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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 0-23337
SPORTSLINE USA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 65-0470894
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
6340 N.W. 5TH WAY
FORT LAUDERDALE, FLORIDA 33309
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 351-2120
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK (PAR VALUE $.01 PER SHARE)
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(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of shares of Common Stock held by non-affiliates
of the Registrant as of March 12, 1999, was approximately $841,826,659 based on
the $57.8125 closing price for the Common Stock on The Nasdaq National Market on
such date. For purposes of this computation, all executive officers and
directors of the registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such directors and
officers are, in fact, affiliates of the registrant.
The number of shares of Common Stock of the registrant outstanding as of
February 28, 1999 was 22,289,880.
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PART III
Part III is replaced in its entirety as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD WITH THE COMPANY
- ---- --- ---------------------------------
<S> <C> <C>
Michael Levy 52 Chairman of the Board, President and Chief Executive Officer
Kenneth W. Sanders 42 Senior Vice President and Chief Financial Officer
Mark J. Mariani 42 Executive Vice President, Sales
Andrew S. Sturner 34 Senior Vice President, Business Development
Thomas Jessiman 38 Senior Vice President of Operations
Thomas Cullen 39 Director
Gerry Hogan 53 Director
Richard B. Horrow 44 Director
Joseph Lacob 43 Director
Sean McManus 44 Director
Andrew Nibley 47 Director
Fredric G. Reynolds 48 Director
Michael P. Schulhof 57 Director
James C. Walsh 58 Director
</TABLE>
MICHAEL LEVY has served as the President, Chief Executive Officer and
Chairman of the Board of the Company since its inception in February 1994. From
1979 through March 1993, Mr. Levy served as President, Chief Executive Officer
and as a director of Lexicon Corporation, a high technology company specializing
in data communications and signal processing technology. From January 1988 to
June 1993, Mr. Levy also served as Chairman of the Board and Chief Executive
Officer of Sports-Tech International, Inc., a company engaged in the
development, acquisition, integration and sale of computer software, equipment
and computer-aided video systems used by professional, collegiate and high
school sports programs. Between June 1993 and February 1994, Mr. Levy was a
private investor. Mr. Levy serves as a member of the Board of Directors of
iVillage Inc.
KENNETH W. SANDERS has served as the Vice President and Chief Financial
Officer of the Company since September 1997 and was appointed Senior Vice
President in October 1998. From January 1996 to August 1997, Mr. Sanders served
as Senior Vice President, Chief Financial Officer of Paging Network, Inc., the
world's largest paging company. From May 1993 to December 1995, Mr. Sanders
served as Executive Vice President, Chief Financial Officer and a director of
CellStar Corporation, an integrated wholesaler and retailer of cellular phones
and related products. Between July 1979 and April 1993, Mr. Sanders was with
KPMG Peat Marwick, most recently as an Audit Partner from July 1990 to April
1993.
MARK J. MARIANI has served as the Company's Executive Vice President,
Sales since April 1996. From August 1991 to March 1996, Mr. Mariani served as
Executive Vice President of Sports Sales for Turner Broadcasting Sales, Inc.
From June 1990 to August 1991, Mr. Mariani served as Senior Vice President and
National Sales Manager for CNN in New York, and from May 1986 to June 1990, Mr.
Mariani served as Vice President for CNN Sales Midwest. Prior to joining Turner
Broadcasting, Mr. Mariani served as an Account Executive for WBBM, an owned and
operated CBS television station in Chicago, Illinois.
ANDREW S. STURNER has served as the Company's Vice President, Business
Development since June 1995 and was appointed Senior Vice President, Business
Development in October 1998. From May 1994 to June 1995, Mr. Sturner served as
Vice President of Business Development for MovieFone, Inc., an interactive
telephone service company. From March 1993 to May 1994, Mr. Sturner served as
President of Interactive Services, an interactive
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audiotext development company which he co-founded in 1992. From August 1990 to
March 1993, Mr. Sturner was a bankruptcy associate at the law firm of Stroock &
Stroock & Lavan.
THOMAS JESSIMAN has served as the Company's Senior Vice President of
Operations since February 1998. From March 1997 to February 1998, Mr. Jessiman
served as the Company's Vice President, International. From November 1995 to
March 1997, Mr. Jessiman served as the Director of Business Development for U S
WEST Media Group's Interactive Services Division and from September 1995 to
November 1995, Mr. Jessiman served as Director of Business Development in the
U S WEST Multimedia Group. From January 1992 to September 1994, Mr. Jessiman
served as Manager in IBM's Multimedia Group.
THOMAS CULLEN, appointed a director of the Company in April 1997, has
served as President of MediaOne Interactive Services, Inc. (formerly U S WEST,
Inc. Media Group's Interactive Services Division) since April 1997. Prior
thereto, Mr. Cullen held various positions with U S WEST since 1981, including
Vice President, Business Development for U S WEST Media Group's Interactive
Services Division from April 1992 to April 1997. Mr. Cullen serves as a member
of the Board of Directors of Preview Travel, Inc. and Third Age Media, Inc.
GERRY HOGAN, appointed a director of the Company in November 1996, has
served as Chairman and Chief Executive Officer of Cygnus Publishing, Inc., a
magazine publishing company, since May 1997. He served as President and Chief
Executive Officer of the Home Shopping Network from February 1993 to August
1995. Prior thereto, Mr. Hogan served as vice chairman of Whittle
Communications, L.P. from October 1990 to February 1993. From October 1971 to
September 1987, Mr. Hogan held various positions at Turner Entertainment
Networks and most recently served as President. Mr. Hogan serves as a member of
the Board of Directors of the Hard Rock Hotel & Casinos, London Fog Industries,
Inc. and Ethnic American Broadcasting Company and as a member of the Board of
Trustees of Eckerd College.
RICHARD B. HORROW, appointed a director of the Company in September 1994,
is an attorney and sports development consultant and has served as President of
Horrow Sports Ventures, Inc., a sports consulting firm, since its inception in
May 1988. Since July 1994, Mr. Horrow has been the host of the weekly television
show "The Sports Business Report," which is distributed nationally through Prime
Network/Sports Channel/New Sport affiliates, and has also hosted the weekly
radio show "The Sports Professor," aired nationally on Prime Radio. Mr. Horrow
also currently serves as a consultant for various sports-related matters to The
City of Oklahoma City, the National Football League, the Ladies Professional
Golf Association, the Baltimore Orioles and the National Association of
Professional Baseball Leagues. From March 1991 to March 1992, Mr. Horrow served
as the Executive Director of Golden Bear Sports Management, a sports management
firm.
JOSEPH LACOB, appointed a director of the Company in May 1995, has served
as a general partner of Kleiner Perkins Caufield & Byers, a venture capital
partnership, since May 1987. Mr. Lacob also serves on the Board of Directors of
Heartport, Inc., Corixa, Inc., IsoStent, Inc. and Pharmacyclics, Inc., as well
as several other privately held ventures in the medical and sports media
businesses.
SEAN McMANUS, appointed a director of the Company in March 1997, has
served as President of CBS Sports since December 1996. From October 1987 to
December 1996, Mr. McManus was Senior Vice President U.S. Television Sales and
Programming at Trans World International, the television division of
International Management Group. From August 1981 to October 1987, Mr. McManus
was Vice President Planning and Development at NBC Sports. From September 1979
to August 1981, Mr. McManus served as Associate Producer and Producer at NBC
Sports and from August 1977 to September 1979 he was a Production Assistant to
the Associate Producer at ABC Sports.
ANDREW NIBLEY, appointed a director of the Company in March 1996, has
served as President, Reuters NewMedia, Inc. ("Reuters NewMedia") since January
1998 and a director of Reuters NewMedia since January 1994. From January 1994 to
January 1998, Mr. Nibley was the Editor and Executive Vice President of Reuters
NewMedia. From January 1989 to January 1994, Mr. Nibley was the Editor, America
for Reuters America, Inc. He was also named the Senior Vice President, News and
Television of Reuters America, Inc. in July 1993.
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FREDRIC G. REYNOLDS, appointed a director of the Company in April 1999,
has served as Executive Vice President and Chief Financial Officer of CBS
Corporation since March 1994. From December 1990 to March 1994, Mr. Reynolds was
Senior Vice President, Finance and Chief Financial Officer of PepsiCo
International Foods.
MICHAEL P. SCHULHOF, appointed a director of the Company in November 1997,
is a private investor. From June 1974 to January 1996, Mr. Schulhof held various
positions at Sony Corporation of America, Inc. and most recently served as
President and Chief Executive Officer from June 1993 to January 1996. Mr.
Schulhof is a trustee of Brandeis University, Lincoln Center for the Performing
Arts, Inc., New York University Medical Center and the Brookings Institute,
serves on the Board of Directors of the Center on Addiction and Substance Abuse
at Columbia University, is a member of the Council on Foreign Relations and a
member of the Investment and Services Policy Advisory Committee to the U.S.
Trade Representative.
JAMES C. WALSH, appointed a director of the Company in August 1994, is an
attorney who has been engaged in the private practice of law since 1968. Mr.
Walsh has also served as the President of Namanco Productions, Inc., a sports
marketing and management firm, since 1969. Namanco Productions, Inc. is the
agent and manager of NFL Hall of Fame quarterback Joe Namath.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than 10 percent of the Company's Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Officers, directors and greater than 10
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, the Company believes that all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with during the year ended December 31, 1998, with the
exception of Forms 4 for each of Mike Levy and Mark Mariani in connection with
the Company's secondary offering in April 1998 and a Form 4 for Richard Horrow
reporting certain transactions in September 1998 which were inadvertently filed
late.
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ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the years
ended December 31, 1996, 1997 and 1998 by the Company's Chief Executive Officer
and its other executive officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION (1) ------------------
--------------------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Michael Levy, 1998 $306,250 $105,000 175,000 $25,097 (2)
Chairman, President and 1997 206,787 75,000 150,000 23,027 (2)
Chief Executive Officer 1996 167,887 50,000 -- 22,922 (2)
Kenneth W. Sanders, 1998 225,000 56,000 100,000 1,716 (4)
Senior Vice President and Chief 1997 72,717 15,000 100,000 47,579 (4)
Financial Officer (3)
Mark J. Mariani, 1998 197,917 50,000 100,000 --
Executive Vice President, Sales 1997 165,066 25,000 20,000 --
1996 112,243 10,000 80,000 8,205 (4)
Andrew Sturner, 1998 178,125 50,000 130,000 --
Senior Vice President, Business 1997 127,500 20,000 30,000 --
Development 1996 101,934 10,000 -- --
Thomas Jessiman 1998 171,875 40,000 100,000 --
Senior Vice President of 1997 118,750 10,000 50,000 5,318 (4)
Operations (5)
</TABLE>
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(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such column. The aggregate
amount of perquisites and other personal benefits provided to each Named
Executive Officer is less than 10% of the total annual salary and bonus of
such officer.
(2) Represents premiums paid for life and disability insurance policies for
the benefit of Mr. Levy.
(3) Mr. Sanders joined the Company in September 1997.
(4) Represents reimbursement of relocation and moving expenses.
(5) Mr. Jessiman joined the Company in March 1997.
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STOCK OPTION GRANTS
The following table sets forth information concerning the grant of
stock options made during 1998 to each Named Executive Officer.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
DATE OF OPTIONS EMPLOYEES IN PRICE ------------------------
NAME GRANT GRANTED(1) FISCAL YEAR ($/SHARE)(2) EXPIRATION DATE 5%($) 10%($)
---- ------- ---------- ----------- ------------ --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael Levy 09/16/98 175,000 8.84% 14.0625 09/14/2008 $1,547,670 $3,922,101
Mark J. Mariani 06/11/98 (3) 40,000 2.02 14.0625 06/10/2008 342,845 863,321 (4)
09/16/98 30,000 1.52 14.0625 09/14/2008 265,315 672,360
12/31/98 30,000 1.52 15.5625 12/31/2008 293,615 744,079
Kenneth W. Sanders 06/11/98 (3) 40,000 2.02 14.0625 06/10/2008 342,845 863,321 (4)
09/16/98 30,000 1.52 14.0625 09/14/2008 265,315 672,360
12/31/98 30,000 1.52 15.5625 12/31/2008 293,615 744,079
Andrew S. Sturner 06/11/98 (3) 30,000 1.52 14.0625 06/10/2008 257,134 647,491 (4)
09/16/98 70,000 3.54 14.0625 09/14/2008 619,068 1,568,840
12/31/98 30,000 1.52 15.5625 12/31/2008 293,615 744,079
Thomas Jessiman 06/11/98 (3) 50,000 2.54 14.0625 06/10/2008 428,557 1,079,152 (4)
09/16/98 25,000 1.26 14.0625 09/14/2008 221,096 560,300
12/31/98 25,000 1.26 15.5625 12/31/2008 244,679 620,065
</TABLE>
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(1) All such options were granted under the Incentive Plan and become
exercisable in installments over four years. Under the Incentive Plan,
these options will become immediately exercisable in the event of certain
change of control transactions involving the Company.
(2) In accordance with the rules of the Commission, the potential realizable
values for such options shown in the table are based on assumed rates of
stock price appreciation of 5% and 10% compounded annually from the date
the respective options were granted to their expiration date. These
assumed rates of appreciation do not represent the Company's estimate or
projection of the appreciation of shares of Common Stock of the Company.
(3) The indicated options were initially granted on June 11, 1998 with an
exercise price of $29.44 per share. Such options were repriced on
September 16, 1998 with the terms described in this table. See
"--Historical Information Regarding Repricing, Replacement or
Cancellation and Regrant of Options."
(4) The potential realizable values for these options are based on assumed
rates of stock price appreciation of 5% and 10% compounded annually from
September 16, 1998, the date these options were repriced, to their
expiration date. See "--Historical Information Regarding Repricing,
Replacement or Cancellation and Regrant of Options."
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STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUE TABLE
The following table sets forth information concerning (i) options
exercised during 1998 by the Named Executive Officers and (ii) the number and
value of unexercised stock options held by the Named Executive Officers at
fiscal year-end, based on a value per share of Common Stock of $15.5625, the
closing sale price of the Common Stock on the Nasdaq National Market System on
December 31, 1998.
OPTIONS EXERCISED IN 1998 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Levy -- -- 37,500 287,500 $283,594 $1,113,281
Mark J. Mariani 10,000 $349,300 49,166 140,834 691,399 610,476
Kenneth W. Sanders -- -- 51,666 148,334 390,724 470,526
Andrew S. Sturner -- -- 45,000 155,000 608,938 389,438
Thomas Jessiman -- -- 20,000 130,000 203,750 406,875
</TABLE>
DIRECTOR COMPENSATION
The Company reimburses its directors for out-of-pocket expenses
incurred in connection with their rendering of services as directors. The
Company currently does not pay cash fees to its directors for attendance at
meetings. Non-employee directors are eligible to receive options under the 1997
Plan.
On June 11, 1998, the Compensation Committee granted an option to purchase
3,000 shares of common stock to each of Messrs. Hogan, Horrow, Nibley, Schulhof
and Walsh at an exercise price of $29.44 per share. As a result of a significant
decline in the market price of the Company's Common Stock during the third
quarter of 1998, the Compensation Committee of the Board of Directors amended
these options on September 16, 1998 to reduce their exercise prices to the
market value of the Common Stock on such date ($14.0625 per share). None of the
other terms of the options so amended were affected and none of such options
were exercisable as of March 31, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Gerry Hogan, Michael Levy and
Sean McManus. Mr. Levy is an executive officer of the Company. Mr. Levy does not
participate in discussions or decisions regarding his own compensation or
performance appraisals.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Michael Levy,
pursuant to which he will serve as Chairman of the Board, President and Chief
Executive Officer through December 31, 2003, subject to extension or renewal.
Mr. Levy will receive an annual base salary of at least $300,000 and such
bonuses as may be awarded from time to time by the Board or any compensation
committee thereof. Pursuant to the agreement, the Company shall grant Mr. Levy
options to purchase at least 150,000 shares of Common Stock during each calendar
year of his employ at exercise prices to be determined at the time of grant. If
the agreement is terminated by the Company other than by reason of death,
Disability (as defined in the agreement) or Cause (as defined in the agreement),
or by Mr. Levy for Good Reason (generally defined as a material breach by the
Company of the agreement), the Company will pay to Mr. Levy within five days of
such termination an amount equal to the sum of Mr. Levy's accrued base salary
and vacation pay through the date of termination, a pro rata portion of his most
recent bonus pay and an amount equal to the greater of two times his current
annual base salary or the amount of base salary that would have been payable to
him for the remainder of the term of the agreement. The agreement prohibits Mr.
Levy from competing with the Company during his employment and for a period of
two years after termination of his employment.
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The Company has entered into a three-year employment agreement with
Kenneth W. Sanders pursuant to which he will serve as Chief Financial Officer
through September 2000. Mr. Sanders will receive an annual base salary of
$210,000, subject to annual review for merit increases, and such bonuses as may
be awarded from time to time by the Board or any compensation committee thereof.
Upon commencement of his employment, the Company granted Mr. Sanders options to
purchase 80,000 shares of Common Stock at an exercise price of $8.00 per share.
If the agreement is terminated by the Company other than by reason of death,
Disability (as defined) or Cause (as defined), or by Mr. Sanders for Good Reason
(generally defined as a material breach by the Company of the agreement), the
Company will continue to pay Mr. Sanders for a period of six months (one year,
if such termination is within one year following a change in control) his base
salary plus, an additional amount not to exceed $105,000 depending on the value
during such six-month period of the stock options granted to him. In addition,
all unvested stock options held by Mr. Sanders at the time his employment is
terminated will immediately vest and become exercisable for a period of one year
following the date of termination. The agreement prohibits Mr. Sanders from
competing with the Company during his employment and for a period of two years
after termination of his employment.
The Company has also entered into an agreement with each of Mark J.
Mariani, Andrew S. Sturner and Thomas Jessiman, whereby the Company has agreed
to provide each of Messrs. Mariani, Sturner and Jessiman with certain
compensation in the event any of such person's employment is terminated by the
Company without Cause. If any of such person's employment is terminated without
Cause, the Company will continue to pay Messrs. Mariani, Sturner or Jessiman, as
applicable, an amount equal to the installments of such person's base salary (at
the rate in effect immediately prior to the date of termination) that would have
been paid to such person had such employment not been so terminated for a period
of (i) six months if such termination is either prior to a change of control or
more than one year after a change of control or (ii) one year if such
termination is within one year following a change of control. In addition, all
unvested stock options held by Messrs. Mariani, Sturner or Jessiman, as
applicable, at the time such employment is terminated will immediately vest and
become exercisable for a period of one year following the date of termination.
STOCK PLANS
1995 STOCK OPTION PLAN. The Company's 1995 Stock Option Plan (the "1995
Plan") was adopted by the Board of Directors in August 1995 and approved by the
Company's shareholders in March 1996. The 1995 Plan provides for the grant of
"incentive stock options," within the meaning of the Internal Revenue Code, to
employees and officers of the Company, and non-qualified stock options to
employees, consultants, directors and officers of the Company. Up to 1,200,000
shares of Common Stock are authorized for issuance under the 1995 Plan. As of
December 31, 1998, options to purchase a total of 735,278 shares of Common Stock
at a weighted average exercise price of $4.86 were outstanding under the 1995
Plan (of which options to purchase approximately 385,193 shares were then
exercisable).
The 1995 Plan is administered by the Board of Directors, which has the
authority to select the optionees and determine the terms of the options
granted, including (i) the number of shares subject to each option, (ii) option
exercise terms, (iii) the exercise price of the option (which in the case of an
incentive stock option cannot be less that the fair market value of the Common
Stock as of the date of grant), (iv) the duration of the option, and (v) the
time, manner and form of payment upon exercise of an option. An option is not
transferable by the optionholder except by will or by the laws of descent and
distribution. Generally, no incentive stock option may be exercised more than
three months following termination of employment, unless the termination is due
to death or disability, in which case the option is exercisable for a maximum of
twelve months after such termination or unless the termination is due to the
employee's misconduct, in which case the option shall terminate immediately.
1997 INCENTIVE COMPENSATION PLAN. The 1997 Incentive Compensation Plan
(the "Incentive Plan") which is designed to assist the Company in attracting,
motivating, retaining and rewarding high-quality executives and other employees,
officers, directors and independent contractors (collectively, the
"Participants") by enabling the Participants to acquire or increase a
proprietary interest in the Company, as well as providing the Participants with
annual and long term performance incentives to expend their maximum efforts in
the creation of shareholder value. Pursuant to the Incentive Plan, the Company
may grant Participants stock options, stock appreciation rights, restricted
stock, deferred stock, other stock-related awards and performance or annual
incentive awards that may be
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settled in cash, stock or other property (collectively, "Awards"). A committee
comprised of at least two non-employee directors (the "Committee"), or in the
absence thereof the Board of Directors, administers and interprets the Incentive
Plan and is authorized to grant Awards to all eligible Participants.
The total number of shares of Common Stock that may be subject to the
granting of Awards under the Incentive Plan is equal to: (i) 3,000,000 shares,
plus (ii) the number of shares with respect to Awards previously granted under
the Incentive Plan that terminate without being exercised, expire, are forfeited
or canceled, and the number of shares of Common Stock that are surrendered in
payment of any Awards or any tax withholding requirements. As of December 31,
1998, options to purchase a total of 2,086,426 shares of Common Stock at a
weighted average exercise price of $11.28 were outstanding under the Incentive
Plan (of which options to purchase approximately 103,982 shares were then
exercisable). As a result of a significant decline in the market price of the
Company's Common Stock during the third quarter of 1998, certain options granted
pursuant to the Incentive Plan had exercise prices substantially in excess of
the market price of the Company's Common Stock. In order to ensure that such
options continued to provide sufficient incentives to key employees to continue
their meaningful efforts on behalf of the Company, in September 1998 the Company
amended an aggregate of 230,000 outstanding options held by certain officers and
directors to reduce their exercise prices to current market value, and in
October 1998 the Company amended an aggregate of 625,382 outstanding options
held by certain other employees of the Company to reduce their exercise prices
to current market value. None of the other terms of the options so amended were
affected and, as of March 31, 1999, 47,632 of such options were exercisable.
The right of a Participant to exercise or receive a grant or settlement of
an Award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the Committee. In
addition, the Incentive Plan authorizes specific annual incentive Awards, which
represent a conditional right to receive cash, shares of Common Stock or other
Awards upon achievement of certain pre-established performance goals and
subjective individual goals during a specified fiscal year.
Awards may be settled in the form of cash, shares of Common Stock, other
Awards or other property in the discretion of the Committee. The Committee may
condition any payment relating to an Award on the withholding of taxes and may
provide that a portion of any shares of Common Stock or other property to be
distributed will be withheld (or previously acquired shares of Common Stock or
other property surrendered by the Participant) to satisfy withholding and other
tax obligations. Awards granted under the Incentive Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
Participant's death, except that the Committee may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions.
The Incentive Plan also provides that each non-employee director who is
not affiliated with or a designee of a beneficial owner of more than 5% of the
Common Stock will automatically receive (i) an option to purchase 12,000 shares
of Common Stock on the date of his or her election or appointment and (ii) on
the date of the Company's annual meeting of stockholders, an option to purchase
3,000 shares of Common Stock. Such options have a term of 10 years and become
exercisable at the rate of 25% per year commencing on the first anniversary of
the date of grant; provided, however, that the options shall be fully
exercisable in the event that, while serving as a director, the non-employee
director dies, suffers a "disability," or "retires" (within the meaning of such
terms as defined in the Incentive Plan). The per share exercise price of options
granted to non-employee directors will be equal to the fair market value of a
share of Common Stock on the date such option is granted. Unless otherwise
extended in the sole discretion of the Compensation Committee, the unexercised
portion of any formula option grant will become null and void (i) three months
after the date on which the non-employee director ceases to be a director for
any reason other than the non-employee director's willful misconduct or
negligence, disability, death or retirement, (ii) immediately in the event of
the non-employee director's willful misconduct or negligence, (iii) at the
expiration of its original term if the non-employee ceases to be a director by
reason or his or her retirement, or (iv) one year after the non-employee
director ceases to be a director by reason of his or her disability or death.
EMPLOYEE STOCK PURCHASE PLAN. The Company has reserved for issuance
500,000 shares of Common Stock under the Company's 1997 Employee Stock Purchase
Plan (the "Purchase Plan"). All eligible employees (as defined therein), other
than holders of stock or options to purchase 5% or more of the Company's Common
Stock, employed by the Company from time to time may elect to participate in the
Purchase Plan. Under the Purchase
9
<PAGE> 10
Plan, participants are granted a purchase right to acquire shares of Common
Stock at semi-annual intervals, during 12-month offering periods, with the
exception of the first period, which commenced on November 13, 1997 and ended on
December 31, 1998. The purchase price for the shares under the Purchase Plan
will be paid by the employee through periodic payroll deductions and/or lump sum
payments not to exceed 25% of the participant's total annual compensation. The
purchase price per share will be equal to 85% of the lower of (i) the fair
market value of the Common Stock at the beginning of the offering period (which,
in the case of the first offering period, was $8.00) or, if greater, the fair
market value of the Common Stock on the date the participant enrolls in the
Purchase Plan, or (ii) the fair market value per share of the Common Stock on
the purchase date. In no event may a participant purchase more than $25,000 of
Common Stock pursuant to the Purchase Plan in any calendar year. As of December
31, 1998, employees' contributions to the Purchase Plan aggregating
approximately $2,325,751 had been applied to the purchase of 329,085 shares of
Common Stock.
401(k) PLAN
The Company maintains a 401(k) retirement savings plan (the "401(k)
Plan"). All employees of the Company, meeting certain minimum eligibility
requirements, are eligible to participate in the 401(k) Plan. The 401(k) Plan
provides that each participant may contribute up to 15% of his or her pre-tax
gross compensation (but not greater than a statutorily prescribed annual limit).
The percentage elected by certain highly compensated participants may be
required to be lower. The 401(k) Plan permits, but does not require, additional
contributions to the 401(k) Plan by the Company. As of December 31, 1998, the
Company had not made any such contributions. All amounts contributed by employee
participants in conformance with plan requirements and earnings on such
contributions are fully vested at all times.
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<PAGE> 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of March 31, 1999 by (a) each person
known to the Company to own beneficially more than 5 percent of the Company's
outstanding Common Stock, (b) each director who owns any such shares, (c) each
Named Executive Officer who owns any such shares (see "Item 11. Executive
Compensation -- Summary Compensation Table"), and (d) the directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED (2)
---------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES PERCENT
- ---------------------------------------- ------ -------
<S> <C> <C>
CBS Corporation (3)...................................................... 4,540,000 19.5%
Massachusetts Financial Services Company (4)............................. 2,451,107 11.0
Thomas Cullen (5)........................................................ 1,596,652 7.1
MediaOne Interactive Services, Inc....................................... 1,595,852 7.1
Michael Levy (6)......................................................... 1,288,417 5.7
Joseph Lacob (7)......................................................... 558,460 2.5
Andrew Nibley (8)........................................................ 425,672 1.9
James C. Walsh (9)....................................................... 160,000 *
Mark J. Mariani (10)..................................................... 55,832 *
Kenneth Sanders (11)..................................................... 41,082 *
Andrew S. Sturner (12)................................................... 32,238 *
Thomas Jessiman (13)..................................................... 31,457 *
Richard B. Horrow (14)................................................... 24,750 *
Gerry Hogan (15)......................................................... 20,000 *
Michael P. Schulhof (16)................................................. 7,333 *
Sean McManus............................................................. -- *
Fredric G. Reynolds...................................................... -- *
All directors and executive officers as a group (14 persons) (17)........ 4,241,893 18.4
</TABLE>
- -----------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o SportsLine USA, Inc., 6340 N.W. 5th Way, Fort Lauderdale,
Florida 33309. Except as otherwise indicated, such beneficial owners have
sole voting and investment power with respect to all shares of Common Stock
owned by them, except to the extent such power may be shared with a spouse.
(2) The number of shares of Common Stock deemed outstanding as of March 31,
1999 includes (i) 22,384,266 shares of Common Stock outstanding, and (ii)
an aggregate of 1,524,619 shares issuable pursuant to options and warrants
held by the respective person or group which may be exercised within 60
days thereafter ("presently exercisable stock options" and "presently
exercisable warrants," respectively), as set forth below. Pursuant to the
rules of the Securities and Exchange Commission, presently exercisable
stock options and presently exercisable warrants are deemed to be
outstanding and to be beneficially owned by the person or group holding
such options or warrants for the purpose of computing the percentage
ownership of such person or group, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person or
group.
(3) Reflects (i) 3,660,000 shares held of record and (ii) 880,000 shares
subject to presently exercisable warrants. Does not include any additional
shares of Common Stock and warrants to purchase Common Stock to be issued
to CBS after March 31, 1999 pursuant to the CBS agreement. See "Certain
Relationships and Related Transactions -- CBS Agreement." The address of
CBS is 51 West 52nd Street, New York, New York 10019.
(4) This disclosure of Massachusetts Financial Services Company ("MFS") is
based solely upon information set forth in MFS's Schedule 13G/A dated
February 11, 1999. The address of MFS is 500 Boylston Street, Boston, MA
02116.
(5) Reflects (i) 800 shares held of record and (ii) 1,595,852 shares held of
record by MediaOne of which Mr. Cullen is President. Mr. Cullen disclaims
beneficial ownership of the shares held of record by MediaOne except to the
extent of his pecuniary interest therein. The address of MediaOne and Mr.
Cullen is 9000 East Nichols, Englewood, Colorado 80112.
(6) Reflects (i) 1,235,292 shares held of record and (ii) 53,125 shares
issuable upon exercise of presently exercisable stock options. Excludes
271,875 shares issuable upon exercise of stock options held by Mr. Levy not
exercisable within 60 days.
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<PAGE> 12
(7) Reflects (i) 63,803 shares held of record by Mr. Lacob, (ii) 6,602 shares
held of record by a trust for the benefit of Mr. Lacob's children for which
Mr. Lacob disclaims beneficial ownership and (iii) 158,055 shares held of
record and 330,000 shares subject to presently exercisable warrants held by
various funds associated with Kleiner Perkins Caufield & Byers of which Mr.
Lacob is a general partner for which Mr. Lacob disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein. Mr. Lacob's address is 2750 Sand Hill Road, Menlo Park, California
94025.
(8) Reflects shares held of record by Reuters NewMedia of which Mr. Nibley is a
director and President. Mr. Nibley disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein. The address
of Reuters NewMedia and Mr. Nibley is 1700 Broadway, New York, New York
10019.
(9) Reflects (i) 74,000 shares held of record by Mr. Walsh, (ii) 74,000 shares
subject to presently exercisable warrants held by Mr. Walsh and (iii) 6,000
shares held of record and 6,000 shares subject to presently exercisable
warrants held by the children of Mr. Walsh.
(10) Reflects (i) 6,250 shares held of record and (ii) 49,582 shares issuable
upon exercise of presently exercisable stock options. Excludes 130,418
shares issuable upon exercise of stock options held by Mr. Mariani not
exercisable within 60 days.
(11) Reflects (i) 4,000 shares held of record and (ii) 37,082 shares issuable
upon exercise of presently exercisable stock options. Excludes 137,918
shares issuable upon exercise of stock options held by Mr. Sanders not
exercisable within 60 days.
(12) Reflects (i) 4,948 shares held of record and (ii) 27,290 shares subject to
presently exercisable stock options. Excludes 147,710 shares issuable upon
exercise of stock options held by Mr. Sturner not exercisable within
60 days.
(13) Reflects (i) 6,250 shares held of record and (ii) 25,207 shares subject to
presently exercisable stock options. Excludes 124,793 shares issuable upon
exercise of stock options held by Mr. Jessiman not exercisable within
60 days.
(14) Reflects (i) 6,750 shares held of record by Mr. Horrow, (ii) 3,000 shares
owned by a corporation wholly-owned by Mr. Horrow and (iii) 15,000 shares
subject to presently exercisable warrants. Excludes 5,000 shares issuable
upon exercise of warrants and 3,000 shares issuable upon exercise of stock
options held by Mr. Horrow that are not exercisable within 60 days.
(15) Reflects 20,000 shares issuable upon exercise of presently exercisable
warrants. Excludes 20,000 shares issuable upon exercise of warrants and
3,000 shares issuable upon exercise of stock options held by Mr. Hogan that
are not exercisable within 60 days.
(16) Reflects 7,333 shares issuable upon exercise of presently exercisable
options. Excludes 15,667 shares issuable upon exercise of stock options
held by Mr. Schulhof that are not exercisable within 60 days.
(17) Includes the information in the notes herein, as applicable. Reflects (i)
3,597,274 shares held of record, (ii) 199,619 shares subject to presently
exercisable stock options and (iii) 445,000 shares subject to presently
exercisable warrants. Excludes (i) 834,381 shares issuable upon exercise of
stock options and (ii) 25,000 shares issuable upon exercise of warrants not
exercisable within 60 days.
12
<PAGE> 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CBS AGREEMENT. In March 1997, the Company entered into a strategic
alliance with CBS pursuant to which CBS acquired a minority ownership interest
in the Company and the Company's flagship Web site was renamed
"cbs.sportsline.com". The agreement provides for cbs.sportsline.com to receive,
among other things, extensive network television advertising and on-air
promotion during the term of the agreement, primarily during CBS television
sports broadcasts such as the NFL, the NCAA Men's Basketball Tournament, NCAA
Football, PGA Tour events, U.S. Open tennis and the Daytona 500. In addition,
the Company has the right to use certain CBS logos and television-related sports
content on cbs.sportsline.com and in connection with the operation and promotion
of that Web site. CBS and the Company will seek to maximize revenue through a
joint advertising sales effort and by creating merchandising opportunities. The
agreement also provides the Company access to certain CBS television-related
sports content and the potential to create distribution and revenue
opportunities with more than 200 CBS affiliates throughout the United States. In
addition, under the terms of the agreement, the Company and CBS will share
advertising revenue on pages of cbs.sportsline.com that relate to certain CBS
broadcast sports events or that contain CBS content.
In February 1999, the Company amended its agreement with CBS to extend the
term of the agreement for five years,through 2006. Commencing with calendar year
1999, CBS will provide advertising and promotion in accordance with a fixed
promotion schedule. The Company accelerated the issuance to CBS of 1,052,937
shares of Common Stock and warrants to purchase 760,000 shares of Common Stock,
which originally were to be issued in 2000 and 2001. The Company also issued to
CBS new warrants to purchase 1,200,000 shares of Common Stock, which vest on
various dates through January 2001, and agreed to issue to CBS on specified
issue dates for each of the sixth through tenth contract years Common Stock
having a fair market value of $20 million on each such issue date. In addition,
a revenue sharing provision which required the Company to pay CBS a percentage
of certain advertising revenues was replaced with a new revenue sharing formula
based on specified percentages of the Company's "Net Revenue" (as defined in the
agreement).
REUTERS NEWMEDIA AGREEMENT. In March 1996, the Company and Reuters
NewMedia entered into an agreement pursuant to which the Company agreed to
provide Reuters NewMedia a 60-day exclusive negotiation period with respect to
(i) the provision of non-U.S. sports news and information for any Internet,
wireless or other proprietary online service marketed to foreign countries or
regions that the Company considers launching, (ii) the branding of such service
and (iii) an investment in such service. The Company also agreed to provide
Reuters NewMedia a reasonable opportunity to match the terms for such an
agreement offered by another party if such terms are equivalent or less
favorable to the Company than those offered by Reuters NewMedia. The Company
also agreed (i) subject to technological feasibility, to negotiate an agreement
to develop a customized version of cbs.sportsline.com available only to Reuters
NewMedia subscribers through a Reuters NewMedia product, (ii) to grant Reuters
NewMedia the exclusive right to redistribute the Company's news and information
content within a Reuters NewMedia product as part of a sports news service,
subject to negotiation of royalties and the agreement of the Company's third
party content providers and (iii) to provide Reuters NewMedia an opportunity to
license to the Company content specifically related to sports outside the United
States, if such content is already owned, licensed or produced by Reuters
NewMedia, and to license such content from Reuters NewMedia if its proposal is
equivalent to or better than proposals received from third parties.
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<PAGE> 14
HORROW CONSULTING AGREEMENT. In September 1994, the Company and Horrow
Sports Ventures, an entity owned by Richard Horrow, a director of the Company,
entered into a consulting agreement that, among other things, provides for
Horrow Sports Ventures and Mr. Horrow to assist the Company in obtaining access
to representatives of professional sports leagues, college sports associations
and television networks and developing strategic, promotional and marketing
plans. In consideration of the services rendered pursuant to the agreement, Mr.
Horrow received warrants to purchase 10,000 shares of Common Stock at an
exercise price of $5.00 per share in August 1994 and received warrants to
purchase an additional 10,000 shares of Common Stock at an exercise price of
$5.00 per share in January 1997. Horrow Sports Ventures currently receives a
consulting fee of $5,000 per month.
SCHULHOF CONSULTING AGREEMENT. In June 1996, the Company and Michael P.
Schulhof entered into a two year consulting agreement that provides for Mr.
Schulhof to consult with and advise the Company from time to time with respect
to corporate, business and marketing strategy. In consideration of the services
rendered pursuant to the agreement, Mr. Schulhof received warrants to purchase
40,000 shares of Common Stock at an exercise price of $5.00 per share in 1994
and received warrants to purchase an additional 8,000 shares of Common Stock at
an exercise price of $8.00 per share in December 1997.
PLANNED LICENSING AGREEMENT. In August 1994, the Company and Planned
Licensing, Inc., a wholly owned subsidiary of Namanco Productions, Inc.
("Planned Licensing"), entered into a five-year agreement pursuant to which
Planned Licensing agreed to cause Joe Namath to provide certain services for the
Company, including endorsements of the Company's products. James C. Walsh, a
director of the Company, is the president and sole stockholder of Namanco
Productions, Inc. The Company has the right to renew the agreement for three
additional five-year terms. Under the agreement, the Company is obligated to pay
Planned Licensing royalties equal to $0.15 per month for each individual who
becomes a member during the initial term of the agreement and remains a member
for three months, and, during each renewal term, $0.15 per month for each new
member, or $0.05 per month if the total royalties during the last calendar year
prior to the renewal term were more than $500,000. The royalties paid to Planned
Licensing for the years ended December 31, 1996, 1997 and 1998 were $18,645,
$49,967 and $78,834, respectively.
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SPORTSLINE USA, INC.
By: /s/ Michael Levy
-------------------------------------
Michael Levy
April 28, 1999 President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Michael Levy President, Chief Executive Officer and April 28, 1999
- -------------------------------- Director (principal executive officer)
Michael Levy
/s/ Kenneth W. Sanders Chief Financial Officer April 28, 1999
- -------------------------------- (principal financial and accounting officer)
Kenneth W. Sanders
/s/ Thomas Cullen Director April 28, 1999
- --------------------------------
Thomas Cullen
/s/ Gerry Hogan Director April 28, 1999
- --------------------------------
Gerry Hogan
/s/ Richard B. Horrow Director April 28, 1999
- --------------------------------
Richard B. Horrow
/s/ Joseph Lacob Director April 28, 1999
- --------------------------------
Joseph Lacob
/s/ Sean McManus Director April 28, 1999
- --------------------------------
Sean McManus
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
/s/ Fredric G. Reynolds Director April 28, 1999
- --------------------------------
Fredric G. Reynolds
/s/ Andrew Nibley Director April 28, 1999
- --------------------------------
Andrew Nibley
/s/ Michael P. Schulhof Director April 28, 1999
- --------------------------------
Michael P. Schulhof
/s/ James C. Walsh Director April 28, 1999
- --------------------------------
James C. Walsh
</TABLE>
16
