FROM OPERATIONS (13,084,385) (3,287,159) - (16,371,544)
INTEREST EXPENSE (136,309) (24,961) - (161,270)
INTEREST AND OTHER INCOME 365,320 64,840 - 430,160
----------- ---------- --------- -----------
Net loss $(12,855,374) $(3,247,280) $ - $(16,102,654)
============ =========== ========= ============
Net loss per share $ (1.92) $ (2.31)
============ ============
Weighted average common and common equivalent
shares outstanding 6,681,043 290,326 (d) 6,971,369
=========== ========= ===========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SPORTSLINE USA, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
PRO FORMA PRO FORMA
SPORTSLINE GOLFWEB ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUE $ 52,097 $ 47,738 $ - $ 99,835
COST OF REVENUE 756,874 61,142 - 818,016
----------- ---------- --------- -----------
GROSS MARGIN (DEFICIT) (704,777) (13,404) - (718,181)
----------- ---------- --------- -----------
OPERATING EXPENSES:
Product development 632,659 87,986 - 720,645
Sales and marketing 1,179,106 276,483 - 1,455,589
General and administrative 2,662,269 418,687 - 3,080,956
Depreciation and amortization 192,869 13,410 - 206,279
----------- ---------- --------- -----------
Total operating expenses 4,666,903 796,566 - 5,463,469
----------- ---------- --------- -----------
LOSS FROM OPERATIONS (5,371,680) (809,970) - (6,181,650)
INTEREST EXPENSE (50,074) (1,236) - (51,310)
INTEREST AND OTHER INCOME 91,851 32,683 - 124,534
----------- ---------- --------- -----------
Net loss $(5,329,903) $ (778,523) $ - $(6,108,426)
=========== ========== ========= ===========
Net loss per share $ (1.42) $ (1.59)
============ ============
Weighted average common and common equivalent
shares outstanding 3,748,241 87,736 (e) 3,835,977
=========== ========= ===========
</TABLE>
9
<PAGE>
SPORTSLINE USA, INC.
NOTES TO UNAUDITED PRO FORMA INFORMATION
AS OF SEPTEMBER 30, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(a) Represents the reclassification of GolfWeb's equity interests which are
being exchanged for 860,345 shares of SportsLine common stock.
(b) Represents the issuance of the 860,345 shares of SportsLine common stock to
be issued in connection with the terms of the Agreement and Plan of merger.
(c) Represents 586,397 of the 860,345 shares of SportsLine common stock to be
issued in connection with the terms of the Agreement and Plan of Merger
determined by applying the exchange ratio, adjusted for certain preferred
stock conversions which occurred immediately prior to the Merger, to the
weighted average equity interests of GolfWeb stock outstanding during the
nine months ended September 30, 1997.
(d) Represents 290,326 of the 860,345 shares of SportsLine common stock to be
issued in connection with the terms of the Agreement and Plan of Merger
determined by applying the exchange ratio, adjusted for certain preferred
stock conversions which occurred immediately prior to the Merger, to the
weighted average equity interests of GolfWeb stock outstanding during the
year ended December 31, 1996.
(e) Represents 87,736 of the 860,345 shares of SportsLine common stock to be
issued in connection with the terms of the Agreement and Plan of Merger
determined by applying the exchange ratio, adjusted for certain preferred
stock conversions which occurred immediately prior to the Merger, to the
weighted average equity interests of GolfWeb stock outstanding during the
year ended December 31, 1995.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPORTSLINE USA, INC.
Date: January 30, 1998 By:/s/ KENNETH W. SANDERS
----------------------
Kenneth W. Sanders
Chief Financial Officer
11
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated as of January 15, 1998, among
SportsLine, Merger Sub and GolfWeb (excluding Exhibits thereto)
2.2 Amendment No. 1 to the Merger Agreement dated of January 29, 1998, among
SportsLine, Merger Sub and GolfWeb
99.1 Press Release of the Company dated January 15, 1998 and January 30, 1998.
99.2 Audited Financial Statements of GolfWeb for the period from Inception
through December 31, 1995 and for the year ended December 31, 1996.
99.3 Unaudited Financial Statement of GolfWeb for the nine months ended
September 30, 1997.
EXHIBIT 2.1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 15, 1998
AMONG
SPORTSLINE USA, INC.,
GOLFWEB.COM, INC.
AND
GOLFWEB
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
1.1 The Merger...........................................................5
1.2 Effective Time.......................................................5
1.3 Effect of the Merger.................................................6
1.4 Supplementary Action.................................................6
ARTICLE II
THE SURVIVING CORPORATION
2.1 Articles of Incorporation of the Surviving Corporation...............6
2.2 Bylaws of the Surviving Corporation..................................6
2.3 Directors and Officers of the Surviving Corporation..................6
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of GolfWeb Capital Stock..................................6
3.2 Conversion of Capital Stock of Merger Sub............................8
3.3 Assumption of Currently Outstanding Options..........................8
3.4 Assumption of Outstanding Warrants...................................9
3.5 Dissenters' Rights...................................................9
3.6 Exchange of Certificates............................................10
3.7 Dividends...........................................................11
3.8 Adjustments.........................................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SPORTSLINE
4.1 Corporate Status....................................................12
4.2 Capitalization of SportsLine........................................12
4.3 Authorization; Enforceability.......................................12
4.4 No Violation........................................................13
4.5 Consents, etc.......................................................13
4.6 SEC Filings.........................................................13
4.7 Absence of Certain Changes or Events................................14
4.8 Litigation..........................................................14
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GOLFWEB
5.1 Organization, Authority, Qualification..............................14
5.2 Authorization; Enforceability.......................................14
5.3 Capitalization......................................................15
5.4 No Violation........................................................15
5.5 Consents, etc.......................................................16
5.6 Litigation..........................................................16
5.7 Subsidiaries........................................................16
5.8 Status of Proprietary Assets........................................16
5.9 Marketing Rights....................................................17
5.10 Compliance with Law, Charter Documents and Agreement................17
5.11 Registration Rights; Termination of Certain Agreements..............18
5.12 Financial Statements................................................18
5.13 Title to Property and Assets........................................19
5.14 ERISA Plans.........................................................19
5.15 Labor Relations.....................................................19
5.16 Contracts and Transactions..........................................20
5.17 Related Party Transactions..........................................21
5.18 Environmental and Safety Laws.......................................21
5.19 Tax Returns and Payments............................................21
5.20 Notes and Accounts Receivable.......................................22
5.20 Notes and Loans Payable.............................................22
5.22 Absence of Certain Changes or Events................................22
5.23 Insurance...........................................................23
5.24 No Commissions......................................................24
5.25 Certain Accounting Matters..........................................24
5.26 Shareholder Approval................................................24
5.27 Disclosure..........................................................24
ARTICLE VI
CONDUCT OF BUSINESS BY GOLFWEB PENDING THE MERGER
6.1 Conduct of Business by GolfWeb Pending the Merger...................24
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Best Efforts; Cooperation; Further Assurances.......................26
7.2 Access to Information...............................................27
7.3 Notification of Certain Matters.....................................27
7.4 Tax and Accounting Treatment........................................27
7.5 Publicity...........................................................27
7.6 Exclusive Dealings; Failure by GolfWeb to Consummate Without Cause..28
2
<PAGE>
7.7 Trading in SportsLine Common Stock..................................29
7.8 Affiliates of GolfWeb...............................................29
7.9 Additional Financial Statements.....................................29
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SPORTSLINE COMPANIES
8.1 Accuracy of Representations and Warranties and Compliance
with Obligations ................................................30
8.2 Corporate Matters...................................................30
8.3 No Adverse Proceedings..............................................30
8.4 No Material Adverse Change or Destruction of Property...............30
8.5 Consents and Approvals..............................................30
8.6 Opinion of Counsel..................................................31
8.7 Pooling Letters.....................................................31
8.8 Affiliates Letters..................................................31
8.9 Resignations........................................................31
8.10 Releases............................................................31
8.11 Additional Financial Statements.....................................31
8.12 No Change in Conversion Agreement...................................32
8.13 Dissenting Shares...................................................32
8.14 Termination of Certain Agreements...................................32
8.15 Payment of Bank Loan................................................32
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF GOLFWEB
9.1 Accuracy of Representations and Warranties and Compliance
with Obligations.................................................32
9.2 Corporate Matters...................................................33
9.3 No Adverse Proceedings..............................................33
9.4 No Material Adverse Change..........................................33
9.5 Governmental Consents...............................................33
9.6 Opinion of Counsel..................................................33
9.7 Tax Representation Certificate......................................33
ARTICLE X CLOSING
10.1 Closing.............................................................34
10.2 Deliveries by GolfWeb...............................................34
10.3 Deliveries by the SportsLine Companies..............................34
ARTICLE XI
REGISTRATION RIGHTS
11.1 Certain Definitions.................................................35
3
<PAGE>
11.2 Mandatory Registration..............................................35
11.3 Incidental (Piggyback) Registration.................................36
11.4 Obligations of SportsLine...........................................37
11.5 Expenses of Registration............................................38
11.6 Conditions Precedent to SportsLine's Obligations....................38
11.7 Indemnification.....................................................38
11.8 Termination of SportsLine's Obligations.............................41
11.9 Rights of Holders Subject and Subordinate...........................41
ARTICLE XII
SECURITIES LAW MATTERS
12.1 Disposition of Shares...............................................41
12.2 Private Placement...................................................41
12.3 Legend..............................................................41
ARTICLE XIII
DEFINITIONS
13.1 Defined Terms.......................................................42
13.2 Other Definitional Provisions.......................................43
ARTICLE XIV
TERMINATION
14.1 Termination.........................................................44
14.2 Effect of Termination...............................................44
ARTICLE XV
GENERAL PROVISIONS
15.1 Notices.............................................................45
15.2 Entire Agreement....................................................46
15.3 Expenses............................................................46
15.4 Amendment; Waiver...................................................46
15.5 Binding Effect; Assignment..........................................46
15.6 Counterparts........................................................46
15.7 Interpretation......................................................47
15.8 Governing Law; Interpretation.......................................47
15.9 Arm's Length Negotiations...........................................47
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of January 15, 1998,
among SportsLine USA, Inc., a Delaware corporation ("SportsLine"), GolfWeb.Com,
Inc., a
4
<PAGE>
Delaware corporation and a wholly owned subsidiary of SportsLine ("Merger Sub"
and together with SportsLine sometimes hereinafter referred to as the
"SportsLine Companies"), and GolfWeb, a California corporation ("GolfWeb").
Certain other capitalized terms used herein and not otherwise defined shall have
the meanings as set forth in Article IX hereof.
WHEREAS, SportsLine has organized Merger Sub as a wholly owned subsidiary
under the Deleware General Corporation Law (the "Delaware Code") for the purpose
of merging Merger Sub with and into GolfWeb pursuant to the applicable
provisions of the California General Corporation Law (the "California Code") and
the Delaware Code (the "Merger") so that GolfWeb will continue as the surviving
corporation of the Merger and will become a wholly owned subsidiary of
SportsLine;
WHEREAS, the respective Boards of Directors of SportsLine, Merger Sub and
GolfWeb have approved the Merger and the terms and conditions of this Agreement
and have determined that the Merger is in the best interests of their respective
shareholders;
WHEREAS, the Merger has been approved by the written consent of a
sufficient number of shareholders of GolfWeb under the California Code, but is
subject to satisfaction of certain other conditions described in this Agreement;
and
WHEREAS, for accounting purposes it is intended that the Merger shall be
qualify as a pooling of interests business combination, and for federal income
tax purposes it is intended that the Merger shall qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to and upon the terms and conditions of this
Agreement and in accordance with the California Code and the Delaware Code, at
the Effective Time (as defined in Section 1.2 hereof), Merger Sub shall be
merged with and into GolfWeb, which shall be the surviving corporation
(sometimes hereinafter referred to as the "Surviving Corporation") in the
Merger, and as a result thereof the separate corporate existence of Merger Sub
shall cease.
1.2 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Articles VIII and IX hereof shall have been fulfilled or waived in accordance
herewith and this Agreement shall not have been terminated as provided in
Article XIV hereof, on the Closing Date the parties hereto shall cause an
Agreement of Merger in the form required by the California Code (the "Agreement
of Merger") and a Certificate of Merger in the form required by the Delaware
Code (the "Certificate of Merger"), to be duly prepared and executed and filed
in accordance with the California Code and the
5
<PAGE>
Delaware Code, respectively. The Merger shall become effective at the time of
filing of the Articles of Merger with the Secretary of State of the State of
California and the Secretary of State of the State of Delaware in accordance
with the California Code and the Delaware Code, respectively, or at such later
time which the parties hereto shall have agreed upon and designated in such
filings as the effective time of the Merger (the "Effective Time").
1.3 EFFECT OF THE MERGER. From and after the Effective Time, the Merger
shall have all the effects set forth in the California Code and the Delaware
Code. Without limiting the generality of the foregoing, at the Effective Time,
by virtue of the Merger, all properties, rights, privileges, powers and
franchises of GolfWeb and Merger Sub shall vest in the Surviving Corporation and
all debts, liabilities and duties of GolfWeb and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 SUPPLEMENTARY ACTION. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of the GolfWeb, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered, in the name of and on
behalf of GolfWeb, to execute and deliver any and all things necessary or proper
to vest or to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions of
this Agreement.
ARTICLE II
THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The Articles
of Incorporation of the Surviving Corporation shall, at the Effective Time, be
amended so as to read in their entirety as attached hereto as Exhibit 2.1.
2.2 BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of the Surviving
Corporation shall, at the Effective Time, be amended so as to read in their
entirety as attached hereto as Exhibit 2.2.
2.3 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of Merger Sub at the Effective Time shall be the directors and
officers of the Surviving Corporation until their respective successors are duly
elected and qualified in accordance with the Surviving Corporation's Articles of
Incorporation, Bylaws and applicable law.
ARTICLE III
CONVERSION OF SHARES
3.1 CONVERSION OF GOLFWEB CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder thereof,
each share of GolfWeb's common stock, no par value ("GolfWeb Common"), Series A
Preferred Stock, no par value per share ("Series A Preferred"), Series B
Preferred Stock, no par value per share ("Series B Preferred"), and Series C
Preferred Stock, no par value per share ("Series C Preferred"; and, collectively
with the GolfWeb Common, the Series A Preferred and the Series B Preferred, the
"GolfWeb Stock") issued and outstanding immediately prior to the Effective Time,
other than, in each case, shares held by GolfWeb as treasury stock or by any
subsidiary of GolfWeb or by persons who exercise dissenter's rights in
accordance with Chapter 13 of the California Code ("Dissenting Shares"), shall
be converted into and exchanged for the number of validly issued,
6
<PAGE>
fully paid and nonassessable shares of common stock, $0.01 par value per share,
of SportsLine ("SportsLine Common Stock") determined in accordance with the
following exchange ratios (rounded to the nearest thousandth) (the "Exchange
Ratios"):
(a) each share of Series A Preferred shall be converted into the
right to receive the number of shares of SportsLine Common
Stock that is the sum of (1) the quotient of (i) $1.00,
divided by (ii) $17.26, which is the average of the closing
prices of SportsLine Common Stock on the Nasdaq National
Market on the 5 days prior to the date of this Agreement (the
"Average Trading Price"), plus (2) the "Common Exchange
Ratio", as defined below;
(b) each share of Series B Preferred shall be converted into the
right to receive the number of shares of SportsLine Common
Stock that is the sum of (1) the quotient of (i) $2.00,
divided by (ii) the Average Trading Price, plus (2) the
"Common Exchange Ratio", as defined below;
(c) each share of Series C Preferred shall be converted into the
right to receive the number of shares of SportsLine Common
Stock that is the sum of (1) the quotient of (i) $4.86,
divided by (ii) the Average Trading Price, plus (2) the
"Common Exchange Ratio," as defined below;
(d) each share of GolfWeb Common shall be converted into the right
to receive the number of shares of SportsLine Common Stock
(the "Common Exchange Ratio") that is the quotient of:
(1) the difference between (i) 860,371 minus (ii) the
quotient of (A) the sum of (I) the product of $1.00
times the aggregate number of shares of Series A
Preferred outstanding as of the Effective Time or
subject to warrants or options outstanding as of the
Effective Time, plus (II) the product of $2.00 times the
aggregate number of shares of Series B Preferred
outstanding as of the Effective Time or subject to
warrants or options outstanding as of the Effective
Time, plus (III) the product of $4.86 times the
aggregate number of shares of Series C Preferred
outstanding as of the Effective Time or subject to
warrants or options outstanding as of the Effective
Time, divided by (B) the Average Trading Price; divided
by
(2) the sum of (i) the total number of shares of GolfWeb
Common Stock outstanding as of the Effective Time, plus
(ii) the total number of shares of GolfWeb Common into
which all outstanding shares of Series A Preferred,
Series B Preferred and Series C Preferred could be
converted as of the Effective Time, plus (iii) the total
number of shares of GolfWeb Common subject to
outstanding warrants or outstanding options that are
vested and exercisable as of the Effective Time, plus
(iv) the total number of shares of GolfWeb Common into
which shares of Series B Preferred and
7
<PAGE>
Series C Preferred that are subject to outstanding
warrants could be converted as of the Effective Time.
It is the intention of the parties hereto that in no event shall SportsLine, by
virtue of the Merger, be obligated to issue in the aggregate more than 860,371
shares of SportsLine Common Stock to (A) the holders of the GolfWeb Stock
outstanding as of the date hereof, (B) the holders of the options to purchase an
aggregate of 1,044,952 shares of GolfWeb Common granted under the GolfWeb 1995
Equity Incentive Plan and outstanding as of the date hereof (the "Currently
Outstanding Options") in respect of the portions of such stock options (238,634)
that are vested and exercisable as of the date hereof (whether such vested
options are exercised prior to the Effective Time or assumed by SportsLine in
accordance with Section 3.3 hereof) and (C) the holders of the any of the
warrants to purchase an aggregate of 40,000 shares of GolfWeb Common, 2,500
shares of GolfWeb Series B Preferred and 2,572 shares of Series C Preferred
outstanding as of the date hereof (the "Currently Outstanding Warrants")(whether
or not such warrants are exercised prior to the Effective Time or assumed by
SportsLine in accordance with Section 3.4 hereof); and appropriate adjustment in
the Exchange Ratios shall be made to limit the number of shares of SportsLine
Common Stock issuable in the Merger in the event it is hereafter determined that
the formulas set forth above would result in the issuance of a greater number of
shares of SportsLine Common Stock to such holders.
Upon conversion of the outstanding GolfWeb Stock in accordance with this
Section 3.1, all such shares shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist; and each
certificate formerly representing any such shares (a "Certificate") shall
thereafter represent only the right to receive that number of shares of
SportsLine Common Stock into which the shares represented by such Certificate
have been converted in accordance with this Section 3.1. Certificates previously
representing shares of GolfWeb Stock shall be exchanged for certificates
representing whole shares of SportsLine Common Stock, and cash in lieu of any
fractional share, without interest, issued in consideration therefor upon the
surrender of such certificates in accordance with Section 3.5 hereof.
At the Effective Time, each share of GolfWeb Stock issued and held in
GolfWeb's treasury or by any subsidiary of GolfWeb shall, by virtue of the
Merger and without any action on the part of GolfWeb, cease to be outstanding,
shall be canceled and retired without payment of any consideration therefor and
shall cease to exist.
3.2 CONVERSION OF CAPITAL STOCK OF MERGER SUB. Each share of common
stock, par value $0.001 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall by virtue of the Merger and
without any action on the part of Merger Sub be converted into and become one
validly issued, fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation.
3.3 ASSUMPTION OF CURRENTLY OUTSTANDING OPTIONS. Each of the Currently
Outstanding Options that remains outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be assumed by SportsLine (the "Assumed Options"). From and after
the Effective Time, each Assumed Option shall be exercisable upon the same terms
and conditions as were applicable under such Assumed Option prior to the
Effective Time for a number of shares of SportsLine Common Stock (rounded to the
8
<PAGE>
nearest whole number) equal to the product of (x) the number of shares of
GolfWeb Common that the holder of such Assumed Option would have been entitled
to receive had such holder exercised such option in full immediately prior to
the Effective Time times (y) the Exchange Ratio for the GolfWeb Common
determined in accordance with Section 3.1, at an exercise price per share of
SportsLine Common Stock equal to the sum determined by dividing (A) the exercise
price per share of such Assumed Option in effect immediately prior to the
Effective Time by (B) the Exchange Ratio for the GolfWeb Common determined in
accordance with Section 3.1. For purposes of illustration only, if the Common
Exchange Ratio is 0.051, an individual who holds immediately prior to the
Effective Time an Assumed Option to purchase 1,000 shares of GolfWeb Common at
an exercise price of $0.50 per share would, following the Effective Time be
entitled to receive options to purchase 51 shares of SportsLine Common Stock at
an exercise price of $9.80 per share. Between the date hereof and the Effective
Time, GolfWeb shall take no action to accelerate the date on which any Currently
Outstanding Option vests or becomes exercisable or to amend or modify any of the
other terms and conditions thereof (including the exercise price). As soon as
practicable after the Effective Time, SportsLine shall deliver to each holder of
an Assumed Option an appropriate notice setting forth such holder's rights
pursuant thereto, and such Assumed Option shall continue in effect on the same
terms and conditions, except as otherwise provided herein. On or prior to June
1, 1998, SportsLine will cause the SportsLine Common Stock issuable upon
exercise of the Assumed Options to be registered on Form S-8 of the SEC, and
thereafter will exercise best efforts to maintain the effectiveness of such
registration statement for so long as such Assumed Options remain outstanding
and will reserve a sufficient number of shares of SportsLine Common Stock for
issuance upon exercise thereof.
3.4 ASSUMPTION OF OUTSTANDING WARRANTS. Each of the Currently
Outstanding Warrants that remains outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be assumed by SportsLine (the "Assumed Warrants"). From and
after the Effective Time, each Assumed Warrant shall be exercisable upon the
same terms and conditions as were applicable under such Assumed Warrant prior to
the Effective Time for a number of shares of SportsLine Common Stock (rounded to
the nearest whole number) equal to the product of (x) the number of shares of
GolfWeb Common, Series B Preferred or Series C Preferred that the holder of such
Assumed Warrant would have been entitled to receive had such holder exercised
such option in full immediately prior to the Effective Time times (y) the
Exchange Ratio for the GolfWeb Common, Series B Preferred or Series C Preferred,
as applicable, determined in accordance with Section 3.1, at an exercise price
per share of SportsLine Common Stock equal to the sum determined by dividing (A)
the exercise price per share of such Assumed Warrant in effect immediately prior
to the Effective Time by (B) the Exchange Ratio for the GolfWeb Common, Series B
Preferred or Series C Preferred, as applicable, determined in accordance with
Section 3.1. Between the date hereof and the Effective Time, GolfWeb shall take
no action to accelerate the date on which any Currently Outstanding Warrant
vests or becomes exercisable or to amend or modify any of the other terms and
conditions thereof (including the exercise price).
3.5 DISSENTERS' RIGHTS . If holders of GolfWeb Stock are entitled to
dissenters' rights in connection with the Merger under Chapter 13 of the
California Code, any Dissenting Shares shall not be converted into SportsLine
Common Stock but shall be converted into the right to receive such consideration
as may be determined to be due with respect to such Dissenting Shares pursuant
to the law of the State of California. GolfWeb shall give SportsLine prompt
notice of
9
<PAGE>
any demand received by GolfWeb to require GolfWeb to purchase shares of GolfWeb
Stock, and SportsLine shall have the right to participate in all negotiations
and proceedings with respect to such demand. GolfWeb agrees that, except with
the prior written consent of SportsLine, or as required under the California
Code, it will not voluntarily make any payment with respect to, or settle or
offer to settle, any such purchase demand. Each holder of Dissenting Shares
("Dissenting Shareholder") who, pursuant to the provisions of the California
Code, becomes entitled to payment of the value of shares of GolfWeb Stock shall
receive payment therefor (but only after the value therefor shall have been
agreed upon or finally determined pursuant to such provisions). In the event of
legal obligation, after the Effective Time, to deliver shares of SportsLine
Common Stock to any holder of shares of GolfWeb Stock who shall have failed to
make an effective purchase demand or shall have lost his status as a Dissenting
Shareholder, SportsLine shall issue and deliver, upon surrender by such
Dissenting Shareholder of his certificate or certificates representing shares of
GolfWeb Stock, the shares of SportsLine Common Stock to which such Dissenting
Shareholder is then entitled under this Section 3.5 and the Agreement of Merger.
3.6 EXCHANGE OF CERTIFICATES.
(a) At the Effective Time, SportsLine shall instruct its transfer
agent (the "Transfer Agent") to issue, for the benefit of the holders of the
GolfWeb Stock (the "GolfWeb Shareholders") entitled thereto, certificates
representing the shares of SportsLine Common Stock issuable pursuant to Section
3.1 in exchange for the outstanding shares of GolfWeb Stock. The aggregate
number of shares of SportsLine Common Stock which SportsLine shall instruct its
transfer agent to issue shall be a number of shares equal to the product
(rounded to the nearest whole share) of (x) the number of shares of GolfWeb
Stock outstanding at the Effective Time times (y) the Exchange Ratios for such
shares set forth in Section 3.1. The shares of SportsLine Common Stock issuable
by SportsLine in the Merger are sometimes herein referred to as the "SportsLine
Shares".
(b) Upon the surrender to the Transfer Agent of one or more
Certificates for cancellation, together with such letter of transmittal, duly
executed, the holder thereof will be entitled to receive certificates
representing that number of whole shares of SportsLine Common Stock to be issued
in respect of the aggregate number of shares of GolfWeb Stock previously
represented by the Certificates surrendered based upon the Exchange Ratio for
such shares of GolfWeb Stock and cash in lieu of fractional shares, without
interest, as provided in Section 3.6(c) hereof. In the event that any
Certificate representing GolfWeb Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such certificate to be lost, stolen or destroyed, SportsLine will cause the
Transfer Agent to be issue in exchange for such lost, stolen or destroyed
Certificate the number of SportsLine Shares into which the GolfWeb Stock
represented by such Certificate are converted in the Merger in accordance with
this Article III. When authorizing such issuance in exchange therefor,
SportsLine may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to give
SportsLine a bond in such sum as it may direct as indemnity, or such other form
of indemnity, as it shall direct, against any claim that may be made against
SportsLine with respect to the Certificate alleged to have been lost, stolen or
destroyed.
10
<PAGE>
(c) No certificates or scrip representing fractional SportsLine
Shares shall be issued upon the surrender for exchange of Certificates
representing GolfWeb Stock, and such fractional interests shall not entitle the
owner thereof to vote or to any rights as a stockholder of SportsLine. All
fractional shares of SportsLine Common Stock that a holder of GolfWeb Stock
would otherwise be entitled to receive as a result of the Merger shall be
aggregated and if a fractional share results from such aggregation, such holder
shall be entitled to receive, in lieu thereof, an amount in cash determined by
multiplying (i) the Fair Market Value at the Effective Time (as defined below)
of one share of SportsLine Common Stock, by (ii) the fraction of a share of
SportsLine Common Stock to which such holder would otherwise have been entitled.
SportsLine shall timely make available to the Transfer Agent any cash necessary
to make payments in lieu of fractional shares as aforesaid. No such cash in lieu
of fractional shares of SportsLine Common Stock shall be paid to any holder of
GolfWeb Stock until Certificates are surrendered and exchanged in accordance
with Section 1.3(a). The term "Fair Market Value at the Effective Time" of one
share of SportsLine Common Stock shall be the average of the closing sales
prices per share of SportsLine Common Stock on the Nasdaq National Market during
the 20 trading days immediately preceding the last business day before the date
of the Effective Time.
(d) If a certificate for SportsLine Common Stock is to be sent to
a person other than the person in whose name the Certificates for shares of
GolfWeb Stock surrendered for exchange are registered, it shall be a condition
of the exchange that the person requesting such exchange shall pay to the
Transfer Agent any transfer or other taxes required by reason of the delivery of
such Certificate to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Transfer Agent that
such tax has been paid or is not applicable.
(e) The SportsLine Shares issued and cash paid and upon the
surrender of Certificates in accordance with the terms hereof shall be deemed to
have been paid and issued in full satisfaction of all rights pertaining to the
shares of GolfWeb Stock.
3.7 DIVIDENDS. No dividends or other distributions that are declared or
made after the Effective Time with respect to SportsLine Common Stock payable to
holders of record thereof after the Effective Time shall be paid to a GolfWeb
shareholder entitled to receive certificates representing SportsLine Common
Stock until such shareholder has properly surrendered such shareholder's
Certificates. Upon such surrender, there shall be paid to the shareholder in
whose name the certificates representing such SportsLine Common Stock shall be
issued any dividends which shall have become payable with respect to such
SportsLine Common Stock between the Effective Time and the time of such
surrender, without interest. After such surrender, there shall also be paid to
the shareholder in whose name the certificates representing such SportsLine
Common Stock shall be issued any dividend on such SportsLine Common Stock that
shall have a record date subsequent to the Effective Time and prior to such
surrender and a payment date after such surrender; provided that such dividend
payments shall be made on such payment dates. In no event shall the shareholders
entitled to receive such dividends be entitled to receive interest on such
dividends.
3.8 ADJUSTMENTS. If, subsequent to the date of this Agreement but prior
to the Effective Time, SportsLine changes the number of shares of SportsLine
Common Stock, issued and outstanding as a result of a stock split, reverse stock
split, stock dividend, recapitalization or
11
<PAGE>
other similar change with a record date prior to the Effective Time, the
Exchange Ratios shall be appropriately adjusted to reflect the effect of any
such stock split, reverse stock split, stock dividend, recapitalization or other
similar change.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SPORTSLINE
SportsLine hereby represents and warrants to GolfWeb as follows:
4.1 CORPORATE STATUS. SportsLine is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SportsLine (i) 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 and (ii) is duly qualified
or licensed to conduct business as a foreign corporation and is in good standing
in all jurisdictions that require such qualification or licensing, except where
the failure to be so qualified or licensed or to be in good standing does not
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on SportsLine.
4.2 CAPITALIZATION OF SPORTSLINE.
(a) The authorized capital stock of SportsLine consists of 50,000,000
shares of SportsLine Common Stock and 1,000,000 shares of Preferred Stock, $0.01
par value per share. As of December 31, 1997, (i) 14,176,494 shares of
SportsLine Common Stock were issued and outstanding and (ii) no shares of
Preferred Stock were issued and outstanding. All of the issued and outstanding
capital stock of SportsLine is duly authorized, validly issued, fully paid and
nonassessable and was issued in compliance with applicable state and federal
securities laws. Upon consummation of the Merger, the shares of SportsLine
Shares to be issued in exchange for the GolfWeb Stock in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable.
(b) Except as set forth in the Prospectus, and except for outstanding
options and warrants to purchase an aggregate of approximately 3,410,000 shares
of SportsLine Common Stock outstanding, as of December 31, 1997 there were no
outstanding (i) securities convertible into or exchangeable for capital stock of
SportsLine; (ii) obligations, options, warrants or other rights of any kind or
character to acquire, purchase or subscribe for capital stock of SportsLine or
securities convertible into or exchangeable for capital stock of SportsLine; or
(iii) agreements, arrangements or understandings of any kind relating to the
authorization, issuance or sale of capital stock of SportsLine or securities
convertible into or exchangeable for capital stock of SportsLine.
4.3 AUTHORIZATION; ENFORCEABILITY. Each of SportsLine and Merger Sub has
the corporate power and authority to execute and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary corporate action on the part of each of SportsLine and
12
<PAGE>
Merger Sub. This Agreement has been duly executed and delivered by each of
SportsLine and Merger Sub and constitutes a valid and binding obligation of each
of SportsLine and Merger Sub, enforceable against it in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
4.4 NO VIOLATION. The execution, delivery and performance of this
Agreement by SportsLine and Merger Sub does not and will not (i) conflict with
or violate any provision of SportsLine's or Merger Sub's respective Certificate
of Incorporation or Bylaws, each as amended to date; (ii) 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 with respect to
the stock or any assets, business or properties of SportsLine or Merger Sub
pursuant to, any note, bond, mortgage, indenture, deed, license, franchise,
permit, lease, contract, agreement or other instrument, commitment or obligation
to which SportsLine or Merger Sub is a party or by which SportsLine or Merger
Sub or any of its assets is bound or subject, or violate or conflict with any
other restriction of any kind or character to which SportsLine or Merger Sub, or
any of their respective properties or assets, is subject or bound; (iii) violate
any order, writ, injunction, decree, judgment or ruling of any court or
governmental authority to which SportsLine or Merger Sub is a party or it or its
properties or assets is subject or bound; or (iv) violate any statute, law, rule
or regulation applicable to SportsLine or Merger Sub.
4.5 CONSENTS, ETC. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Authority or any other Person on the part of SportsLine or Merger
Sub is required in connection with the execution and delivery by SportsLine or
Merger Sub of this Agreement or the consummation by SportsLine or Merger Sub of
the transactions contemplated hereby, except (a) filings required pursuant to
the Exchange Act, the Securities Act and applicable Nasdaq National Market rules
and regulations, (b) filings, if any, required under state securities and blue
sky laws, (c) any filings required to be made by GolfWeb and (d) any filings
required to be made pursuant to the terms of this Agreement with respect to the
consummation of the Merger.
4.6 SEC FILINGS. SportsLine has previously made available to
representatives of GolfWeb copies of the final Prospectus filed with respect to
SportsLine's Registration Statement on Form S-1 (Registration Statement Number
333-25259) in connection with the initial public offering of the SportsLine
Common Stock (the "Prospectus"), and will promptly furnish to GolfWeb copies of
any reports, proxy statements or other reports filed by SportsLine with the SEC
pursuant to Sections 13, 14 or 15(d) of the Exchange Act between the date hereof
and the Closing Date (collectively, the "SEC Filings"). As of the effective date
thereof, the Prospectus complied (and, with respect to SEC Filings filed after
the date of this Agreement, such SEC Filings will comply as of the filing date
thereof) in all material respects with the rules and regulations promulgated by
the SEC and did not contain (and, with respect to SEC Filings filed after the
date of this Agreement, will not contain as of the filing date thereof) any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or
13
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Prospectus or the SEC Filings, and except as expressly contemplated by this
Agreement, since the date of the Prospectus there has not been: (i) any change
in the business, operations, assets, liabilities, financial condition or
operating results of SportsLine which has had or would reasonably be expected to
have a Material Adverse Effect on SportsLine, or (ii) any damage, destruction or
loss, whether or not covered by insurance to or of the assets of SportsLine
which has had or would reasonably be expected to have a Material Adverse Effect
on SportsLine.
4.8 LITIGATION. Except as disclosed in the Prospectus or the SEC
Filings, there are no claims, suits, actions, investigations, indictments or
informations, or administrative, arbitration or other proceedings pending or, to
the best of SportsLine's knowledge, threatened against SportsLine or Merger Sub
(i) challenging the Merger, or seeking to restrain or prohibit the consummation
of the Merger, or (ii) which, if determined adversely to SportsLine,
individually or in the aggregate, would have or would reasonably be expected to
have a Material Adverse Effect on SportsLine. There are no judgments, orders,
decrees, injunctions, stipulations or awards of any Governmental Authority or
arbitrator outstanding against SportsLine which have or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
SportsLine.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GOLFWEB
GolfWeb hereby represents and warranties to the SportsLine Companies as
follows:
5.1 ORGANIZATION, AUTHORITY, QUALIFICATION. GolfWeb is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of California. GolfWeb (i) 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 and (ii) is duly qualified or licensed to conduct
business as a foreign corporation and is in good standing in all jurisdictions
that require such qualification or licensing, except where the failure to be so
qualified or licensed or to be in good standing does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on GolfWeb. The minute books of GolfWeb provided to SportsLine
contain a complete summary of all meetings of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
5.2 AUTHORIZATION; ENFORCEABILITY. GolfWeb has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary corporate action
on the part of GolfWeb. This Agreement has been duly executed and delivered by
GolfWeb and constitutes a valid and binding obligation of GolfWeb, enforceable
against it in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application affecting the
14
<PAGE>
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
5.3 CAPITALIZATION.
(a) The authorized capital stock of GolfWeb consists of 17,500,000
shares of GolfWeb Common, 1,654,500 shares of Series A Preferred, 1,654,500
shares of Series A1 Preferred Stock, no par value per share ("Series A1
Preferred"), 1,800,000 shares of Series B Preferred, 1,800,000 shares of Series
B1 Preferred Stock, no par value per share ("Series B1 Preferred"), and
2,500,000 shares of Series C Preferred. As of the date of this Agreement,
1,352,617 shares of GolfWeb Common, 1,654,500 shares of Series A Preferred, no
shares of Series A1 Preferred, 1,775,000 shares of Series B Preferred, no shares
of Series B1 Preferred and 1,701,898 shares of Series C Preferred were issued
and outstanding; after giving effect to the transactions contemplated by the
Stock Conversion Agreement of even date herewith among certain shareholders of
GolfWeb a copy of which has been provided to SportsLine (the "Conversion
Agreement"), and assuming (i) no other conversions, issuances, repurchases,
exchanges, stock splits, stock dividends or other transactions affecting the
GolfWeb Stock, and (ii) no exercise of any Currently Outstanding Options or
Currently Outstanding Warrants, immediately prior to the Effective Time, there
will be issued and outstanding 4,126,898 shares of GolfWeb Common, 4,500 shares
of Series A Preferred, no shares of Series A1 Preferred, 1,378,737 shares of
Series B Preferred, no shares of Series B1 Preferred and 1,257,586 shares of
Series C Preferred. All of the issued and outstanding capital stock of GolfWeb
is duly authorized, validly issued, fully paid and nonassessable and was issued
in compliance with applicable state and federal securities laws. Paragraph
5.3(a) of the Disclosure Letter sets forth a true and correct list of the
GolfWeb Shareholders as of the date hereof, including the number of shares of
each type of GolfWeb Stock owned of record and beneficially by each such GolfWeb
Shareholder, both prior to and after giving effect to the transactions
contemplated by the Conversion Agreement.
(b) Except as set forth in Paragraph 5.3 of the Disclosure Letter, there
are no outstanding or existing (A) proxies, voting trusts, shareholder
agreements or other rights, understandings or arrangements regarding the voting
or disposition of the capital stock of GolfWeb; (B) securities convertible into
or exchangeable for capital stock of GolfWeb; (C) obligations, options, warrants
or other rights of any kind or character to acquire, purchase or subscribe for
capital stock of GolfWeb or securities convertible into or exchangeable for
capital stock of GolfWeb, other than the Currently Outstanding Options and the
Currently Outstanding Warrants; or (D) agreements, arrangements or
understandings of any kind relating to the authorization, issuance or sale of
capital stock of GolfWeb or securities convertible into or exchangeable for
capital stock of GolfWeb.
5.4 NO VIOLATION. Except as set forth in Paragraph 5.4 of the Disclosure
Letter, the execution, delivery and performance of this Agreement by GolfWeb
does not and will not (i) conflict with or violate any provision of GolfWeb's
Articles of Incorporation or Bylaws, each as amended to date and, with respect
to GolfWeb's Articles of Incorporation, as proposed to be amended prior to the
Closing by that certain Certificate of Amendment of Amended and Restated
Articles of Incorporation dated January 15, 1998 (the "Articles Amendment"), a
copy of which has been furnished to SportsLine; (ii) 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
15
<PAGE>
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 with respect to the stock or any assets, business or properties of
GolfWeb pursuant to, any note, bond, mortgage, indenture, deed, license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which GolfWeb is a party or by which GolfWeb or any of its assets
is bound or subject or bound, or violate or conflict with any other restriction
of any kind or character to which GolfWeb, or any of its properties or assets,
is subject or bound; (iii) violate any order, writ, injunction, decree, judgment
or ruling of any court or governmental authority to which GolfWeb is a party or
it or its properties or assets is subject or bound; or (iv) violate any statute,
law, rule or regulation applicable to GolfWeb.
5.5 CONSENTS, ETC. Except as set forth in Paragraph 5.5 of the
Disclosure Letter, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Authority or any other Person on the part of GolfWeb is required in
connection with the execution and delivery by GolfWeb of this Agreement or the
consummation by GolfWeb of the transactions contemplated hereby, except (a)
filings required pursuant to the Exchange Act, the Securities Act and applicable
Nasdaq National Market rules and regulations, (b) filings, if any, required
under state securities and blue sky laws, (c) any filings required to be made by
GolfWeb (including, without limitation, the Articles Amendment) and (d) any
filings required to be made pursuant to the terms of this Agreement with respect
to the consummation of the Merger.
5.6 LITIGATION. Except as set forth in Paragraph 5.6 of the Disclosure
Letter, there are no claims, suits, actions, investigations, indictments or
informations, or administrative, arbitration or other proceedings pending or, to
the best of GolfWeb's knowledge, threatened against GolfWeb. There are no
judgments, orders, decrees, injunctions, stipulations or awards of any
Governmental Authority or arbitrator outstanding against GolfWeb.
5.7 SUBSIDIARIES. Except as set forth in Paragraph 5.7 of the Disclosure
Letter, GolfWeb (i) does not presently own or control, directly or indirectly,
any interest in any other corporation, association, or other business entity and
(ii) is not a participant in any joint venture, partnership, or similar
arrangement.
5.8 STATUS OF PROPRIETARY ASSETS.
(a) STATUS. Paragraph 5.8(a) of the Disclosure Letter contains a
true and correct list of all patents, patent applications, rights to file for
patent applications (including but not limited to continuations,
continuations-in-part, divisionals and reissues), trademarks, logos, service
marks, trade names and service names (in each case whether or not registered)
and applications for and the right to file applications for registration
thereof, copyrights (whether or not registered) and applications for and the
right to file applications for registration thereof, moral rights, mask works
and mask work registrations and applications for the right to file applications
for registration thereof, trade secrets, trade dress, publicity and privacy
rights, and any other intellectual property rights arising under the laws of the
United States of America, any State thereof, or any country or province
("Proprietary Assets") currently used by GolfWeb in its business or necessary to
enable GolfWeb to carry on its business as now conducted and as
16
<PAGE>
proposed to be conducted. GolfWeb has full title to and ownership of, or is duly
licensed under or otherwise authorized to use, all such Proprietary Assets,
without any conflict with or infringement of any rights of any other Person.
(b) LICENSES; OTHER AGREEMENTS. Except as set forth in Paragraph
5.8(b) of the Disclosure Letter, GolfWeb has not granted, and there are not
outstanding, any options, licenses or agreements of any kind relating to any
Proprietary Asset of GolfWeb, nor is GolfWeb bound by or a party to any option,
license or agreement of any kind with respect to the Proprietary Assets of any
third party. Except as set forth in Paragraph 5.8(b) of the Disclosure Letter,
GolfWeb is not obligated to pay any royalties or other payments to third parties
with respect to the marketing, sale, distribution, manufacture, license or use
of any Proprietary Asset or any other property or rights. Except as set forth in
Paragraph 5.8(b) of the Disclosure Letter, GolfWeb has not received any
communications alleging that GolfWeb has infringed or, by conducting its
business as proposed, would infringe any of the Proprietary Assets of any other
person or entity. To the best of GolfWeb's knowledge, none of GolfWeb'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 promote the interests of GolfWeb or that
would conflict with GolfWeb's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of GolfWeb's
business by the employees of GolfWeb, nor the conduct of GolfWeb's business as
proposed, will, to the best of GolfWeb'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. GolfWeb is not and will not be required 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
GolfWeb to carry on its business as now conducted and as proposed to be
conducted, other than inventions, trade secrets or proprietary information which
have been assigned to GolfWeb.
(c) SOFTWARE. GolfWeb owns, or possesses valid license rights to,
all computer software programs that are used in the conduct of its business.
There are no infringement suits, actions or proceedings pending or, to the best
of GolfWeb's knowledge, threatened against GolfWeb with respect to any software
owned or licensed by GolfWeb.
5.9 MARKETING RIGHTS. Except as set forth in Paragraph 5.9 of the
Disclosure Letter, GolfWeb has not granted rights to license, market or sell its
products or services to any other person and is not bound by any agreement that
affects GolfWeb's exclusive right to distribute, market or sell its products or
services.
5.10 COMPLIANCE WITH LAW, CHARTER DOCUMENTS AND AGREEMENTS. GolfWeb
is not in violation or default of any provisions of its Articles of
Incorporation or Bylaws, and (i) 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) is in compliance with all applicable statutes, laws,
regulations and executive orders of any Governmental Authority having
jurisdiction over GolfWeb's business or properties, and all governmental
licenses, certifications, permits, franchises, approvals and other
17
<PAGE>
authorizations, and (iii) is in compliance with all of the terms and provisions
of any Contract listed in Paragraph 5.16 of the Disclosure Letter.
5.11 REGISTRATION RIGHTS; TERMINATION OF CERTAIN AGREEMENTS.
(a) Except as set forth in Paragraph 5.11 of the Disclosure Letter,
GolfWeb has not granted or agreed to grant to any person or entity any rights
(including piggyback registration rights) to have any securities of GolfWeb, or
any securities into which the securities of GolfWeb are converted or for which
such securities are exchanged (including any SportsLine Common Stock into which
such GolfWeb Stock is converted pursuant to the Merger), registered with the SEC
or any other Governmental Authority.
(b) On or prior to the date hereof, GolfWeb has entered into one or more
written agreements with certain of the parties to (i) the Second Amended and
Restated Investors Rights Agreement dated as of May 9, 1997, as amended, among
GolfWeb and certain holders of GolfWeb Stock (the "Investors Rights Agreement"),
(ii) the Second Amended and Restated Co-Sale Agreement dated May 9, 1997 (the
"Co-Sale Agreement"), and (iii) the Second Amended and Restated Voting Agreement
dated as of May 9, 1997, as amended (the "Voting Agreement"); the effect of such
written agreement(s) is to terminate each of the Investors Rights Agreement, the
Co-Sale Agreement and the Voting Agreement at the Effective Time.
(c) On or prior to the date hereof, GolfWeb has entered into a written
agreement with KR Investment Company ("KR"), the effect of which agreement is to
terminate the letter agreement dated May 7, 1997 between GolfWeb and the Right
of First Refusal Agreement dated as of May 9, 1997, as amended, between GolfWeb
and KR (collectively, the "KR Agreements") at the Effective Time.
5.12 FINANCIAL STATEMENTS. Paragraph 5.12 of the Disclosure Letter
contains a true and correct copy of (i) GolfWeb's audited financial statements
(balance sheet and profit and loss statement, statement of stockholders' equity
and statement of cash flows, including notes thereto) as of December 1996 and
1995 and for the years then ended, and (ii) GolfWeb's unaudited financial
statements (balance sheet and profit and loss statement) as of and for the
twelve-month period ended December 31, 1997 (collectively, the "Financial
Statements"). All of the Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated and
with each other, except that unaudited Financial Statements may not contain all
footnotes required by generally accepted accounting principles. The Financial
Statements fairly present the financial condition and operating results of
GolfWeb as of the dates and for the periods indicated therein, subject in the
case of the unaudited Financial Statements to the absence of footnotes. Except
as set forth in GolfWeb's December 31, 1997 unaudited balance sheet (the "12/31
Balance Sheet"), GolfWeb has no debts, liabilities or obligations, whether
accrued, absolute, contingent or otherwise, other than (A) debts or liabilities
incurred in the ordinary course of business subsequent to December 31, 1997 and
(B) obligations under contracts and commitments incurred in the ordinary course
of business and not required under GAAP to be reflected in the 12/31 Balance
Sheet. Except as disclosed in the Financial Statements, GolfWeb is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. GolfWeb maintains and will continue to maintain a standard system
of accounting established and administered in accordance with GAAP.
18
<PAGE>
5.13 TITLE TO PROPERTY AND ASSETS. The 12/31 Balance Sheet reflects
all of the properties and assets used by GolfWeb in its business, except for (i)
properties or assets acquired or disposed of in the ordinary course of business
since December 31, 1997, and (ii) properties or assets not required under GAAP
to be reflected thereon. Except as set forth in Paragraph 5.13 of the Disclosure
Letter, the properties and assets GolfWeb owns are owned by GolfWeb free and
clear of all Liens, except statutory Liens for the payment of current taxes that
are not yet delinquent. With respect to the properties and assets it leases,
GolfWeb holds valid leasehold interests free and clear of all Liens.
5.14 ERISA PLANS. GolfWeb does not have any Employee Pension
Benefit Plan as defined in Section 3 of the Employee Retirement Income Security
Act of 1974, as amended.
5.15 LABOR RELATIONS.
(a) Except as set forth in Paragraph 5.15(a) of the Disclosure
Letter, GolfWeb is not a party to or bound by any and, to the best of GolfWeb's
knowledge there are no, agreements or arrangements on behalf of any officer,
director or employee providing for severance payments or similar benefits
following termination of their employment with GolfWeb or for any payment or
other benefits to such person contingent upon the execution of this Agreement or
the Closing. There are no collective bargaining agreements to which GolfWeb is a
party.
(b) GolfWeb has not experienced any organized slow down, work
interruption, strike or work stoppage. There are no existing or, to the best of
GolfWeb's knowledge, threatened labor disputes. GolfWeb has not failed to pay
when due any wages, bonuses, commissions, taxes, penalties or assessments, owed
to, or arising out of the employment of, any officer, director or employee.
(c) GolfWeb is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, occupational safety and health, and is not engaged in any unfair
labor or unfair employment practices.
(d) There is no unfair labor practice charge or complaint or any
other matter against (or to the best of GolfWeb's knowledge, involving) GolfWeb
pending or, to the best of GolfWeb's knowledge, threatened before any
Governmental Authority.
(e) There are no investigations, administrative proceedings or
formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, handicap or
veteran status) pending or, to the best of GolfWeb's knowledge, threatened
before the Equal Employment Opportunity Commission or any federal, state or
local agency or court against or involving GolfWeb.
(f) There are no citations, investigations, administrative
proceedings or formal complaints of violations of local, state or federal
occupational safety and health laws pending or, to the best of GolfWeb's
knowledge, threatened before the Occupational Safety and Health Review
Commission or any federal, state or local agency or court against or involving
GolfWeb.
19
<PAGE>
(g) Paragraph 5.15(g) of the Disclosure Letter sets forth a true
and correct list of all full-time employees employed by GolfWeb as of January 1,
1998, together with their respective job titles, dates of hire and compensation.
GolfWeb does not pay or provide any benefits (other than wages) to part-time
employees in the ordinary course of business.
(h) No agreement, arbitration or court decision or governmental
order to which GolfWeb is a party or to which it or any of its properties or
assets is bound or subject in any way limits or restricts GolfWeb from
relocating or closing any of its operations.
(i) The employment of each officer and employee of GolfWeb is
terminable at the will of GolfWeb. GolfWeb is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with GolfWeb, and GolfWeb does not have a present intention to
terminate the employment of any of the foregoing.
5.16 CONTRACTS AND TRANSACTIONS. Except as set forth in Paragraph 5.16 of
the Disclosure Letter:
(a) there are no Contracts, transactions or proposed transactions to
which GolfWeb is a party or by which it or its properties or assets is bound;
and
(b) there are no Contracts, transactions or proposed transactions
to which GolfWeb is a party or by which it or its properties or assets is bound
involving any of GolfWeb's directors, officers, shareholders or other Affiliates
or Associates of GolfWeb or any entity in which any such director, officer,
shareholder or other Affiliate or Associate, or their respective Affiliates or
Associates, has a direct or indirect interest.
(c) GolfWeb is not a party to and is not bound by or subject to
any Contract, or subject to any restriction under its Articles of Incorporation
or Bylaws, that limits or restricts GolfWeb from engaging in any business in any
jurisdiction or adversely affects its ability to carry on its business as now
conducted or as proposed to be conducted, its properties or its financial
condition.
(d) Other than negotiations to acquire another golf web site,
which negotiations have been disclosed to SporstLine prior to the date hereof,
have been terminated and did not result in any binding commitments or Contract
on the part of GolfWeb, GolfWeb has not engaged in the last three (3) months in
any discussion with any Person regarding the consolidation or merger of GolfWeb
with or into any Person, the sale, conveyance or disposition of all or
substantially all of the assets of GolfWeb or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
GolfWeb would be disposed of, or any other form of acquisition, liquidation,
dissolution or winding up of GolfWeb.
True and complete copies of all Contracts set forth in Paragraph 5.16 of
the Disclosure Letter, including all amendments thereto, and a true and accurate
description of all transactions and proposed transactions set forth in Paragraph
5.16 of the Disclosure Letter, have been provided to SportsLine prior to the
date hereof. The Contracts set forth in Paragraph 5.16 of the Disclosure Letter
are valid and enforceable in accordance with
20
<PAGE>
their respective terms with respect to GolfWeb and valid and, to the best of
GolfWeb's knowledge, enforceable in accordance with their respective terms with
respect to any other party to any such Contract, in each subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies. There is not under any of the Contracts
set forth in Paragraph 5.16 of the Disclosure Letter any existing breach,
default or event of default by GolfWeb or event that with notice or lapse of
time or both would constitute a breach, default or event of default by GolfWeb,
nor has GolfWeb received notice of, or made a claim with respect to, any breach
or default by any other party to any such Contract.
5.17 RELATED PARTY TRANSACTIONS. Except as set forth in Paragraph
5.17 of the Disclosure Letter, no director, officer or other Affiliate or
Associate of GolfWeb or any entity in which any such director, officer or other
Affiliate or Associate, or their respective Affiliates or Associates, has any
direct or indirect interest in, or owns any beneficial interest in any Person
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by any such persons) that has any direct or
indirect interest in: (i) any Contract, or any other arrangement or
understanding with, or relating to, the business or operations of GolfWeb, or
any Person with which GolfWeb has a business relationship; (ii) any loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness of GolfWeb; (iii) any property (real, personal or mixed), tangible,
or intangible, used or currently intended to be used in, the business or
operations of GolfWeb, or (iv) any Person that competes with GolfWeb.
5.18 ENVIRONMENTAL AND SAFETY LAWS. GolfWeb is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to the best of GolfWeb's knowledge, no
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
5.19 TAX RETURNS AND PAYMENTS. Paragraph 5.19 of the Disclosure
Letter sets forth a true and complete list of all Taxes to which GolfWeb is
currently subject. GolfWeb has timely filed all Tax returns and reports required
by applicable federal, state, local and foreign law. All Tax returns and reports
of GolfWeb are true and correct in all material respects. GolfWeb has paid all
Taxes and other assessments due (including all sales, franchise, income,
property and use Taxes), except those, if any, currently being contested by it
in good faith and which are listed in Paragraph 5.19 of the Disclosure Letter.
The provision for taxes of GolfWeb as shown in the Financial Statements is
adequate for taxes due or accrued as of the respective dates thereof. GolfWeb
has not elected pursuant to the Code to be treated as a Subchapter S corporation
or a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of
the Code, nor has it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) other than in the ordinary course of business consistent with past
practices. GolfWeb has never had any Tax deficiency proposed or assessed against
it and has not executed any waiver of any statute of limitations on the
assessment or collection of any Tax or governmental charge. None of GolfWeb's
federal income Tax returns and none of its state income or franchise Tax or
sales or use Tax returns has ever been audited by any Governmental Authority.
Since the date of the Financial Statements, GolfWeb has made adequate provisions
on its books of account for all Taxes, assessments and governmental charges with
respect to its business, properties and operations for such period. GolfWeb has
withheld or collected from each payment made to each of its employees, the
amount of all Taxes (including,
21
<PAGE>
but not limited to, federal income taxes, 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 Governmental Authority
or authorized depositories. No material special charges, penalties, fines, liens
or other similar encumbrances have been asserted against GolfWeb with respect to
the payment or failure to pay any Taxes which have not been paid or received
without further liability to GolfWeb.
5.20 NOTES AND ACCOUNTS RECEIVABLE.
(a) Paragraph 5.20(a) of the Disclosure Letter sets forth a true and
complete list as of December 31, 1997 of all notes receivable of GolfWeb owing
by any director, officer, stockholder or employee of GolfWeb or any Affiliate or
Associate of any such person (including those notes receivable reflected on the
12/31 Balance Sheet and those incurred since the date of the 12/31 Balance
Sheet). All such notes receivable have been paid in full prior to the date
hereof or shall have been paid in full prior to the Closing Date.
(b) All accounts receivable of GolfWeb which are reflected on the 12/31
Balance Sheet (i) are valid, existing and collectible in a manner consistent
with GolfWeb's past practice without (to the best of GolfWeb's knowledge) resort
to legal proceedings or collection agencies, (ii) represent monies due for goods
sold and delivered or services rendered in the ordinary course of business and
(iii) are not subject to any refunds or adjustments or any defenses, rights of
set-off, assignment, restrictions or any Liens. Except as set forth in Paragraph
5.20(b) of the Disclosure Letter, all such accounts receivable are current, and
there are no disputes regarding the collectibility of any such accounts
receivable.
5.21 NOTES AND LOANS PAYABLE. Paragraph 5.21 of the Disclosure
Letter sets forth a true and complete list of all notes and loans payable owing
by GolfWeb as of the date hereof (excluding trade payable incurred in the
ordinary course of business on customary terms), including, for each such note
or loan payable, the Person to whom such note or loan is payable, the amount
thereof, the interest rate and other payment terms, the maturity date and a
description of any collateral therefor.
5.22 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Paragraph 5.22 of the Disclosure Letter, since January 1, 1997, there has not
been:
(a) any change in the business, operations, assets, liabilities,
financial condition or operating results of GolfWeb which has had or would
reasonably be expected to have a Material Adverse Effect on GolfWeb;
(b) any damage, destruction or loss, whether or not covered by
insurance to or of the assets of GolfWeb which has had or would reasonably be
expected to have a Material Adverse Effect on GolfWeb;
(c) any forgiveness of or waiver by GolfWeb of any rights or of any
debt, liability or obligation owed to it;
(d) any satisfaction or discharge of any Lien or payment of any
debt, liability or obligation by GolfWeb, except in the ordinary course of
business;
22
<PAGE>
(e) any sale, license, assignment or transfer by GolfWeb of any
Proprietary Assets, or any sale, lease, license, exchange or other disposition
by GolfWeb of any other assets or rights, other than the sales of advertising
inventory or merchandise in the ordinary course of business;
(f) any mortgage, pledge, transfer of a Lien on or other
encumbrance of GolfWeb's properties or assets, except Liens for current taxes
not yet due or payable;
(g) any direct or indirect loans or guarantees made by GolfWeb 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;
(h) any declaration, setting aside or payment of any dividend or
other distribution in respect of any of GolfWeb's capital stock, or any direct
or indirect redemption, purchase or other acquisition of any of such stock by
GolfWeb;
(i) any purchase or agreement to purchase or otherwise acquire any
debt or equity securities of any corporation, partnership, joint venture, firm
or other entity;
(j) any change in, or agreement to change, 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;
(k) any change in the contingent obligations of GolfWeb by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(l) any Contract, agreement or commitment by GolfWeb to do any of
the things described in this Section 5.22; or
(m) any other event or condition of any character that, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on GolfWeb.
5.23 INSURANCE. Paragraph 5.23 of the Disclosure Letter sets forth
a true and complete list of all insurance policies in force naming GolfWeb or
employees thereof as an insured or beneficiary or as a loss payable payee or for
which GolfWeb has paid or is obligated to pay all or part of the premiums.
GolfWeb has not received notice of any pending or threatened cancellation or
premium increase (retroactive or otherwise) with respect thereto, and GolfWeb is
in compliance with all conditions contained therein. There are no pending claims
against such insurance by GolfWeb as to which insurers are defending under
reservation of rights or have denied liability, and there exists no material
claim under such insurance that has not been properly filed by GolfWeb. Except
for the self-insurance retentions or deductibles set forth in the policies
listed on Paragraph 5.23 of the Disclosure Letter, the policies maintained by
GolfWeb are adequate in scope and amount to cover all prudent and reasonably
foreseeable risks which may arise in the conduct of GolfWeb's business as
currently conducted and as proposed to be conducted.
23
<PAGE>
5.24 NO COMMISSIONS. Neither GolfWeb, nor any of its officers,
directors or employees, has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions, or
finder's fees, and no broker or finder has acted directly or indirectly for
GolfWeb, in connection with this Agreement, the Merger or any of the
transactions contemplated hereby.
5.25 CERTAIN ACCOUNTING MATTERS. GolfWeb has consulted with Coopers
& Lybrand LLP, its independent accountants, and, as of the date hereof and based
on such consultation, examinations of the financial statements of GolfWeb and
other inquiries, GolfWeb is not aware of any conditions relating to GolfWeb that
would preclude the use of "pooling of interests" accounting in connection with
the Merger. Neither GolfWeb nor, to the best of GolfWeb's knowledge, any
shareholder of GolfWeb or any of their respective Affiliates or Associates, has
taken or agreed to take any action that would prevent SportsLine from using
"pooling of interests" accounting in connection with the Merger.
5.26 SHAREHOLDER APPROVAL.
(a) This Agreement has been approved by the written consent of the
holders of a majority of the outstanding shares of GolfWeb Common, a majority of
the outstanding shares of Series A Preferred, a majority of the outstanding
shares of Series B Preferred and a majority of the outstanding shares of Series
C Preferred. True and correct copies of the written consents of such holders
have been furnished to SportsLine on or prior to the date hereof. No other
approval of the GolfWeb Shareholders is necessary under applicable law
(including the California Code) for the execution and delivery by GolfWeb of
this Agreement or the consummation by GolfWeb of the transactions contemplated
hereby.
(b) Within five (5) days after the date hereof, GolfWeb shall solicit
shareholder approval by written consent in accordance with applicable law from
those GolfWeb Shareholders whose written consents have not been received prior
to the date hereof, for the purpose of obtaining their approval of this
Agreement and the transactions contemplated hereby and by the Agreement of
Merger, and shall use its best efforts to obtain such consents. GolfWeb will
send to such shareholders, for the purpose of considering and consenting the
Merger, an Offering Memorandum/Information Statement, which will include, among
other things, a recommendation by GolfWeb's Board of Directors and management
that such shareholders consent to the Merger and the notification regarding
dissenters' rights required by the California Code.
5.27 DISCLOSURE. Neither this Agreement nor any documents,
information, statements or certificates made or delivered by GolfWeb to
SportsLine in connection herewith, contained (or will contain) any untrue
statement of a material fact or omits to state (or will omit to state) a
material fact necessary to make the statements herein or therein not misleading.
ARTICLE VI
CONDUCT OF BUSINESS BY GOLFWEB PENDING THE MERGER
6.1 CONDUCT OF BUSINESS BY GOLFWEB PENDING THE MERGER. GolfWeb hereby
covenants and agrees that, between the date of this Agreement and the Effective
Time, GolfWeb shall operate its business only in the ordinary course consistent
with past practice and will not engage
24
<PAGE>
in any new line of business or enter into any new Contract, transaction or
activity or make any commitment except in the ordinary course of business
consistent with past practice. GolfWeb shall use its best efforts to preserve
intact its business organization, to keep available the services of its current
officers, employees and consultants, and to preserve its present relationships
with customers, suppliers and other persons with which it has business
relations. By way of amplification and not limitation, except as contemplated by
this Agreement, GolfWeb shall not, between the date of this Agreement and the
Effective Time, directly or indirectly, do or propose or agree to do any of the
following absent prior consultation with SportsLine and receipt of SportsLine's
written consent:
(a) (i) amend or otherwise change its Articles of Incorporation or
By-Laws; (ii) except for the issuance of shares of Golf Web Common, Series B
Preferred or Series C Preferred upon exercise of any Currently Outstanding
Options or Currently Outstanding Warrants vested on the date hereof or upon
conversion of any preferred stock of GolfWeb issued and outstanding on the date
hereof, issue, sell, pledge, dispose of, or encumber, or, authorize the
issuance, sale, pledge, disposition, or encumbrance of any shares of its capital
stock of any class or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any other
ownership interest, of it; (iii) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock; or (iv) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(b) acquire (including, without limitation, for cash or shares of
stock, by merger, consolidation, or acquisition of stock or assets) any interest
in any corporation, partnership or other business organization or division
thereof or any assets, or make any investment either by purchase of stock or
securities, contributions of capital or property transfer, or purchase any
property or assets of any other Person;
(c) (i) create, incur or assume any indebtedness for borrowed
money or issue any debt securities; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for,
the obligations of any Person; (iii) make any loans or advances to any other
Person; or (iv) make any capital expenditures, other than those proposed to be
made in any financial budgets delivered to SportsLine prior to the date hereof;
(d) (i) sell, pledge, dispose of, or encumber, or authorize the
sale, pledge, disposition or encumbrance of its assets, tangible or intangible,
except sales of merchandise and advertising inventory in the ordinary course of
business consistent with past practice; (ii) enter into any Contract other than
in the ordinary course of business, consistent with past practice; or (iii)
amend, terminate or cancel any Contract identified in Paragraph 5.16 of the
Disclosure Letter, or fail to perform in any material respect any of its
obligations thereunder (provided, that SportsLine acknowledges that on or prior
to the Effective Time, Knight Ridder will be released from its current
advertising commitment to the Company (in an amount estimated to be
approximately $700,000));
(e) (i) increase the compensation payable or to become payable to
its officers or salaried employees; (ii) except as presently bound to do, change
the employment conditions of any employee; (iii) grant any severance or
termination pay to, or enter into any employment or
25
<PAGE>
severance agreement with, any of its directors, officers, or salaried personnel;
or (iv) establish, adopt, enter into or amend any bonus, profit sharing, trust,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers,
personnel or employees, or take any action to accelerate any rights or benefits
thereunder;
(f) (i) change any accounting policies or procedures or make any
change in any accounting methods or systems of internal accounting controls,
except as may be appropriate to conform to changes in GAAP; or (ii) make any tax
election, other than in the ordinary course of business consistent with past
practice;
(g) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of due and payable
liabilities reflected or reserved against in the Financial Statements, as
appropriate, or liabilities incurred after the date of the 12/31 Balance Sheet
in the ordinary course of business and consistent with past practice;
(h) increase or decrease prices charged to its customers, other
than in the ordinary course of business consistent with past practice, or fail
to use all commercially reasonable efforts to enforce any Contract or other
agreement with any customer or collect its accounts receivable in the ordinary
course of business consistent with past practice;
(i) enter into any Contract or transaction with any directors,
officers, shareholders or other Affiliates or Associates of GolfWeb or any
entity in which any such director, officer, shareholder or other Affiliate or
Associate, or their respective Affiliates or Associates, has a direct or
indirect interest, whether or not in the ordinary course of business; or
(j) agree, in writing or otherwise, to take or authorize any of
the foregoing actions or any action which would make any representation or
warranty in Article V hereof untrue or incorrect in any respect.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 BEST EFFORTS; COOPERATION; FURTHER ASSURANCES. Each of the parties
hereto shall: use its best efforts to take, or cause to be taken, all
appropriate actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated herein, including, without limitation,
(i) cooperating with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any law, rule or regulation, including the rules of the
Nasdaq National Market or any other exchange on which the SportsLine Common
Stock is listed, in connection with the transactions contemplated by this
Agreement; (ii) using its best efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of any
Governmental Authority and parties to Contracts with GolfWeb as are necessary
for the consummation of the transactions contemplated hereby, (iii) making on a
prompt and timely basis all governmental or regulatory notifications and filings
26
<PAGE>
required to be made by it for the consummation of the transactions contemplated
hereby, (iv) defending all lawsuits or other legal proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby and to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby, and (v) executing and delivering such additional instruments and other
documents and shall take such further actions as may be necessary or appropriate
to effectuate, carry out and comply with all of the terms of this Agreement and
the transactions contemplated hereby.
7.2 ACCESS TO INFORMATION. From the date hereof to the Effective Time,
GolfWeb shall (and shall cause its directors, officers, employees, auditors,
counsel and agents to) afford SportsLine and SportsLine's officers, employees,
auditors, counsel and agents full and complete access during business hours to
all assets, properties, books, records, accounts, contracts and documents of or
relating to GolfWeb and such other information as SportsLine may reasonably
request concerning the businesses, finances and properties of GolfWeb and its
operations. No information provided to or obtained by SportsLine either before
or after the date of this Agreement shall limit or otherwise affect any
representation or warranty in this Agreement. All confidential information
provided pursuant to this Section 7.2 will be subject to the confidentiality
agreement previously executed by SportsLine and GolfWeb.
7.3 NOTIFICATION OF CERTAIN MATTERS. GolfWeb shall give prompt written
notice to SportsLine of (i) any material change in the normal course of its
business; (ii) the receipt by it of notice of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or the receipt by it of a notice of the institution or the threat
of litigation or other legal proceedings involving it; and (iii) the occurrence
or non-occurrence of any other event which causes, or would be reasonably likely
to cause, any representation or warranty of GolfWeb contained herein to be
untrue or inaccurate in any respect, or any covenant, condition or agreement of
GolfWeb contained herein not to be complied with or satisfied in any respect.
7.4 TAX AND ACCOUNTING TREATMENT. SportsLine and GolfWeb will use their
respective best efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368(a) of the Code and, unless GolfWeb and SportsLine
agree in writing, will not knowingly take or fail to take any action which would
cause the Merger to lose such status. Neither GolfWeb nor SportsLine shall take
any action after the date hereof that would prevent or would reasonably be
expected to prevent SportsLine from using "pooling of interests" accounting in
connection with the Merger, and each of GolfWeb and SportsLine shall use its
best efforts to prevent any of its shareholders from taking any such action.
7.5 PUBLICITY. No press release or other public announcement related to
this Agreement or the transactions contemplated hereby shall be issued by
SportsLine nor GolfWeb without the prior approval of the other, except that
SportsLine may make such public disclosure which it believes in good faith to be
required by law or rule or regulation or the rules of the Nasdaq National Market
(in which case SportsLine will consult with an officer of GolfWeb prior to
making such disclosure).
27
<PAGE>
7.6 EXCLUSIVE DEALINGS; FAILURE BY GOLFWEB TO CONSUMMATE MERGER WITHOUT
CAUSE.
(a) From the date hereof until the Effective Time, or earlier
termination of this Agreement as provided in Article XIV hereof, GolfWeb and its
Affiliates and Associates shall not, nor shall GolfWeb authorize or permit any
of its officers, directors, employees, agents or representatives to, directly or
indirectly: (i) solicit, initiate, encourage the initiation or submission by
others of any Acquisition Proposal (as hereinafter defined); (ii) enter into or
participate in discussions or negotiations with, respond to solicitations
relating to, furnish to any Person any information with respect to, or take any
other action to encourage or facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; or (iii) enter into any Contract, agreement or commitment
(whether or not binding) with respect to any Acquisition Proposal. For purposes
of this Agreement, the term "Acquisition Proposal" means any proposal with
respect to a sale or other disposition of all or any part of the assets,
business or properties of GolfWeb (whether by merger, consolidation, sale of
stock or assets or otherwise), or a purchase or other acquisition by GolfWeb of
all or any part of the assets, business or properties of any other Person
(whether by merger, consolidation, sale of stock or assets or otherwise).
GolfWeb will immediately notify SportsLine if any third party initiates any
solicitation, discussion or negotiation with respect to any Acquisition
Proposal.
(b) If (i) GolfWeb, any Affiliate or Associate thereof, or any of
GolfWeb's officers, directors, employees, agents or representatives breaches or
violates any of the covenants set forth in Section 7.6(a) hereof, or (ii)
GolfWeb fails to consummate the Merger other than by reason of (A) SportsLine's
failure to satisfy any of the conditions precedent to GolfWeb's obligations set
forth in Article IX hereof on or prior to February 28, 1998, (B) the termination
of this Agreement by SportsLine and GolfWeb in accordance with Section 14.1(a)
or the termination of this Agreement by SportsLine or GolfWeb in accordance with
Section 14.1(d), (C) the termination of this Agreement by SportsLine or GolfWeb
in accordance with Section 14.1(b), provided, that at the time of such
termination GolfWeb has satisfied all of the conditions precedent to
SportsLine's obligations set forth in Article VIII hereof, or (D) the
termination of this Agreement by GolfWeb in accordance with Section 14.1(c)
then, in any such case, GolfWeb shall immediately pay SportsLine an amount equal
to SportsLine's documented costs and expenses incurred prior to or after the
date hereof in connection with the execution, delivery and performance of this
Agreement and any investigation, negotiation and structuring of the transactions
contemplated hereby (including, without limitation, legal, accounting,
consulting and financial advisory fees) (collectively, the "SportsLine
Expenses").
(c) If SportsLine fails to consummate the Merger other than by
reason of (i) GolfWeb's failure to satisfy any of the conditions precedent to
SportsLine's obligations set forth in Article VIII hereof on or prior to
February 28, 1998, (ii) the termination of this Agreement by SportsLine and
GolfWeb in accordance with Section 14.1(a) or the termination of this Agreement
by SportsLine or GolfWeb in accordance with Section 14.1(d), (iii) the
termination of this Agreement by SportsLine or GolfWeb in accordance with
Section 14.1(b), provided, that at the time of such termination SportsLine has
satisfied all of the conditions precedent to GolfWeb's obligations set forth in
Article IX hereof, or (iv) the termination of this Agreement by SportsLine in
accordance with Section 14.1(c), then, in any such case, SportsLine shall
immediately pay GolfWeb an amount equal to GolfWeb's documented costs and
expenses incurred prior to or after the date hereof in connection with the
execution, delivery and performance of this Agreement and
28
<PAGE>
any investigation, negotiation and structuring of the transactions contemplated
hereby (including, without limitation, legal, accounting, consulting and
financial advisory fees) (collectively, the "GolfWeb Expenses").
7.7 TRADING IN SPORTSLINE COMMON STOCK. Except as otherwise expressly
consented to by SportsLine, from the date of this Agreement until the Effective
Time, neither GolfWeb nor any Affiliate or Associate thereof will directly or
indirectly purchase or sell (including short sales) any shares of SportsLine
Common Stock (or any put, call, option or derivative security or the like
relating thereto) in any transactions effected on the Nasdaq National Market or
otherwise.
7.8 AFFILIATES OF GOLFWEB. At least five (5) business days prior to the
Effective Time GolfWeb shall deliver to SportsLine a letter in form and
substance reasonably satisfactory to SportsLine, identifying all persons who
might, at the time the Merger becomes effective, be deemed to be "affiliates" of
GolfWeb for purposes of Rule 145 under the Securities Act. GolfWeb will provide
SportsLine with all information and documents needed to evaluate this list for
compliance with securities laws. GolfWeb shall cause each person who is
identified as a possible "affiliate" in such letter, together with such other
persons as SportsLine reasonably determines might be deemed to be "affiliates"
of GolfWeb, to deliver to SportsLine on or prior to the Effective Time a written
statement in the form of Exhibit 7.8 (the "Affiliates Letter"). SportsLine shall
be entitled to place legends on any certificates representing shares of
SportsLine Common Stock issued to such possible affiliates to restrict transfer
of such shares in accordance with the terms of the Affiliates Letter.
7.9 ADDITIONAL FINANCIAL STATEMENTS. GolfWeb shall cause Coopers &
Lybrand LLP to assist SportsLine's independent certified public accountants in
connection with the preparation of any and all additional financial statements
that SportsLine deems to be necessary to satisfy its obligations under the
federal securities laws (the "Additional Financial Statements") including,
without limitation, pro-forma financial statements giving effect to the Merger,
all of which financial statements shall be in conformity with GAAP and
Regulation S-X as promulgated under the Securities Act.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SPORTSLINE COMPANIES
The obligations of the SportsLine Companies to effect the Merger and the
other transactions contemplated hereunder shall be subject to the fulfillment at
or prior to the Effective Time of the following conditions, any or all of which
may be waived in whole or in part by SportsLine:
29
<PAGE>
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of GolfWeb contained in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time with the same force and effect as though made at and as of that
time except that those representations and warranties which address matters only
as of a particular date shall have been true and correct as of such date.
GolfWeb shall have performed and complied in all material respects with all of
its obligations required by this Agreement to be performed or complied with at
or prior to the Effective Time. GolfWeb shall have delivered to the SportsLine
Companies a certificate, dated as of the Effective Date, duly signed by its
President, certifying that such representations and warranties are true and
correct and that all such obligations have been performed and complied with.
8.2 CORPORATE MATTERS. GolfWeb shall have delivered to the SportsLine
Companies: (a) copies of the Articles of Incorporation and By-laws of GolfWeb as
in effect immediately prior to the Effective Time; (b) copies of resolutions
adopted by the Board of Directors and shareholders of GolfWeb authorizing this
Agreement and the consummation of the transactions contemplated hereby; and (c)
a certificate of good standing of GolfWeb issued by the Secretary of State of
the State of California and each other state in which GolfWeb is qualified to do
business as of a date not more than five (5) days prior to the Effective Date,
certified in the case of subsections (a) and (b) of this Section 8.2 as of the
Effective Date by the President of GolfWeb as being true, correct and complete.
8.3 NO ADVERSE PROCEEDINGS. No court or Governmental Authority or other
regulatory body shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making illegal, materially restricting or preventing or
prohibiting the Merger or the transactions contemplated by this Agreement. No
suit, investigation, action or other proceeding shall be overtly threatened or
pending against SportsLine or GolfWeb before any court or Governmental Authority
which seeks to restrain, prohibit, invalidate or collect damages arising out of
the Merger or any other transaction contemplated hereby or obtain damages or
other relief from any such party, in connection with this Agreement or the
consummation of the transactions contemplated hereby.
8.4 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Effective Time: (a) there shall have been no Material
Adverse Change to GolfWeb or its business, financial position or results of
operations excluding events which affected companies in the Internet industry
generally in a like manner or which affected the economy generally, or which
were cause by the public announcement of the Merger; (b) there shall have been
no adverse federal, state or local legislative or regulatory change affecting in
any material respect the services, products or business of GolfWeb; and (c) none
of the properties or assets of GolfWeb shall have been damaged by fire, flood,
casualty, act of God or the public enemy or other cause (regardless of insurance
coverage for such damage) which damage may, in the reasonable opinion of
SportsLine, have a Material Adverse Effect on GolfWeb.
8.5 CONSENTS AND APPROVALS. GolfWeb shall have delivered to SportsLine
copies of (a) all consents, approvals, orders and authorizations of, and all
registrations, qualifications, designations, declarations or filings with, any
Governmental Authority required in connection with the execution and delivery by
GolfWeb of this Agreement or the consummation by GolfWeb of
30
<PAGE>
the transactions contemplated hereby and (b) all consents to the transactions
contemplated hereby and waivers of rights to terminate or modify any Contracts,
rights or obligations of GolfWeb from any Person from whom such consent or
waiver is required under any Contract or instrument, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such Contracts or instruments, either by the terms thereof or as a matter of
law.
8.6 OPINION OF COUNSEL. SportsLine shall have received an opinion dated
as of the Effective Date from Fenwick & West LLP counsel for GolfWeb, in form
and substance reasonably acceptable to SportsLine, to the effect of the matters
set forth in Exhibit 8.6.
8.7 POOLING LETTERS. SportsLine shall have received from Coopers &
Lybrand LLP a letter dated the Effective Date, in form and substance acceptable
to SportsLine, confirming that, based on inquiries and representations of
GolfWeb officials responsible for financial and accounting matters, no
conditions exist that would preclude GolfWeb from being a party to a merger
accounted for as a pooling of interests business combination in accordance with
GAAP and the criteria of Accounting Principles Board Opinion No. 16 ("APB No.
16") and the regulations of the SEC. SportsLine shall have received from Arthur
Andersen LLP a letter dated the Effective Date, in form and substance acceptable
to SportsLine, confirming that based on inquiries and representations of
SportsLine officials responsible for financial and accounting matters, no
conditions exist that would preclude SportsLine from being a party to a merger
accounted for as a pooling of interests business combination in accordance with
GAAP as described in APB No. 16 and the regulations of the SEC. SportsLine shall
also have received from Arthur Andersen LLP a letter dated the Effective Date,
in form and substance acceptable to SportsLine, confirming that based on
inquiries and representations of SportsLine officials responsible for financial
and accounting matters and the assumption that GolfWeb is a "poolable" entity,
that the Merger should be treated as a pooling of interests in conformity with
generally accepted accounting principles, as described in APB No. 16.
8.8 AFFILIATES LETTERS. SportsLine shall have received an Affiliates
Letter, in the form attached hereto as Exhibit 7.8 hereto, from each possible
"affiliate" of GolfWeb identified pursuant to Section 7.8.
8.9 RESIGNATIONS. SportsLine shall have received from each of the
directors of GolfWeb a written resignation letter, in form and substance
satisfactory to SportsLine, such resignations to be effective at the Effective
Time.
8.10 RELEASES. Each shareholder of GolfWeb shall have delivered to
SportsLine a release in such form and substance satisfactory to SportsLine,
releasing SportsLine from and against all claims of any nature which such
shareholder has or may have against SportsLine or GolfWeb whether arising out of
any Contract to which GolfWeb is a party or by which it or its properties or
assets is bound, or any other event or circumstance arising prior to the
Effective Time; provided, such Releases shall not cover any rights of the
shareholders of GolfWeb against SportsLine arising under this Agreement.
8.11 ADDITIONAL FINANCIAL STATEMENTS. The Additional Financial
Statements referred to in Section 7.9 shall have been substantially completed in
form and substance satisfactory to SportsLine.
31
<PAGE>
8.12 NO CHANGE IN CONVERSION AGREEMENT. There shall have been no
amendment or modification to, waiver of, or other change in the Conversion
Agreement or any of the terms and conditions thereof, except as consented to in
writing by SportsLine, and GolfWeb shall have delivered to the SportsLine
Companies a certificate to that effect, dated as of the Closing Date, duly
signed by the President of GolfWeb.
8.13 DISSENTING SHARES. The Dissenting Shares, together with the
shares held by holders of GolfWeb Stock who, as of the Closing Date, have not
yet consented to the Merger, shall not constitute more than (a) 1% of the total
number of shares of GolfWeb Common outstanding immediately prior to the
Effective Time (b) and 0.1% of the total number of shares of Series A Preferred
outstanding immediately prior to the Effective Time; and the holders of all of
the Series B Preferred and Series C Preferred outstanding immediately prior to
the Effective Time shall have consented to the Merger.
8.14 TERMINATION OF CERTAIN AGREEMENTS. Certain parties to the
following agreements, holding a number of shares of GolfWeb Stock sufficient to
take such action, shall have agreed in writing to the termination of such
agreements at the Effective Time: (i) the Investors Rights Agreement, (ii) the
Co-Sale Agreement, (iii) the Voting Agreement and (iv) the KR Agreements; and
SportsLine shall have received evidence, in form and substance reasonably
acceptable to SportsLine, to the effect that such agreements have been
terminated and that the Surviving Corporation shall have no obligations
thereunder. In addition, GolfWeb's severance agreements with each of Brent
Knudsen, Tim Harrington, Stuart Schneider and Don Dixon shall be terminated
without the payment by GolfWeb of any consideration therefor; provided, that
SportsLine acknowledges that as a condition to such termination, it will offer
each such employee guaranteed employment (except in the case of termination for
cause or a voluntary resignation), or a comparable consulting relationship, with
the Surviving Corporation on terms no worse than the terms on which he is
currently employed (other than with respect to severance) for a period following
the Effective Time of (A) in the case of Brent Knudsen, Tim Harrington and
Stuart Schneider, six months and (B) in the case of Don Dixon, three months.
8.15 PAYMENT OF BANK LOAN. GolfWeb shall have paid to Silicon
Valley Bank all amounts due and owing under the Business Loan Agreement dated
November 15, 1996, as amended or modified (the "Bank Loan") and shall have
obtained releases of all Liens on GolfWeb's properties and assets granted
thereunder or in connection therewith; and SportsLine shall have received
evidence, in form and substance reasonably acceptable to SportsLine, of such
payment and releases
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF GOLFWEB
The obligations of GolfWeb to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by GolfWeb:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of each of the SportsLine
Companies contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time with
32
<PAGE>
the same force and effect as though made at and as of that time except that
those representations and warranties which address matters only as of a
particular date shall have been true and correct as of such date. Each of the
SportsLine Companies shall have performed and complied in all material respects
with all of its obligations required by this Agreement to be performed or
complied with at or prior to the Effective Time. Each of the SportsLine
Companies shall have delivered to GolfWeb a certificate, dated as of the
Effective Date, and signed by an executive officer, certifying that such
representations and warranties are true and correct and that all such
obligations have been performed and complied with.
9.2 CORPORATE MATTERS. SportsLine shall have delivered to the GolfWeb:
(a) copies of the Certificate of Incorporation and By-laws of each of SportsLine
and Merger Sub as in effect immediately prior to the Effective Time; (b) copies
of resolutions adopted by the Board of Directors of SportsLine and the Board of
Directors and shareholder of Merger Sub authorizing this Agreement and the
consummation of the transactions contemplated hereby; and (c) a certificate of
good standing of SportsLine issued by the Secretary of State of the State of
Delaware as of a date not more than five (5) days prior to the Effective Date,
certified in the case of subsections (a) and (b) of this Section 9.2 as of the
Effective Date by an executive officer of SportsLine as being true, correct and
complete.
9.3 NO ADVERSE PROCEEDINGS. No court or Governmental Authority or other
regulatory body shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making illegal, or preventing or prohibiting the Merger or the
transactions contemplated by this Agreement.
9.4 NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Effective Time: (a) there shall have been no Material Adverse Change to
SportsLine or its business, financial position or results of operations
excluding events which affected companies in the Internet industry generally in
a like manner or which affected the economy generally, or which were cause by
the public announcement of the Merger; and (b) there shall have been no adverse
federal, state or local legislative or regulatory change affecting in any
material respect the services, products or business of SportsLine.
9.5 GOVERNMENTAL CONSENTS. SportsLine shall have delivered to GolfWeb
copies of all consents, approvals, orders and authorizations of, and all
registrations, qualifications, designations, declarations or filings with, any
Governmental Authority required in connection with the execution and delivery by
SportsLine of this Agreement or the consummation by SportsLine of the
transactions contemplated hereby.
9.6 OPINION OF COUNSEL. GolfWeb shall have received an opinion dated as
of the Effective Date from Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A., counsel for SportsLine, in form and substance reasonably acceptable to
GolfWeb, to the effect of the matters set forth in Exhibit 9.6.
9.7 TAX REPRESENTATION CERTIFICATE . GolfWeb shall have received a
certificate of SportsLine and Merger Sub, in form and substance reasonably
satisfactory to GolfWeb,
33
<PAGE>
containing representations relating to qualification of the Merger as a
reorganization under the provisions of Section 368(a) of the Code.
ARTICLE X
CLOSING
10.1 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami, Florida, at
10:00 am., local time, on January 30, 1998 or, if the conditions set forth in
Article VIII and IX have not been satisfied or waived on such date, no later
than five (5) business days after the day on which all such conditions have been
satisfied or waived. The date on which the Closing occurs is referred to as the
"Closing Date." The Closing shall be deemed completed as of 12.01 a.m. on the
morning of the Closing Date.
10.2 DELIVERIES BY GOLFWEB. At or prior to the Closing, GolfWeb shall
deliver (or cause to be delivered) to SportsLine:
(a) each certificate, opinion or other letter, agreement and other
document or instruments required to be delivered by GolfWeb to SportsLine in
accordance with Article VIII hereof;
(b) the stock book, stock ledger, minute book and corporate seal of
GolfWeb;
(c) constructive possession of all originals and copies of
agreements, instruments, documents, deeds, books, records, files, tax returns
and other data and information within the possession of GolfWeb;
(d) evidence satisfactory to SportsLine that with respect to each of
GolfWeb's accounts, credit lines, safe deposits boxes or vaults (i) the
authority of all individuals with respect thereto has been terminated, other
than those individuals designated by SportsLine in writing at least three (3)
business days prior to the Closing Date, or (ii) if SportsLine so requests in
writing at least three (3) business days prior to the Closing Date, the account
or credit line in question has been closed;
(e) the Agreement of Merger and the Certificate of Merger, duly
executed by GolfWeb; and
(f) such other documents, instruments, agreements and all
certificates and other evidence as SportsLine or its counsel may reasonably
request as to the satisfaction of the conditions to SportsLine's obligations set
forth herein.
10.3 DELIVERIES BY THE SPORTSLINE COMPANIES. At or prior to the
Closing, the SportsLine Companies shall deliver (or cause to be delivered) to
GolfWeb:
(a) each certificate, opinion or other letter, agreement and other
document or instruments required to be delivered by SportsLine to GolfWeb in
accordance with Article IX hereof;
34
<PAGE>
(b) the Agreement of Merger and the Certificate of Merger, duly
executed by SportsLine; and
(c) such other documents, instruments, agreements and all
certificates and other evidence as GolfWeb or its counsel may reasonably request
as to the satisfaction of the conditions to GolfWeb's obligations set forth in
Article IX hereof.
ARTICLE XI
REGISTRATION RIGHTS
The GolfWeb Shareholders shall have the following registration rights with
respect to the SportsLine Shares issued to them hereunder:
11.1 CERTAIN DEFINITIONS. For purposes of Article 11:
(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:
(i) the shares of SportsLine Common Stock issued upon the conversion of the
GolfWeb Stock pursuant to the Merger; and (ii) any shares of SportsLine Common
Stock 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, the shares of
SportsLine Common Stock described in clause (i) of this Section 11.1(b);
provided, that the term "Registrable Securities" shall not include any shares of
SportsLine Common Stock sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.
(c) HOLDER. 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. If any Holder that is a corporate or
partnership distributes the Registrable Securities held by it to its
shareholders or partners, the distributees of such Registrable Securities shall
succeed to such Holder's rights under this Article 11 with respect to the shares
of Registrable Securities distributed to them, subject to such Holder's
obligations hereunder, and shall be considered "Holders" for purposes hereof.
11.2 MANDATORY REGISTRATION.
(a) On or before September 1, 1998, SportsLine shall prepare and file
with the SEC a registration statement on Form S-1 to effect the registration
under the Securities Act of all of the Registrable Securities then held by the
Holders, to permit such Registrable Securities to be resold from time to time by
the Holders in open market or privately negotiated transactions.
(b) Notwithstanding the foregoing, if SportsLine shall furnish the
Holders a certificate signed by an executive officer stating that in the good
faith judgment of SportsLine's Board of Directors, it would be detrimental to
SportsLine and its stockholders for such registration statement to be filed and
it is therefore in the best interests of SportsLine to defer the
35
<PAGE>
filing of such registration statement, SportsLine shall have the right to defer
such filing for a period of not more than 90 days after September 1, 1998.
11.3 INCIDENTAL (PIGGYBACK) REGISTRATION.
(a) If, at any time within two (2) years after the Effective Time,
SportsLine proposes to file any registration statement under the Securities Act
for purposes of effecting a public offering of its securities (including
registration statements relating to secondary offerings of securities of
SportsLine but excluding registration statements solely relating to any employee
benefit plan or a corporate reorganization), SportsLine shall notify all Holders
of Registrable Securities in writing at least fifteen (15) days prior to such
filing 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 ten (10) days after receipt of the above-described notice from
SportsLine, so notify SportsLine in writing, and in such notice shall inform
SportsLine of the number of Registrable Securities such Holder wishes to include
in such registration statement.
(b) If a registration statement under which SportsLine gives notice
under this Section 11.3 is for an underwritten offering, then SportsLine 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 11.3 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(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 SportsLine; SECOND, to the holders of registration
rights (the "Existing Holders") under that certain Amended and Restated
Investors' Rights Agreement dated as of March 5, 1997 among SportsLine and
certain holders of its outstanding securities (the "Registration Rights
Agreement"); and THIRD, 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. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to SportsLine 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.
36
<PAGE>
11.4 OBLIGATIONS OF SPORTSLINE. Whenever it is required to effect
the registration of any Registrable Securities under this Agreement, SportsLine
shall:
(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 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, that
(i) 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 the SportsLine Common Stock;
and (ii) in the case of the registration statement under Section 11.2 intended
to be effected on a continuous or delayed basis, to keep the registration
statement effective until the earlier of (i) the date on which all Registrable
Securities have been sold, transferred or otherwise disposed of by the Holders,
(ii) the date on which no Holder of Registrable Securities then subject to such
registration statement holds Registrable Securities representing more than one
percent of the SportsLine Common Stock then outstanding or (iii) two (2) years
after the Effective Time.
(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 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 SportsLine 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 SportsLine 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.
(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, and thereupon use all reasonable efforts to file a supplement or
post-effective amendment to the registration statement or the prospectus or any
document incorporated therein by reference so that, as soon as practicable, the
prospectus
37
<PAGE>
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading.
(g) Cause all such Registrable Securities registered pursuant hereto
to be listed on each securities exchange on which similar securities issued by
SportsLine are then listed.
11.5 EXPENSES OF REGISTRATION. All expenses incurred by SportsLine in
connection with a registration pursuant to this Article 11, including all
federal and "blue sky" registration and qualification fees, printing expenses
and fees and disbursements of counsel and accountants for SportsLine shall be
borne by SportsLine. In addition, SportsLine shall reimburse the Holders up to
$10,000 for the reasonable fees and disbursements of one counsel selected by the
Holders. Each Holder participating in a registration pursuant to this Article 11
shall bear the fees and expenses, if any, of its own counsel (except as provided
in the proceeding sentence) and any and all underwriters' or brokers' discounts,
sales commissions or other selling expenses in connection with the sale of any
Registrable Securities.
11.6 CONDITIONS PRECEDENT TO SPORTSLINE'S OBLIGATIONS. SportsLine's
obligations to take any action pursuant to Sections 11.2 or 11.3 hereof shall be
subject to the receipt by SportsLine of: (i) a written agreement from each
Holder, in form and substance satisfactory to SportsLine, agreeing to be bound
by and subject to each and every one of the terms and conditions of this Article
11 with respect to the registration of any of such Holder's Registrable
Securities; (ii) such information regarding the Holders included in any
registration statement to be filed by SportsLine, 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;
and (iii) to the extent requested by the managing underwriter(s) of any
registered offering in which a Holder's Registrable Securities are included, the
written agreement of such Holder that it will not sell or otherwise transfer or
dispose of any Registrable Securities or other shares of stock of SportsLine
owned by such Holder for up to one hundred eighty (180) days following the
effective date of the registration statement with respect to such offering.
11.7 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 11.2 or 11.3:
(a) BY SPORTSLINE. To the extent permitted by law, SportsLine 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 Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange 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 SportsLine of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act
38
<PAGE>
or any state securities law in connection with the offering covered by such
registration statement; and SportsLine 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, that the indemnity agreement contained in this subsection 11.7(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
SportsLine (which consent shall not be unreasonably withheld), nor shall
SportsLine be liable in any such case to a Holder, partner, 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 SportsLine, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls SportsLine 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
Exchange Act, against any losses, claims, damages or liabilities to which
SportsLine 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 Exchange , any state
securities law or any rule or regulation promulgated under the Securities Act,
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 SportsLine 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, that the indemnity agreement contained in this subsection 11.7(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 11.7
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 11.7 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 11.7, 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, 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
39
<PAGE>
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
11.7, 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 11.7.
(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing indemnity
agreements of SportsLine 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 Rule 424(b) promulgated under the Securities Act
(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 11.7 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 11.7
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 11.7; then, and in each such case, SportsLine 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 SportsLine and other selling Holders are
responsible for the remaining portion; provided, 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 SportsLine and Holders under this
Section 11.7 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 SportsLine with respect to a registration
of the Registrable Securities, the provisions of the underwriting agreement
shall supersede and control.
40
<PAGE>
11.8 TERMINATION OF SPORTSLINE'S OBLIGATIONS. SportsLine shall have no
obligations pursuant to this Article 11 with respect to: any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to Section
11.2 or 11.3 if, in the opinion of counsel to SportsLine 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.
11.9 RIGHTS OF HOLDERS SUBJECT AND SUBORDINATE. Notwithstanding anything
herein to the contrary, the rights of the Holders under this Article 11 shall be
subject and subordinate in all respects to the rights granted to the Existing
Holders under the Registration Rights Agreement.
ARTICLE XII
SECURITIES LAW MATTERS
12.1 DISPOSITION OF SHARES. The shares of SportsLine Common Stock to be
issued to the shareholders of GolfWeb pursuant to the Merger may not be sold,
transferred or otherwise disposed of, except pursuant to an exemption from the
registration requirements under the Securities Act or an effective registration
statement filed by SportsLine with the SEC under the Securities Act.
12.2 PRIVATE PLACEMENT. The shares of SportsLine Common Stock to be issued
in the Merger will be offered and issued to the holders of GolfWeb Stock
pursuant to (a) the private placement exemptions from the registration
requirements of the Securities Act provided by Section 4(2) and Regulation D
promulgated thereunder, (b) the exemption provided by Section 25102.1 or
25100(o) of the California Code or any similar exemption under the California
Code, and (c) any registration or qualification provisions of any other "blue
sky" or securities law of any jurisdiction that are applicable to the Merger by
virtue of available exemptions from such requirements. Each holder of any shares
of GolfWeb Stock will execute and deliver to SportsLine any investment
representation letter and/or offeree questionnaire that is affirmatively
requested by SportsLine in which such holder makes such representations and
warranties to SportsLine as SportsLine and its legal counsel deems reasonably
necessary to enable SportsLine to avail itself of the exemptions from all the
securities registration and qualification requirements described above. GolfWeb
and SportsLine will jointly prepare an Offering Memorandum/Information
Statement, which will be delivered to the holders of GolfWeb Stock in connection
with the action by written consent in which such shareholders will be asked to
approve the Merger.
12.3 LEGEND. All certificates representing shares of SportsLine Common
Stock issued to the GolfWeb Shareholders pursuant to the Merger shall bear the
following legend:
41
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE ACT, AND IN COMPLIANCE WITH APPLICABLE
SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO, OR IN
ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE, AND ALSO MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH
THE SECURITIES AND EXCHANGE COMMISSION'S ACCOUNTING SERIES
RELEASES 130 AND 135.
SportsLine may, unless a registration statement is in effect covering such
shares, place stop transfer orders with its transfer agent with respect to such
certificates in accordance with federal securities laws.
ARTICLE XIII
DEFINITIONS
13.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Associate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan or credit agreement, franchise agreement, covenant,
employment agreement, license, instrument, purchase and sales order,
commitment, undertaking, obligation, whether written or oral, express or
implied.
"Disclosure Letter" means the letter dated the date hereof from GolfWeb to
SportsLine setting forth, among other things, items the disclosure of
which is necessary or appropriate either in response to an express
disclosure requirement contained in this Agreement or as an exception to
one or more of GolfWeb's representations, warranties or covenants
contained in this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
42
<PAGE>
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, but not limited to, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code or comparable law or any jurisdiction in connection with
such mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change in (or effect on) the
condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible,
withholding, social security and unemployment taxes imposed by any
federal, state, local or foreign governmental agency, and any interest or
penalties related thereto.
13.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) Unless otherwise expressly indicated herein, all matters of an
accounting nature in connection with this Agreement and the transactions
contemplated hereby shall be determined in accordance with GAAP applied on a
basis consistent with prior periods, where applicable.
43
<PAGE>
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE XIV
TERMINATION
14.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of SportsLine and GolfWeb at any time
prior to the Closing; or
(b) by either SportsLine and GolfWeb, if the Closing shall not have
been consummated by February 28, 1998; or
(c) by either SportsLine or GolfWeb, in the event of (i) a material
breach by the other party of any representation or warranty contained this
Agreement, which breach cannot be or has not been cured within five (5) days
after the giving of written notice to the breaching party of such breach and
which breach or breaches would result in a failure to satisfy any condition to
SportsLine's or GolfWeb's obligations set forth in Article VIII or IX,
respectively; or (ii) a material breach by the other party of any of the
covenants or agreements contained in this Agreement, which breach cannot be or
has not been cured within five (5) days after the giving of written notice to
the breaching party of such breach; provided that the non-breaching party
provides the breaching party with a written notice of termination within five
(5) days after the earlier of the expiration of such 5-day period or the date it
receives a written notice from the breaching party stating that it is unable or
unwilling to cure such breach; or
(d) by either SportsLine or GolfWeb, if (i) there shall be a final
nonappealable order of a federal or state court restraining or prohibiting the
consummation of the Merger, or (ii) there shall be any action taken, or any
statute, rule regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any governmental authority, which would make the
consummation of the Merger illegal.
14.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
pursuant to Section 14.1, written notice thereof shall promptly be given to the
other party hereto, and upon such notice this Agreement shall terminate. Except
as provided below or elsewhere herein, in the event of the termination of this
Agreement pursuant to Section 14.1, this Agreement shall forthwith become void
and of no further force and effect, there shall be no liability on the part of
SportsLine or GolfWeb or any of their respective officers or directors to the
other, all rights and obligations of any party hereto shall cease and the
parties shall be released from any and all obligations. Notwithstanding the
foregoing, (i) if (A) SportsLine or GolfWeb terminates this Agreement in
accordance with Section 14.1(b) and at the time of such termination GolfWeb has
not satisfied all of the conditions precedent to SportsLine's obligations set
forth in Article VIII hereof, or (B) SportsLine terminates this Agreement in
accordance with Section 14.1(c), then, in either such case, GolfWeb shall pay to
SportsLine an amount equal to the SportsLine Expenses;
44
<PAGE>
or (ii) if (A) SportsLine or GolfWeb terminates this Agreement in accordance
with Section14.1(b) and at the time of such termination SportsLine has not
satisfied all of the conditions precedent to GolfWeb's obligations set forth in
Article IX hereof, or (B) GolfWeb terminates this Agreement in accordance with
Section 14.1(c), then, in either such case, Sportsline shall pay to GolfWeb an
amount equal to the GolfWeb Expenses. Nothing herein shall relieve any party
from liability for damages resulting from the breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE XV
GENERAL PROVISIONS
15.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage prepaid), guaranteed overnight delivery,
or facsimile transmission if such transmission is confirmed by delivery by
certified or registered mail (first class postage prepaid) or guaranteed
overnight delivery, to the following addresses and telecopy numbers (or to such
other addresses or telecopy numbers which such party shall designate in writing
to the other party):
(a) if to either of the SportsLine Companies, to:
SportsLine USA, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attn: Michael Levy, President and Chief Executive Officer
Telecopy: (954) 351-2120
with a copy to:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Kenneth C. Hoffman, Esq.
Telecopy: (305) 579-0717
(b) if to GolfWeb, to:
GolfWeb
10001 N. De Anza Blvd., Suite 220
Cupertino, California 95014
Attn: Brent Knudsen, Chief Executive Officer
Telecopy: (408) 366-3482
45
<PAGE>
with a copy to:
Fenwick & West LLP
2 Palo Alto Square, Suite 800
Palo Alto, California 94306
Attn: Susan Dunn, Esq.
Telecopy: (650) 494-1417
Notices shall be deemed given on the date sent if sent by overnight delivery or
facsimile transmission and on the date delivered (or the date of refusal of
delivery) if sent by certified or registered mail.
15.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto and the Disclosure Letter) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter. The Exhibits and Schedules attached hereto and the
Disclosure Letter constitute a part hereof as though set forth in full above.
15.3 EXPENSES. Except as otherwise provided herein, the parties hereto
shall pay their own fees and expenses, including their own , legal, accounting,
consulting and financial advisory fees, incurred in connection with this
Agreement or any transaction contemplated hereby.
15.4 AMENDMENT; WAIVER. This Agreement (including the Schedules and
Exhibits attached hereto and the Disclosure Letter) may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
equity, that they may have against each other.
15.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by GolfWeb without the prior written consent of
SportsLine. SportsLine may assign all or any portion of its rights hereunder to
any Affiliate thereof.
15.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
46
<PAGE>
15.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference and convenience purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or the schedules. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Time shall be of the essence in this Agreement.
15.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State.
15.9 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents and
warrants to all other parties hereto that: (a) before executing this Agreement,
said party has fully informed itself of the terms, contents, conditions and
effects of this Agreement; (b) said party has relied solely and completely upon
its own judgment in executing this Agreement; (c) said party has had the
opportunity to seek and has obtained the advice of counsel before executing this
Agreement; (d) said party has acted voluntarily and of its own free will in
executing this Agreement; (e) said party is not acting under duress, whether
economic or physical, in executing this Agreement; and (f) this Agreement is the
result of arm's length negotiations conducted by and among the parties and their
respective counsel.
(Continued on Signature Page)
47
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SPORTSLINE USA, INC.
By:/s/ MICHAEL LEVY
-----------------------------------
Michael Levy
President and Chief Executive Officer
GOLFWEB.COM, INC.
By: /s/ MICHAEL LEVY
-----------------------------------
Michael Levy
President
GOLFWEB
By: /s/ BRENT KNUDSEN
-----------------------------------
Brent Knudsen
President and Chief Executive Officer
48
EXHIBIT 2.2
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1, dated January 29, 1998, amends a certain Agreement
and Plan of Merger dated as of January 15, 1998 (the "Original Agreement") among
SportsLine USA, Inc., a Delaware corporation ("SportsLine"), GolfWeb.Com, Inc.,
a Delaware corporation and a wholly owned subsidiary of SportsLine ("Merger Sub"
and together with SportsLine sometimes herein after referred to as the
"SportsLine Companies"), and GolfWeb, a California corporation ("GolfWeb").
Capitalized terms not otherwise defined herein have the respective meanings
given them in the Original Agreement.
WHEREAS, Section 15.4 of the Original Agreement provides in part that the
Original Agreement (including the Schedules and Exhibits attached hereto and the
Disclosure Letter) may not be modified, amended, supplemented, canceled or
discharged, except by written instrument executed by all parties; and
WHEREAS, the undersigned are all the parties to the Original Agreement;
NOW, THEREFORE, intending to be legally bound, and in consideration of the
promises and the mutual covenants and agreements herein contained, SportsLine,
Merger Sub and GolfWeb hereby agree as follows:
1. The second sentence of Section 5.3(a) of the Original Agreement is
amended to read in full as follows: "As of the date of this Agreement, 1,352,617
shares of GolfWeb Common, 1,654,500 shares of Series A Preferred, no shares of
Series A1 Preferred, 1,775,000 shares of Series B Preferred, no shares of Series
B1 Preferred and 1,701,898 shares of Series C Preferred were issued and
outstanding; after giving effect to the transactions contemplated by the Stock
Conversion Agreement of even date herewith among certain shareholders of GolfWeb
a copy of which has been provided to SportsLine (the "Conversion Agreement"),
and assuming (i) no other conversions, issuances, repurchases, exchanges, stock
splits, stock dividends or other transactions affecting the GolfWeb Stock, and
(ii) no exercise of any Currently Outstanding Options or Currently Outstanding
Warrants, immediately prior to the Effective Time, there will be issued and
outstanding 3,848,264 shares of GolfWeb Common, 4,500 shares of Series A
Preferred, no shares of Series A1 Preferred, 1,376,237 shares of Series B
Preferred, no shares of Series B1 Preferred and 1,255,014 shares of Series C
Preferred."
2. Section 8.13 of the Original Agreement is amended to read in full as
follows: "The Dissenting Shares, together with the shares held by holders of
GolfWeb Stock who, as of the Closing Date, have not yet consented to the Merger,
shall not constitute more than (a) 1% of the total number of shares of GolfWeb
Common outstanding as of the date of this Agreement and (b) 0.1% of the total
number of shares of Series A Preferred outstanding on the date of this
<PAGE>
Agreement; and the holders of all of the Series B Preferred and Series C
Preferred outstanding immediately prior to the Effective Time shall have
consented to the Merger."
3. The Disclosure Letter is amended to add the attached Schedule
5.3(a)-2.
4. Paragraph 5.3(b) of the Disclosure Letter is amended by adding: "The
Conversion Agreement."
5. Paragraph 5.10 of the Disclosure Letter is amended by adding: "GolfWeb
has not complied with California Civil Code Section 1812.600 et seq. with
respect to its on-line auction."
6. Schedule 5.16A of the Disclosure Schedule is amended to add
"Confidentiality Agreement dated October 28, 1997 between GolfWeb and Golf.com
L.L.C." and "Letter of Intent and Terms Outline dated October 22, 1997 between
GolfWeb and Golf.com L.L.C."
Except as modified by this Amendment, the terms of the Original Agreement remain
in full force and effect.
SportsLine USA, Inc.
By:/s/ MICHAEL LEVY
---------------------------------
Michael Levy
President and Chief Executive Officer
GolfWeb.Com, Inc.
By:/s/ MICHAEL LEVY
---------------------------------
Michael Levy
President
GolfWeb
By:/s/ BRENT KNUDSEN
---------------------------------
Brent Knudsen,
President and Chief Executive Officer
EXHIBIT 99.1
SPORTSLINE USA TO ACQUIRE GOLFWEB; ACQUISITION TO COMBINE PREMIER INTERNET
GOLF DESTINATION WITH SPORTSLINE USA'S AWARD-WINNING SPORTS COVERAGE AND
PROGRAMMING
JANUARY 15, 1998
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Jan. 15, 1998-- SportsLine USA, Inc.
(NASDAQ: SPLN), the publisher of CBS SportsLine (cbs.sportsline.com), announced
today that it has agreed to acquire GolfWeb, a privately-held Internet company
that provides golf-related content, interactive entertainment, membership
services and merchandise through its GolfWeb online service (www.golfweb.com)
and international Web sites targeted to golf enthusiasts in Japan, the United
Kingdom, Canada and Australia. The acquisition will dramatically expand the
coverage of golf on SportsLine USA's Web sites which, in addition to CBS
SportsLine, include the official Web sites of Tiger Woods, Arnold Palmer, John
Daly, The Golf Channel and Golf Holidays. The transaction will also provide
SportsLine USA an additional platform to reach its objective of becoming the
leading Internet sports media company. The transaction provides for SportsLine
USA to acquire all of the outstanding capital stock of GolfWeb in a merger in
exchange for approximately 860,000 shares of SportsLine USA common stock. Based
on the five-day average closing price of SportsLine USA's common stock through
January 14, the value of the shares to be issued to GolfWeb's shareholders in
connection with this transaction is approximately $14.85 million. The
acquisition is intended to qualify for "pooling of interests" accounting
treatment. Following the acquisition, GolfWeb, based in Cupertino, California,
will operate as a wholly-owned subsidiary of SportsLine USA, under Tim
Harrington who will continue as GolfWeb general manager. The transaction is
expected to close by the end of January, subject to the fulfillment of certain
conditions. "GolfWeb instantly allows us to significantly expand the depth and
breadth of our golf coverage to exceed that of any Web site in the world," said
Michael Levy, president and CEO of SportsLine USA, Inc. "With GolfWeb's
outstanding international content, coupled with our extensive marketing and
distribution relationships, we have now become the world's leader in online golf
information." The acquisition of GolfWeb is the latest in a series of business
relationships that have had a positive and measurable impact on traffic to
SportsLine USA's Web sites. In 1997, SportsLine USA entered into strategic
relationships with distribution partners including CBS Sports, AOL, Microsoft
and Netscape. Those relationships, combined with the traditionally strong fourth
quarter sports season, resulted in a 251% increase in SportsLine USA's Web site
traffic over fourth quarter 1996. SportsLine USA's partnership with CBS Sports
provides frequent, on-air promotion of the CBS SportsLine Web site as well as
original content, research, video and talent. CBS's strong line-up of sports
programming in 1998 is expected to continue boosting traffic numbers for CBS
SportsLine, and now, for GolfWeb. In 1998, CBS Sports will broadcast more than
24 golf tournaments, including The Masters, the PGA Championship, AT&T Pebble
Beach National Pro-Am, The Presidents Cup, and The Sprint International.
"SportsLine USA and GolfWeb are a winning combination, bringing together the
Web's leading golf site and one of the most exciting new sports media companies
in the world, SportsLine USA," said Brent Knudsen, CEO of GolfWeb. "The
<PAGE>
combination allows GolfWeb to offer our readers, advertisers and business
partners vastly increased exposure through SportsLine USA and through its
relationship with CBS."
ABOUT SPORTSLINE USA
SportsLine USA, Inc. (NASDAQ: SPLN) is a leading Internet-based sports media
company that provides branded, interactive information and programming as well
as merchandise to sports enthusiasts worldwide. SportsLine USA publishes several
sports Web sites including CBS SportsLine (cbs.sportsline.com) and Soccernet
(www.soccernet.com) and exclusive Web sites for sports teams, organizations and
superstars such as Michael Jordan, Tiger Woods and Shaquille O'Neal. SportsLine
USA's most heavily trafficked Web site, CBS SportsLine, features more than
200,000 pages of multimedia sports information, entertainment and merchandise
covering all major collegiate and professional sports. SportsLine USA was
founded in 1994, and its primary Web site was renamed CBS SportsLine in March of
1997 as part of an exclusive five-year promotional and content agreement with
CBS Sports.
ABOUT GOLFWEB
GolfWeb (www.golfweb.com) is the Internet's leading golf site, currently
generating over eight million monthly page views. Founded in 1994, GolfWeb
provides tournament coverage from over 24 golf tours worldwide, including the
PGA, LPGA, and senior PGA, and is the official site of the European tour.
GolfWeb has a worldwide golf course directory with information on over 21,000
golf courses, as well as the Web's largest online discount golf pro shop.
GolfWeb offers something for everyone with an interest in golf, including
fantasy golf leagues, golf classifieds, a golf auction, online stats tracking
and game improvement and online instruction. The GolfWeb business model is based
on revenue from multiple revenue streams: advertising, product sales, membership
and services. GolfWeb attracts advertisers from all business sectors. Recent
advertisers include BMW, Mercedes Benz, MasterCard, VISA, Microsoft, Schwab,
Hyatt Hotels, Cobra Golf and Taylor Made Golf.
NOTICE: This press release contains forward-looking statements. The Company's
actual results could differ materially from those set forth in the
forward-looking statements. Factors that might cause such a difference include,
among others, competitive pressures, the growth rate of the Internet, constantly
changing technology, acceptance of SportsLine USA's services in the market place
and the other risks detailed in the Company's Securities and Exchange Commission
filings, including the Company's Prospectus dated November 13, 1997.
CONTACT: Kenneth Sanders, CFO, (954) 351-2120 ext. 829
<PAGE>
SPORTSLINE USA COMPLETES ACQUISITION OF GOLFWEB
JANUARY 30, 1998
ACQUISITION COMBINES PREMIER INTERNET GOLF DESTINATION WITH SPORTSLINE
USA'S AWARD-WINNING SPORTS COVERAGE AND PROGRAMMING
SportsLine USA, Inc. (NASDAQ: SPLN), the publisher of CBS SportsLine
(cbs.sportsline.com), announced today that it has completed the acquisition of
GolfWeb, a privately-held Internet company that provides golf-related content,
interactive entertainment, membership services and merchandise through its
GolfWeb online service (www.golfweb.com) and international Web sites targeted to
golf enthusiasts in Japan, the United Kingdom, Canada and Australia. The
acquisition dramatically expands the coverage of golf on SportsLine USA's Web
sites which, in addition to CBS SportsLine, include the official Web sites of
Tiger Woods, Arnold Palmer, John Daly, The Golf Channel and Golf Holidays. The
transaction also provides SportsLine USA an additional platform to reach its
objective of becoming the leading Internet sports media company.
SportsLine USA acquired all of the outstanding capital stock of GolfWeb in
exchange for approximately 860,000 shares of SportsLine USA common stock. Based
on the five-day average closing price of SportsLine USA's common stock through
January 14, the date the acquisition agreement was executed, the value of the
shares to be issued to GolfWeb's shareholders in connection with this
transaction is approximately $14.85 million. The acquisition will be accounted
for under the "pooling of interests" accounting method. GolfWeb, based in
Cupertino, California, will operate as a wholly-owned subsidiary of SportsLine
USA, under Tim Harrington who will continue as GolfWeb general manager.
SportsLine USA's partnership with CBS Sports provides frequent, on-air promotion
of the CBS SportsLine Web site as well as original content, research, video and
talent. CBS's strong line-up of sports programming in 1998 is expected to
continue boosting traffic numbers for CBS SportsLine, and now, for GolfWeb. In
1998, CBS Sports will broadcast more than 24 golf tournaments, including The
Masters, the PGA Championship, AT&T Pebble Beach National Pro-Am, The Presidents
Cup, and The Sprint International.
ABOUT SPORTSLINE USA
SportsLine USA, Inc. (NASDAQ: SPLN) is a leading Internet-based sports media
company that provides branded, interactive information and programming as well
as merchandise to sports enthusiasts worldwide. SportsLine USA publishes several
sports Web sites including CBS SportsLine (cbs.sportsline.com) and Soccernet
(www.soccernet.com) and exclusive Web sites for sports teams, organizations and
superstars such as Michael Jordan, Tiger Woods and Shaquille O'Neal. SportsLine
USA's flagship Web site, CBS SportsLine, features more than 200,000 pages of
multimedia sports information, entertainment and merchandise covering all major
collegiate and professional sports. SportsLine USA was founded in 1994, and its
primary Web site was renamed
<PAGE>
CBS SportsLine in March of 1997 as part of an exclusive five-year promotional
and content agreement with CBS Sports.
ABOUT GOLFWEB
GolfWeb (www.golfweb.com) is the Internet's leading golf site, currently
generating over eight million monthly page views. Founded in 1994, GolfWeb
provides tournament coverage from over 24 golf tours worldwide, including the
PGA, LPGA, and senior PGA, and is the official site of the European tour.
GolfWeb has a worldwide golf course directory with information on over 21,000
golf courses, as well as the Web's largest online discount golf pro shop.
GolfWeb offers something for everyone with an interest in golf, including
fantasy golf leagues, golf classifieds, a golf auction, online stats tracking
and game improvement and online instruction. The GolfWeb business model is based
on revenue from multiple revenue streams: advertising, product sales, membership
and services. GolfWeb attracts advertisers from all business sectors. Recent
advertisers include BMW, Mercedes Benz, MasterCard, VISA, Microsoft, Schwab,
Hyatt Hotels, Cobra Golf and Taylor Made Golf.
NOTICE: This press release contains forward-looking statements. The Company's
actual results could differ materially from those set forth in the
forward-looking statements. Factors that might cause such a difference include,
among others, competitive pressures, the growth rate of the Internet, constantly
changing technology, acceptance of SportsLine USA's services in the market place
and the other risks detailed in the Company's Securities and Exchange Commission
filings, including the Company's Prospectus dated November 13, 1997.
CONTACT: SportsLine USA, Inc., Fort Lauderdale
Kenneth Sanders, CFO, 954/351-2120 ext. 829
EXHIBIT 99.2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
GolfWeb:
We have audited the accompanying balance sheets of GolfWeb as of December 31,
1996 and 1995, and the related statements of operations, shareholders' equity
and cash flows for the year ended December 31, 1996 and for the period from
April 6, 1995 (date of inception) to December 31, 1995. 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 GolfWeb as of December 31, 1996
and 1995, and the results of its operations and its cash flows for the year
ended December 31, 1996 and for the period from April 6, 1995 (date of
inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
San Jose, California
April 11, 1997, except for Note 10,
for which the date is May 9, 1997
<PAGE>
<TABLE>
<CAPTION>
GOLFWEB
BALANCE SHEETS
December 31, 1996 and 1995
-----
ASSETS 1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,255,760 $ 990,697
Accounts receivable 110,953 34,850
Prepaids and other current assets 78,367 31,662
------------ ------------
Total current assets 1,445,080 1,057,209
Property and equipment, net 642,307 312,727
Other assets 47,128 34,602
------------ ------------
Total assets 2,134,515 1,404,538
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of note payable to bank 2,008 --
Accounts payable 197,413 24,782
Accrued liabilities 185,377 107,951
Accrued compensation 107,894 70,271
Deferred revenue 52,192 216,262
Current portion of capital lease obligations 159,964 42,928
------------ ------------
Total current liabilities 704,848 462,194
Note payable to bank 46,173 --
Capital lease obligations, less current portion 230,528 85,398
------------ ------------
Total liabilities 981,549 547,592
------------ ------------
Commitments (Note 6)
Redeemable convertible preferred shares, no par value:
Authorized: 6,909,000 shares;
Series A:
Designated: 1,654,500 shares;
Issued and outstanding: 1,654,500 shares in
1996 and 1995 1,627,930 1,627,930
Liquidation value: $1,654,500
Series A1:
Designated: 1,654,500 shares;
Issued and outstanding: none in 1996 and 1995
Series B:
Designated: 1,800,000 shares;
Issued and outstanding: 1,775,000 shares in
1996 and none in 1995 3,521,600 --
Liquidation value: $3,550,000
Series B1:
Designated:1,800,000;
Issued and outstanding: none in 1996 and 1995
Common shares, no par value:
Authorized:15,000,000 shares;
Issued and outstanding: 1,531,606 shares in 24,625 24,025
1996 and 1,526,106 shares in 1995
Additional paid-in capital 20,100 --
Notes receivable for common shares (15,486) (16,486)
Accumulated deficit (4,025,803) (778,523)
------------ ------------
Total shareholders' equity 1,152,966 856,946
------------ ------------
Total liabilities and shareholders'equity $ 2,134,515 $ 1,404,538
============ ============
</TABLE>
The accompanying notes are an intrgral part of these financial statements.
2
<PAGE>
GOLFWEB
STATEMENTS OF OPERATIONS
-----
Period from
April 6, 1995
(date of
Year Ended inception) to
December 31, December 31,
1996 1995
--------------- ---------------
Revenues:
Advertising and other $ 473,578 $ 47,738
Pro shop 148,148 --
----------- ---------
Total revenues 621,726 47,738
Cost of goods sold 130,464 --
----------- ---------
Gross profit 491,262 47,738
----------- ---------
Operating Expenses:
Content cost and other cost of revenues 707,107 61,142
Research and development 505,013 87,986
Sales and marketing 1,546,656 276,483
General and administrative 1,019,645 432,097
----------- ---------
Total operating expenses 3,778,421 857,708
----------- ---------
(3,287,159) (809,970)
Operating loss
Interest income, net 39,879 31,447
----------- ---------
Net loss $(3,247,280) $(778,523)
=========== =========
Net loss per share ($ 2.12) ($ 0.92)
Weighted average shares used
in net loss per share
calculation 1,528,856 849,015
=========== =========
The accompanying notes are an intrgral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
GOLFWEB
STATEMENTS OF SHAREHOLDERS' EQUITY
for the period from April 6, 1995
(date of inception) to December 31, 1996
REDEEMABLE CONVERTIBLE PREFERRED SHARES NOTES
------------------------------------------ RECEIVABLE
SERIES A SERIES B COMMON SHARES ADDITIONAL FOR TOTAL
--------------------- -------------------- ------------------ PAID-IN COMMON ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK DEFICIT EQUITY
---------- ---------- --------- ---------- --------- ------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of shares to 4,500 $ 249 1,361,250 $ 7,539 $ 7,788
founders
Issuance of Series A
preferred shares for
cash, net of issuance 1,650,000 1,627,681 1,627,681
costs of $22,319
Issuance of common
shares for notes 164,856 16,486 $ (16,486)
receivable
Net loss $ (778,523) (778,523)
---------- ---------- --------- ------- --------- ----------- ----------
Balances at December 31, 1,654,50 1,627,930 1,526,106 24,025 (16,486) (778,523) 856,946
1995
Payment on notes 1,000 1,000
receivable
Issuance of Series B
preferred shares for
cash, net of issuance 1,775,000 $3,521,600 3,521,600
costs of $28,400
Warrants issued under $ 20,100 20,100
line of credit
Exercise of stock options 5,500 600 600
Net loss (3,247,280) (3,247,280)
--------- ---------- --------- ---------- --------- ------- -------- -------- ----------- ----------
Balances at December 31,
1996 1,654,500 $1,627,930 1,775,000 $3,521,600 1,531,606 $24,625 $ 20,100 $(15,486) $(4,025,803) $1,152,966
========= ========== ========= ========== ========= ======= ======== ======== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
GOLFWEB
STATEMENTS OF CASH FLOWS
-----
PERIOD FROM
APRIL 6, 1995
(DATE OF
YEAR ENDED (INCEPTION)
DECEMBER 31, TO
1996 DECEMBER 31, 1995
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,247,280) $ (778,523)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 69,727 13,410
Exchange of services for property and (132,514)
equipment
Warrants issued under line of credit 20,100
Changes in assets and liabilities:
Accounts receivable (76,103) (34,850)
Prepaids and other current assets (46,705) (31,662)
Accounts payable and accrued liabilities 250,057 112,733
Accrued compensation 37,623 70,271
Deferred revenue (164,070) 86,262
----------- -----------
Net cash used in operating activities (3,189,165) (562,359)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (240,668) (176,137)
Purchases of marketable securities (488,760)
Sales of marketable securities 488,760
Other assets (12,526) (34,602)
----------- -----------
Net cash used in investing activities (253,194) (210,739)
----------- -----------
Cash flows from financing activities:
Payment on notes receivable 1,000
Proceeds from issuance of common stock and 600 7,539
exercise of options
Proceeds from equipment sale/leaseback 231,505 137,298
Proceeds from issuance of preferred shares, 3,521,600 1,627,930
net of issuance costs
Principal payments under capital lease (95,464) (8,972)
obligations
Proceeds from note payable to bank 48,181
----------- -----------
Net cash provided by financing activities 3,707,422 1,763,795
----------- -----------
Net increase in cash and cash equivalents 265,063 990,697
<PAGE>
Cash and cash equivalents at beginning of period 990,697
----------- -----------
Cash and cash equivalents at end of period $1,255,760 $990,697
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 24,961 $ 1,236
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Equipment purchased under capital lease $126,125 $150,000
Issuance of common shares for notes $ 16,486
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. FORMATION AND BUSINESS OF THE COMPANY:
GolfWeb (the Company), a California corporation, was incorporated on April
6, 1995. GolfWeb is a focused information service with golf as the
content, and the world wide web as the publishing technology. Its mission
is to provide "Everything Golf on the World Wide Web." The Company's
business model focuses on deriving revenue from four sources: advertising,
pro shop sales, licensing and services. Since inception, the Company has
earned revenue primarily from advertising and product sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FINANCIAL INSTRUMENTS AND CONCENTRATIONS:
Cash equivalents include highly liquid investments with original or
remaining maturities of three months or less at the date of purchase and
consist primarily of money market funds and commercial paper. The
Company's cash and cash equivalents as of December 31, 1996 are on deposit
with six high quality financial institutions. As of December 31, 1995,
cash and cash equivalents were on deposit with three high quality
financial institutions. The Company has not experienced any material
losses relating to any financial instruments.
The amounts reported for cash equivalents, receivables, debt obligations
and other financial instruments are considered to approximate fair values
based upon comparable market information available at the respective
balance sheet dates. Financial instruments that potentially subject the
Company to concentrations of credit risks consist principally of cash and
cash equivalents, accounts receivable and payable and bank lines of
credit.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, CONTINUED
-------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FINANCIAL INSTRUMENTS AND CONCENTRATIONS, CONTINUED:
At December 31, 1996, one customer accounted for 10% of accounts
receivable. At December 31, 1995, three customers individually accounted
for 43%, 22% and 12% of accounts receivables, respectively.
In 1996, two customers individually accounted for 18% and 12% of total
revenues, respectively.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost and depreciated on the
straight-line basis over estimated useful lives of three years. Leasehold
improvements are amortized on a straight-line basis over the shorter of
the estimated useful life or term of the related lease.
REVENUE RECOGNITION:
Revenue under advertising contracts is deferred and recognized on a
straight-line basis over the life of the contract. The Company recognizes
revenue from product sales upon verification of shipment.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are charged to operations as
incurred.
INCOME TAXES:
The Company uses the liability method whereby deferred tax asset and
liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, CONTINUED
-------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
ADVERTISING EXPENSE:
Advertising costs are expensed as incurred. In 1996 and 1995, advertising
expense was approximately $298,000 and $14,000, respectively.
3. PROPERTY AND EQUIPMENT:
Property and equipment include assets acquired under capital leases of
$357,629 and $137,298, with related accumulated amortization of $98,561
and $12,509 at December 31, 1996 and 1995, respectively. Property and
equipment consist of the following:
DECEMBER 31,
-----------------------------
1996 1995
-------------- --------------
Software $ 140,000 $ 140,000
Computers and equipment 539,863 111,307
Furniture and fixtures 120,846 59,718
Leasehold improvements 24,735 15,112
-------------- --------------
825,444 326,137
Less accumulated depreciation and
amortization (183,137) (13,410)
-------------- --------------
$ 642,307 $ 312,727
============== ==============
4. CAPITAL LEASE OBLIGATIONS:
During 1995, the Company entered into a $250,000 line of credit with a
leasing company and had an option to extend the line up to $500,000. In
1996, the Company elected to extend the line to $500,000. The lease line
of credit accrues interest on the outstanding balance at a rate of
approximately 7% per annum and terminates on August 31, 1997. The Company
currently leases furniture and equipment under six capital leases which
expire in October 1998 through July 1999. Upon termination of the leases,
the Company will have the option to purchase the furniture and equipment,
renew the lease term, or return the furniture and equipment to the lessor.
At December 31, 1996, approximately $5,000
The accompanying notes are an integral part of these financial statements.
9
EXHIBIT 99.3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
GolfWeb:
We have reviewed the accompanying balance sheet of GolfWeb as of September 30,
1997, and the related statements of operations, shareholders' equity and cash
flows for the nine months then ended, in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial statements is
the representation of the Company's management.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we am no aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has insufficient funds available to fund its
operations and has incurred losses from operations that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
COOPERS & LYBRAND L.L.P.
San Jose, California
December 31, 1997
<PAGE>
GOLFWEB
BALANCE SHEET
September 30, 1997
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
-----
ASSETS
Current assets:
Cash and cash equivalents $1,420,808
Accounts receivable 197,457
Prepaid advertising 891,666
Prepaids and other current assets 85,016
----------
Total current assets 2,594,947
Property and equipment, net 827,553
Other assets 51,976
----------
Total assets $3,474,476
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of note payable to bank $126,188
Accounts payable 175,467
Accrued liabilities 104,455
Accrued compensation 311,204
Deferred revenue 148,557
Current portion of capital lease obligations 163,469
---------
Total current liabilities 1,029,340
Note payable to bank 256,706
Capital lease obligations, less current portion 108,134
---------
Total liabilities 1,394,180
---------
Commitments (Note 6).
Redeemable convertible preferred shares, no par value:
Authorized: 9,409,000 shares;
Series A:
Designated: 1,654,500 shares;
Issued and outstanding: 1,654,500 shares in 1997 1,627,930
Liquidation value: $1,654,500
Series A1:
Designated: 1,654,500 shares;
Issued and outstanding: none in 1997
Series B:
Designated: 1,800,000 shares;
Issued and outstanding: 1,775,000 shares in 1997 3,521,600
Liquidation value: $3,550,000
Series B1:
Designated: 1,800,000 shares;
Issued and outstanding: none in 1997
Series C:
Designated 2,500,000 shares;
Issued and outstanding: 1,290,376 shares in 1997 5,993,795
Liquidation value: $6,271,227
Common shares, no par value:
Authorized: 17,500,000 shares;
Issued and outstanding: 1,381,999 shares in 1997 25,181
Additional paid-in capital 20,100
Accumulated deficit (9,108,310)
----------
Total shareholders' equity 2,080,296
----------
Total liabilities and shareholders' equity $3,474,476
==========
2
<PAGE>
GOLFWEB
STATEMENT OF OPERATIONS
for the nine months ended September 30, 1997
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
-----
Revenues:
Advertising and other $ 629,984
Pro shop 600,909
-----------
Total revenues $ 1,230,893
Cost of goods sold 519,502
-----------
Gross profit 711,391
-----------
Operating Expenses:
Content cost and other cost of revenues 1,623,903
Research and development 1,041,517
Sales and marketing 2,437,090
General and administrative 706,872
-----------
Total operating expenses 5,809,382
-----------
Operating loss 5,097,991
Interest income, net 15,484
-----------
Net loss $ 5,082,507
===========
Net loss per share ($ 3.44)
Weighted average shares used in net
loss per share calculations 1,478,895
3
<PAGE>
GOLFWEB
STATEMENT OF CASH FLOWS
for the nine months ended September 30, 1997
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
-----
Cash flows from operating activities:
Net loss $(5,082,507)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 282,453
Provision for doubtful accounts 13,314
Exchange of note receivable for common shares 8,711
Common shares issued for consulting services 450
Changes in assets and liabilities:
Accounts receivable (99,818)
Prepaids and other current assets (6,649)
Prepaid advertising 108,334
Accounts payable and accrued expenses (102,868)
Accrued compensation 203,310
Deferred revenue 96,365
Net cash used in operating activities (4,578,905)
-----------
Cash flows from investing activities:
Acquisition of property and equipment (467,699)
Other assets (4,848)
-----------
Net cash used in investing activities (472,547)
-----------
Cash flows from financing activities:
Proceeds from bridge loan 1,250,000
Payment of bridge loan (1,250,000)
Proceeds from issuance of preferred shares, net of 4,993,795
issuance costs
Proceeds from exercise of stock options 8,314
Repurchase of shares from terminating employee (1,433)
Proceeds from note payable to bank 334,713
Principal payments of long term debt (118,889)
-----------
Net cash provided by financing activities 5,216,500
-----------
Net increase in cash and cash equivalents 165,048
Cash and cash equivalents at beginning of period 1,255,760
-----------
Cash and cash equivalents at end of period $ 1,420,808
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 57,845
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Prepaid advertising received in exchange for preferred $ 1,000,000
shares
3
<PAGE>
<TABLE>
<CAPTION>
GOLFWEB
STATEMENT OF SHAREHOLDERS' EQUITY
for the nine months ended September 30, 1997
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
-----
SERIES A SERIES B SERIES C
---------------------- ----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1997 1,654,000 $1,627,930 1,775,000 $3,521,600
Issuance of Series C preferred shares
for cash and advertising, net of
issuance costs of $277,435
1,290,376 $5,993,795
Common shares issued to
consultants
Common shares
Exercise of stock options
Repayment of note receivable for
common shares
Net loss
--------- ---------- --------- ---------- --------- ----------
Balances at September 30, 1997 1,654,000 $1,627,930 1,775,000 $3,521,600 1,290,376 $5,993,795
========= ========== ========= ========== ========= ==========
NOTES
RECEIVABLE
COMMON SHARES ADDITIONAL FOR TOTAL
---------------------- PAID-IN COMMON ACCUMULATED SHAREHOLDERS
SHARES AMOUNT CAPITAL STOCK DEFICIT EQUITY
--------- ---------- ---------- ----------- ------------- ------------
Balances at January 1, 1997 1,531,606 $ 24,625 $20,100 $ (15,486) $(4,025,803) $1,152,966
Issuance of Series C preferred shares
for cash and advertising, net of
issuance costs of $277,435
5,993,975
Common shares issued to
consultants 900 450 450
Common shares (211,019) (8,208) 6,775 (1,433)
Exercise of stock options 60,512 8,314 8,314
Repayment of note receivable for
common shares 8,711 8,711
Net loss (5,082,507) (5,082,507)
--------- ---------- ---------- ---------- ------------ -----------
Balances at September 30, 1997 1,381,999 $ 25,181 $20,100 $ -- $(9,108,310) $2,080,296
========= ========== ======== ========== ============ ==========
</TABLE>
4
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
-----
1. FORMATION AND BUSINESS OF THE COMPANY:
GolfWeb (the Company), a California corporation, was incorporated on April
6, 1995. GolfWeb is a focused web-based information service for the golf
community. Its mission is to provide "Everything Golf on the World Wide
Web." The Company's business model focuses on deriving revenue from four
sources: advertising, pro shop sales, licensing and services. Since
inception, the Company has earned revenue primarily from advertising and
product sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
The financial statements have been prepared on a basis of accounting which
contemplates realization of assets and satisfaction of liabilities in the
normal course of business. The Company has incurred losses that raise
substantial doubt about its ability to continue as a going concern. The
continued existence of the Company is dependent on the Company's ability
to obtain adequate funding and eventually establish profitable operations
Management expects to generate sufficient cash flows from operations and
to obtain additional financing to meet its liabilities and operational
needs. The financial statements do not include any adjustments that may
result from the outcome of these uncertainties.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FINANCIAL INSTRUMENTS AND CONCENTRATIONS:
Cash equivalents include highly liquid investments with original or
remaining maturities of three months or less at the date of purchase and
consist primarily of money market funds and commercial paper. The
Company's cash and cash equivalents as of September 30, 1997 are on
deposit with six high quality financial institutions. The Company has not
experienced any material losses relating to any financial instruments.
6
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
-----
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FINANCIAL INSTRUMENTS AND CONCENTRATIONS, continued:
The amounts reported for cash equivalents, receivables, debt obligations
and other financial instruments are considered to approximate fair values
based upon comparable market information available at September 30, 1997.
Financial instruments that potentially subject the Company to
concentrations of credit risks consist principally of cash and cash
equivalents, accounts receivable and payable and bank lines of credit.
At September 30, 1997, two customers accounted for 18% and 29% of accounts
receivable.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost and depreciated on the
straight-line basis over estimated useful lives of three years. Leasehold
improvements are amortized on a straight-line basis over the shorter of
the estimated useful life or term of the related lease.
REVENUE RECOGNITION:
Revenue under advertising contracts is deferred and recognized on a
straight-line basis over the life of the contract. The Company recognizes
revenue from product sales upon verification of shipment.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are charged to operations as
incurred.
INCOME TAXES:
The Company uses the liability method whereby deferred tax asset and
liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.
7
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
ADVERTISING EXPENSE:
Advertising costs are expensed as incurred. During the nine months ended
September 30, 1997, advertising expense was approximately $411,000.
3. PROPERTY AND EQUIPMENT:
Property and equipment include assets acquired under capital leases of
$494,927, with related accumulated amortization of $222,293 at September
30, 1997, respectively. Property and equipment consist of the following at
September 30, 1997:
Software $ 197,776
Computers and equipment 902,971
Furniture and fixtures 159,176
Leasehold improvements 33,220
----------
1,293,143
Less accumulated depreciation and amortization (465,590)
----------
$ 827,553
==========
4. CAPITAL LEASE OBLIGATIONS:
During 1995, the Company entered into a $250,000 line of credit with a
leasing company and had an option to extend the line up to $500,000. In
1996, the Company elected to extend the line to $500,000. The Company
could draw against the line of credit through August 30, 1997, subject to
a three month extension. The lease line of credit accrues interest on the
outstanding balance at a rate of approximately 7% per annum, The Company
currently leases furniture and equipment under six capital leases which
expire in October 1998 through July 1999. Upon termination of the leases,
the Company will have the option to purchase the furniture and equipment,
renew the lease term, or return the furniture and equipment to the lessor.
Future minimum lease payments are as follows:
8
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
YEAR ENDING DECEMBER 31,
------------------------
1997 $ 45,731
1998 172,725
1999 70,630
----------
289,086
Less amount representing interest 17,483
----------
271,603
Less current portion 163,469
$ 108,134
==========
9
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
5. NOTE PAYABLE:
The Company has an equipment line of credit agreement with a financial
institution under which it can borrow up to $750,000 through November 15,
1997 at the institution's prime rate (8.25% at September 30, 1997) of
which $382,894 was outstanding at September 30, 1997. At November 15,
1997, the line of credit converts into a note payable which is to be paid
in 36 equal principal payments plus accrued interest at 8.5% per annum
commencing on December 15, 1997. In conjunction with the line of credit,
the Company issued a warrant to the institution to purchase 7,500 shares
of convertible preferred stock (see Note 7). Borrowings under the line of
credit are collateralized by substantially all of the Company's assets- In
addition, the line of credit agreement contains restrictive covenants,
including requirements that the Company maintain certain financial ratios.
Annual maturities of the note payable as of September 30, 1997 are as
follows:
YEAR ENDING DECEMBER 31,
------------------------
1997 $ 11,472
1998 137,659
1999 137,659
2000 96,104
---------
382,894
Less current portion 126,188
---------
$ 256,706
=========
10
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
6. COMMITMENTS:
In October 1995, the Company entered into an agreement to lease a new
facility. In November 1996, the Company amended the lease to include
additional space. This operating lease expires in December 1998. Rent
expense related to the facility lease was approximately $109,835 for the
nine months ended September 30, 1997. In September 1996, the Company
entered into a sublease agreement with another building tenant to lease
additional space through August 1998. Rent expense related to the sublease
was approximately $28,253 for nine months ended September 30, 1997. Future
lease payments, including the sublease, are as follows:
YEAR ENDING DECEMBER 31,
------------------------
1997 $ 39,505
1998 146,473
----------
$ 185,978
==========
7. SHAREHOLDERS' EQUITY:
SERIES A, B AND C REDEEMABLE CONVERTIBLE PREFERRED SHARES:
DESIGNATION OF REDEEMABLE CONVERTIBLE PREFERRED SHARES:
The Company authorized 9,409,000 shares to be issued. Of those shares, the
Company designated 1,654,500 shares as Series A preferred stock, 1,654,500
shares as Series Al preferred stock, 1,800,000 shares as Series B
preferred stock, 1,800,000 shares of Series B1 preferred stock and
2,500,000 shares of Series C preferred stock. The rights and preferences
of the Series Al and Series BI preferred stock are similar to the rights
and preferences of the Series A and Series B preferred stock.
DIVIDENDS:
The holders of the Series A and Al, Series B and B I and Series C
redeemable convertible preferred shares (preferred shares) are entitled to
receive, in any fiscal year, when and as declared by the Board of
Directors, out of any assets legally available, dividends in the amount
per share equal to $0.08, $0.16 and $0.39, respectively, before and in
preference to any dividends paid on common shares.
11
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
7. SHAREHOLDERS' EQUITY, CONTINUED:
The right to such dividends on the preferred shares is not cumulative, and
no right shall accrue to holders of preferred shares by reason of the fact
that dividends on such shares are not declared in any prior year, nor will
any undeclared or unpaid dividend bear or accrue interest. As of September
30, 1997, no dividends have been declared or paid.
SERIES A, B AND C REDEEMABLE CONVERTIBLE PREFERRED SHARES:
LIQUIDATION:
In the event of any liquidation, dissolution, or winding up of the
Company, either voluntary or involuntary, the holders of the then
outstanding preferred shares are entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of
the Company to the holders of the common shares, the amount of $1.00 per
share for Series A and Al preferred shares, $2.00 per share for Series B
and BI preferred shares and $4.86 per share for Series C preferred shares,
plus any declared but unpaid dividends for each preferred share. If, upon
occurrence of such event, the assets and funds thus distributed among the
holders of the preferred shares shall be insufficient to permit the
payment to such holders to the full preferential amount, then the entire
assets and funds of the Company legally available for distribution will be
distributed among the holders of the then outstanding preferred shares,
pro rata, according to the number of outstanding shares held by each
holder thereof.
REDEMPTION
:
Upon delivery to the Company prior to June 30, 2002 of a written election
signed by the holders of 75% of the then outstanding shares of preferred
shares, voting together as a single class, the Company will be required to
redeem on July 30, 2002 and each successive anniversary thereof from each
holder of preferred shares, out of funds legally available, at least 25%
of each of the shares held by each holder of such shares on the date the
Company receives the written request. The redemption price will be an
amount equal to the original issuance price of preferred shares, plus any
declared but unpaid dividends on such shares.
12
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
----
7. SHAREHOLDERS' EQUITY, CONTINUED:
CONVERSION:
The preferred shares are convertible, at the option of the holders, into
such number of shares of common shares, as is determined by dividing the
original issuance price for each share of preferred shares by the
conversion price (as defined and subject to certain adjustments).
Conversion is automatic upon the closing of a firm commitment under
written public offering of the Company's common shares at a price per
share of not less than $7.00 and aggregate offering proceeds of not less
than $7,500,000. The Company has reserved 4,719,876 common shares for
issuance in the event of conversion.
SERIES A, B AND C REDEEMABLE CONVERTIBLE PREFERRED SHARES:
VOTING:
The holder of each share of preferred shares is entitled to the number of
votes equal to the number of whole shares of the Company's common shares
into which such holder's shares of preferred shares could be converted on
the record date for the vote or written consent of the shareholders; has
voting fights and powers equal to the voting rights and powers of the
common shares, and vote as a single class with the common shareholders.
COMMON SHARES:
The Company is authorized to issue 17,500,000 shares of common shares
with no par value.
STOCK REPURCHASE AGREEMENTS:
In May 1995, the Company issued 1,361,250 common shares to its founders at
a price of $0.01 per share in exchange for each founder's fight, title and
interest (rights) in and to the Company. Under the stock purchase
agreement, the Company has the option to repurchase the founders' unvested
common shares should they cease to be employed at the holder's original
purchase price. The Company's repurchase right generally lapses at a rate
of 1/48 per month beginning on the first vest month. In 1997, the Company
repurchased 143,269 common shares issued to founders. At September 30,
1997 69,750 out-standing common shares were subject to repurchase and were
subsequently repurchased in October 1997. The Company also has the right
of first refusal for any common shares purchased
13
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
7. SHAREHOLDERS' EQUITY, CONTINUED:
under these agreements that are no longer subject to the Company's
repurchase right should a holder desire to sell or transfer such common
shares.
WARRANTS:
During 1995, the Company issued a warrant in connection with the extension
of a lease line of credit to purchase up to 40,000 of the Company's common
shares at $1.00 per share. As of September 30, 1997, the fight to purchase
40,000 shares was exercisable under the warrant, The warrant expires
October 30, 2002. The Company has reserved 40,000 common shares for
issuance in the event of exercise.
WARRANTS, continued:
During 1996, the Company issued warrants in connection with the extension
of the line of credit to purchase up to 7,500 shares of preferred shares
determined based on the balance of draws against the line at a price equal
to the most recent financing. The warrants have a term of five years and,
as of September 30, 1997 5,072 shares were exercisable, The Company has
reserved sufficient preferred shares for issuance in the event of
exercise- The value of such warrants was not material.
STOCK OPTION ACTIVITY AND PLAN:
In June 1995, the Company adopted the 1995 Equity Incentive Plan (the
Plan) and reserved 1,113,750 common shares for issuance to employees,
directors and consultants of the Company. The Plan expires in 2005. Under
the Plan, incentive options to purchase the Company's common shares may be
granted to employees at prices not lower than fair market value at the
date of grant, as determined by the Board of Directors. Nonstatutory
options (options which do not qualify as incentive options) may be granted
to key employees, including directors and consultants, at prices not lower
than 85% of fair market value at the date of grant (110% in certain
cases), as determined by the Board of Directors. The Board also has the
authority to set the term of the options (no longer than ten years from
date of grant; five years in certain instances)- Options granted generally
vest over four years, at the rate of 25% one year from the date of hire
and 1/48 each month thereafter. Unexercised options expire three months
after termination of employment with the Company.
14
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
7. SHAREHOLDERS' EQUITY, CONTINUED:
Stock option activity under the Plan is summarized as follows:
OPTIONS
AVAILABLE OPTIONS
FOR UNDER EXERCISE AGGREGATE
GRANT PLAN PRICE PRICE
--------- -------- ----------- ----------
Balances at January 1, 795,253 458,141 $0.10-$0.40 $ 57,638
1997
Options repurchased 67,750
Options granted (726,075) 726,075 $0.40-$0.50 308,953
Options exercised (60,512) $0.10-$0.50 ( 8,214)
Options canceled 160,257 (160,257) $0.10-$0.40 (28,463)
------- -------- ----- ----- -------
Balances at September 297,185 963,447 $0.10-$0.50 $ 329,914
30, 1997 ======= ======= ===== ===== =========
As of September 30, 1997, options to purchase 183,904 common shares were
exercisable.
STOCK OPTION ACTIVITY AND PLAN, continued:
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation (SFAS No. 123). " Accordingly, no compensation cost has been
recognized for the Plan. The impact on the Company's net loss would be
immaterial had compensation cost for the Plan been determined based on the
fair value at the grant date for awards in 1997 consistent with the
provisions of WAS No. 123. However, this result is not likely to be
representative of the effects on reported net income for future years. The
fair value of each option and warrant grant is estimated on the date of
grant using the minimum value method assuming an expected life of four
years and a risk-free interest rate of 6%. The weighted average expected
life was calculated based on the vesting period and the exercise behavior
of each option and warrant granted, The risk-free interest rate was
calculated in accordance with the grant date and expected life calculated
for each option and warrant granted.
15
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
---
7. SHAREHOLDERS' EQUITY, continued:
STOCK OPTION PLAN:
The options outstanding and currently exercisable by exercise price at
September 30, 1997 is as follows:
OPTIONS CURRENTLY
OPTIONS OUTSTANDING EXERCISABLE
-------------------------------------------- ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
-------- ----------- ------------ -------- ----------- ---------
$0.10 196,622 8.24 $0.10 99,326 $0.10
$0.20 74,500 8.96 $0.20 19,374 $0.20
$0.40 508,100 9.36 $0.40 64,204 $0.40
$0.50 184,225 9.75 $0.50 1,000 $.50
8. INCOME TAXES:
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities
using current tax laws and rates. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.
16
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
8. INCOME TAXES, CONTINUED:
The following table shows the major components of the net deferred tax
assets at September 30, 1997:
Property and equipment $ 10,367
Deferred revenue 59,170
Accrued vacation 18,578
Other liabilities and reserves 11,837
Net operating loss carryforward 3,281,081
Research and development credit 16,271
------------
3,397,304
Valuation allowance (3,397,304)
------------
Net deferred tax asset $ --
============
The Company has placed a valuation allowance against its net deferred tax
assets due to the uncertainty surrounding the realization of such assets.
At September 30, 1997, the Company had federal and state income tax net
operating loss carryforwards for tax purposes of approximately $8,894,000
and $4,404,000, respectively. These federal and state carryforwards expire
in years 2004 to 2012.
The Tax Reform Act of 1986 substantially changed the rules relative to net
operating loss carryforwards in the event of an "ownership change" of a
corporation. Future changes in ownership may result in limitations on the
annual utilization of net operating loss carryforwards.
9. EMPLOYEE BENEFIT PLAN:
During 1995, the Company adopted a defined Contribution Plan (the Plan)
which is intended to qualify under section 40 1 (k) of the Internal
Revenue Code of 1986, as amended. The Plan covers essentially all
employees. The Company may make matching contributions. No contributions
were made in 1997.
17
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED - SEE ACCOUNTANTS' REVIEW REPORT)
10. SUBSEQUENT EVENT:
In October 1997, the Company issued 411,522 shares of Series C preferred
stock to an existing shareholder.
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
remained available under the lease line of credit. Future minimum lease payments
are as follows:
YEAR ENDING DECEMBER 31,
1997 $ 182,925
1998 172,725
1999 70,630
---------
426,280
Less amount representing interest 35,788
----------
390,492
Less current portion 159,964
---------
$ 230,528
=========
5. NOTE PAYABLE:
The Company has an equipment line of credit agreement with a financial
institution under which it can borrow up to $750,000 at the institution's
prime rate (8.25% at December 31, 1996) of which $48,181 was outstanding
at December 31, 1996. In conjunction with the line of credit, the Company
issued a warrant to the institution to purchase 7,500 shares of
convertible preferred stock (see Note 7). Borrowings under the line of
credit are collateralized by substantially all of the Company's assets. In
addition, the line of credit agreement contains restrictive covenants,
including requirements that the Company maintain certain financial ratios.
Annual maturities of the note payable as of December 31, 1996 are as
follows:
YEAR ENDING DECEMBER 31,
1997 $ 2,008
1998 16,060
1999 16,060
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
2000 14,053
--------
48,181
Less current portion 2,008
--------
$ 46,173
========
6. COMMITMENTS:
In October 1995, the Company entered into an agreement to lease a new
facility. In November 1996, the Company amended the lease to include
additional space. This operating lease expires in December 1998. Rent
expense related to the facility lease was approximately $88,777 and
$20,913 for the year ended December 31, 1996 and for the period from April
6, 1995 (date of inception) to December 31, 1995, respectively. In
September 1996, the Company entered into a sublease agreement with another
building tenant to lease additional space through August 1998. Rent
expense related to the sublease was approximately $12,557 for 1996. Future
lease payments, including the sublease, are as follows:
YEAR ENDING DECEMBER 31,
1997 $ 158,880
1998 146,473
---------
$ 305,353
=========
7. SHAREHOLDERS' EQUITY:
SERIES A AND B REDEEMABLE CONVERTIBLE PREFERRED SHARES:
DESIGNATION OF REDEEMABLE CONVERTIBLE PREFERRED SHARES:
In 1996, the Company authorized 6,909,000 shares to be issued. Of those
shares, the Company designated 1,654,500 shares as Series A preferred
stock, 1,654,500 shares as Series A1 preferred stock, 1,800,000 shares as
Series B preferred stock and 1,800,000 shares of Series B1 preferred
stock. The rights and preferences of the Series A1 and Series B1 preferred
stock are similar to the rights and preferences of the Series A and Series
B preferred stock.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STAEMENTS, Continued
7. SHAREHOLDERS' EQUITY, CONTINUED:
DIVIDENDS:
The holders of the Series A and A1 and Series B and B1 redeemable
convertible preferred shares (preferred shares) are entitled to receive,
in any fiscal year, when and as declared by the Board of Directors, out of
any assets legally available, dividends in the amount per share equal to
$0.08 and $0.16, respectively, before and in preference to any dividends
paid on common shares.
The right to such dividends on the preferred shares is not cumulative, and
no right shall accrue to holders of preferred shares by reason of the fact
that dividends on such shares are not declared in any prior year, nor will
any undeclared or unpaid dividend bear or accrue interest. As of December
31, 1996, no dividends have been declared or paid.
LIQUIDATION:
In the event of any liquidation, dissolution, or winding up of the
Company, either voluntary or involuntary, the holders of the then
outstanding preferred shares are entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of
the Company to the holders of the common shares, the amount of $1.00 per
share for Series A and A1 preferred shares and $2.00 per share for Series
B and B1 preferred shares, plus any declared but unpaid dividends for each
preferred share. If, upon occurrence of such event, the assets and funds
thus distributed among the holders of the preferred shares shall be
insufficient to permit the payment to such holders to the full
preferential amount, then the entire assets and funds of the Company
legally available for distribution will be distributed among the holders
of the then outstanding preferred shares, pro rata, according to the
number of outstanding shares held by each holder thereof.
SERIES A AND B REDEEMABLE CONVERTIBLE PREFERRED SHARES:
REDEMPTION:
Upon delivery to the Company prior to June 30, 2002 of a written election
signed by the holders of 75% of the then outstanding shares of preferred
shares, voting together as a single class, the Company will be required to
redeem on July 30, 2001 and each successive anniversary thereof from each
holder of preferred shares, out of funds legally available, at least 25%
of each of the shares held by each holder of such shares
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
7. SHAREHOLDERS' EQUITY, CONTINUED:
on the date the Company receives the written request. The redemption price
will be an amount equal to the original issuance price of preferred
shares, plus any declared but unpaid dividends on such shares.
CONVERSION:
The preferred shares are convertible, at the option of the holders, into
such number of shares of common shares, as is determined by dividing the
original issuance price for each share of preferred shares by the
conversion price (as defined and subject to certain adjustments).
Conversion is automatic upon the closing of a firm commitment under
written public offering of the Company's common shares at a price per
share of not less than $7.00 and aggregate offering proceeds of not less
than $7,500,000. The Company has reserved 3,429,500 common shares for
issuance in the event of conversion.
VOTING:
The holder of each share of preferred shares is entitled to the number of
votes equal to the number of whole shares of the Company's common shares
into which such holder's shares of preferred shares could be converted on
the record date for the vote or written consent of the shareholders; has
voting rights and powers equal to the voting rights and powers of the
common shares, and vote as a single class with the common shareholders.
Common Shares:
The Company is authorized to issue 15,000,000 shares of common shares with
no par value.
STOCK REPURCHASE AGREEMENTS:
In May 1995, the Company issued 1,361,250 common shares to its founders at
a price of $0.01 per share in exchange for each founder's right, title and
interest (rights) in and to the Company. Under the stock purchase
agreement, the Company has the option to repurchase the founders' unvested
common shares should they cease to be employed at the holder's original
purchase price. The Company's repurchase right generally lapses at a rate
of 1/48 per month beginning on the first vest month. At December 31, 1996
and 1995, 737,344 and 1,077,656 outstanding common shares were subject to
repurchase, respectively. The Company also has the right of first refusal
for any common shares
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
7. SHAREHOLDERS' EQUITY, CONTINUED:
purchased under these agreements that are no longer subject to the
Company's repurchase right should a holder desire to sell or transfer such
common shares.
The Company issued 154,856 of restricted common shares in August 1995
under the Equity Incentive Plan. These shares contain provisions for the
repurchase of common shares by the Company in the event of termination of
employment during the four years following the date of certain vesting
dates. These shares are generally released from the repurchase provision
ratably over 48 months beginning on certain vesting dates. At December 31,
1996 and 1995, 103,237 and 154,856 shares were subject to repurchase under
these stock purchase agreements, respectively.
WARRANTS:
During 1995, the Company issued a warrant in connection with the extension
of a lease line of credit to purchase up to 40,000 of the Company's common
shares at $1.00 per share. As of December 31, 1996, the right to purchase
40,000 shares was exercisable under the warrant. The warrant expires
October 30, 2002. The Company has reserved 40,000 common shares for
issuance in the event of exercise.
During 1996, the Company issued warrants in connection with the extension
of the line of credit to purchase up to 7,500 shares of common shares at a
price of $5.00 per share. The warrants have a term of five years, and as
of December 31, 1996, none were exercisable. The Company has reserved
7,500 common shares for issuance in the event of exercise.
STOCK OPTION ACTIVITY AND PLAN:
In June 1995, the Company adopted the 1995 Equity Incentive Plan (the
Plan) and reserved 1,113,750 common shares for issuance to employees,
directors and consultants of the Company. The Plan expires in 2005. Under
the Plan, incentive options to purchase the Company's common shares may be
granted to employees at prices not lower than fair market value at the
date of grant, as determined by the Board of Directors. Nonstatutory
options (options which do not qualify as incentive options) may be granted
to key employees, including directors and consultants, at prices not lower
than 85% of fair market value at the date of grant (110% in certain
cases), as determined by the Board of Directors. The Board also has the
authority to set the term of the options (no longer than ten years from
date of grant; five years in certain instances). Options granted generally
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
7. SHAREHOLDERS' EQUITY, CONTINUED:
vest over four years, at the rate of 25% one year from the date of hire
and 1/48 each month thereafter. Unexercised options expire three months
after termination of employment with the Company.
Stock option activity under the Plan is summarized as follows:
Weighted
Options Average
Available Options Exercise Aggregate Exercise
For Grant Under Plan Price Price Price
--------- ---------- -------- --------- --------
Options reserved 1,113,750
Options granted (356,605) 356,605 $0.10 $ 35,660 $0.10
Options exercised (154,856) $0.10 (15,486) $0.10
--------- -------- -------- -----
Balances at December 31, 757,145 201,749 $0.10 20,174 $0.10
1995
Options reserved 300,000
Options granted (341,930) 341,930 $0.10-$0.40 46,068 $0.13
Options exercised (5,500) $0.10-$0.20 (600) $0.11
Options canceled 80,038 (80,038) $0.10 (8,004) $0.10
------- ------- -------
Balances at December 31, 795,253 458,141 $0.10-$0.40 $ 57,638 $0.13
1996 ======= ======= ========
As of December 31, 1996, options to purchase 59,530 common shares were
exercisable. As of December 31, 1995, no options were exercisable.
STOCK OPTION ACTIVITY AND PLAN, continued:
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation (SFAS No. 123)." Accordingly, no compensation cost has been
recognized for the Plan. The impact on the Company's net income would be
immaterial had compensation cost for the Plan been determined based on the
fair value at the grant date for awards in 1996 and 1995 consistent with
the provisions of SFAS No. 123. However, this result is not likely to be
representative of the effects on reported net income for future years.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATMENTS, Continued
The fair value of each option grant is estimated on the date of grant
using the minimum value method assuming an expected life of four years and
a risk-free interest rate of 5.79% to 6.45%. The weighted average expected
life was calculated based on the vesting period
7. SHAREHOLDERS' EQUITY, CONTINUED:
and the exercise behavior of each option granted. The risk-free interest
rate was calculated in accordance with the grant date and expected life
calculated for each option granted.
STOCK OPTION PLAN:
The options outstanding and currently exercisable by exercise price at
December 31, 1996 is as follows:
Options Currently
Options Outstanding Exercisable
- ------------------------------------------------- ------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Years) Price Exercisable Price
$0.10 344,391 9.01 $0.10 59,148 $0.10
$0.20 111,500 9.68 $0.20
$0.40 2,250 9.97 $0.40 382 $0.40
8. INCOME TAXES:
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities
using current tax laws and rates. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATMENTS, Continued
8. INCOME TAXES, CONTINUED:
The following table shows the major components of the net deferred tax
assets:
December 31,
------------------------
1996 1995
---------- ---------
Property and equipment $ (9,542) $ (5,429)
Deferred revenue 48,166 48,168
Accrued vacation 12,183 4,676
Other liabilities and reserves 14,026 (5,464)
Net operating loss 1,547,046 262,017
carryforward
Research and development 4,095
credit ---------- ---------
1,615,974 303,968
Valuation allowance (1,615,974) (303,968)
---------- ---------
Net deferred tax asset $ $
========== =========
The Company has placed a valuation allowance against its net deferred tax
assets due to the uncertainty surrounding the realization of such assets.
At December 31, 1996, the Company had federal and state income tax net
operating loss carryforwards for tax purposes of approximately $3,854,200
and $3,853,400, respectively. These federal and state carryforwards expire
in years 2003 to 2011.
The Tax Reform Act of 1986 substantially changed the rules relative to net
operating loss carryforwards in the event of an "ownership change" of a
corporation. Future changes in ownership may result in limitations on the
annual utilization of net operating loss carryforwards.
9. EMPLOYEE BENEFIT PLAN:
During 1995, the Company adopted a defined Contribution Plan (the Plan)
which is intended to qualify under section 401(k) of the Internal Revenue
Code of 1986, as amended. The Plan covers essentially all employees. The
Company may make matching contributions. No contributions were made in
1996 or 1995.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
GOLFWEB
NOTES TO FINANCIAL STATEMENTS, Continued
10. SUBSEQUENT EVENT:
In May 1997, the Company issued 1,290,376 Series C preferred shares for
consideration of approximately $6,271,000. In connection with the
agreement, the Company is committed to purchase $1,000,000 of advertising.
The Series C preferred shares have rights and preferences similar to the
Series A and B preferred shares.
18
