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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
INTERNET SPORTS NETWORK, INC.
- --------------------------------------------------------------------------------
(Name of issuer)
Common Stock, $.001 Par Value
- --------------------------------------------------------------------------------
(Title of class of securities)
46058W103
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(CUSIP number)
Michael Levy
President and Chief Executive Officer
SportsLine.com, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
(954) 351-2120
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(Name, address and telephone number of person
authorized to receive notices and communications)
Copy to:
Ira N. Rosner, Esq.
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
(305) 579-0844
Telecopy (305) 579-0717
December 21, 1999
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box. /_/
(Continued on following pages)
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- -------------------
CUSIP No. 46058W103 SCHEDULE 13D
- -------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
SportsLine.com, Inc., [IRS #65-0470894]
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
6,856,176
NUMBER OF --------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 6,856,176
PERSON WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,856,176
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
29.87%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
2
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SPORTSLINE.COM, INC.
SCHEDULE 13D
Item 1. Security and Issuer.
This Statement relates to the shares of common stock (the "Common
Stock"), par value $.001 per share, of Internet Sports Network, Inc., a Florida
corporation (the "Company").
The principal executive offices of the Company are located at 225
Richmond Street West, Suite 403, Toronto, Ontario, Canada, M5V 1W2.
Item 2. Identity and Background.
This statement is filed by SportsLine.com, Inc., a Delaware corporation
(the "Reporting Person").
The address of the Reporting Person is 6340 N.W. 5th Way, Fort
Lauderdale, FL 33309.
The principal business of the Reporting Person is to provide
Internet-based sports media including branded, interactive information
and programming as well as merchandise to sports enthusiasts worldwide.
The names, present principal occupation, or employment and the name,
principal businesses and address of any corporation or other
organization in which such employment is conducted of all executive
officers and directors of the Reporting Person are listed on Schedule 1
hereto. All executive officers and directors of the Reporting Person
are citizens of the United States.
Neither the Reporting Person nor any executive officer or director
thereof, has during the past five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
Neither the Reporting Person nor any executive officer or director
thereof, has been during the past five years, a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The Reporting Person entered into a Securities Purchase Agreement (the
"Purchase Agreement") with the Company dated December 21, 1999, a copy of which
is attached hereto as Exhibit 1 and is incorporated herein by reference,
pursuant to which the Reporting Person used working capital to purchase a
Convertible Promissory Note (the "Note") in the principal amount of
3
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$5,000,000, a copy of which is attached hereto as Exhibit 2 and is incorporated
herein by reference and a Stock Purchase Warrant (the "Warrant"), a copy of
which is attached hereto as Exhibit 3 and is incorporated herein by
reference, for an aggregate purchase price of $5,000,010. The Note is initially
convertible at a conversion price of $2.90 per share into 1,724,138 shares of
Common Stock. The Warrant is initially exercisable for 1,033,296 shares of
Common Stock at an exercise price of $2.90 per share.
The Reporting Person also entered into a Promotion Agreement (the
"Promotion Agreement") with the Company dated December 21, 1999, pursuant to
which, the Reporting Person is obligated to perform certain promotional services
for the Company in exchange for compensatory fees, a portion of which was
payable upon effectiveness of the Promotion Agreement by the issuance to the
Reporting Person of 4,098,742 shares of Common Stock. In addition, the Reporting
Person and the Company entered into a letter agreement (the "Letter Agreement"),
a copy of which is attached hereto as Exhibit 4 and incorporated herein by
reference, which gives the Company the right to repurchase a portion of such
shares in the event the Promotion Agreement terminates under certain conditions.
Item 4. Purpose of the Transaction.
The Reporting Person acquired its interest in the Common Stock of the
Company for investment purposes and not for the purpose or in connection with
any transaction having the purpose of changing the control of the Company.
Except as set forth in Item 3 and this Item 4, the Reporting Person has no plans
or proposals with respect to any of the actions specified in clauses (a) through
(j) of Item 4 of Schedule 13D; however, pursuant to the Purchase Agreement, the
Company has agreed to fix the size of its Board of Directors at seven members
and to take all steps necessary to elect or cause the election of two directors
designated by the Reporting Person, who initially are Mark Mariani and Andrew
Sturner. The Purchase Agreement also contains certain negative covenants which,
among other things, restrict the Company's power to issue or sell securities of
the Company, enter into any transaction which would require disclosure pursuant
to Rule 404 of Regulation S-K under the Securities Act of 1933, merge the
Company with another entity, sell assets, acquire other businesses, liquidate or
dissolve the Company, create or fill a vacancy on the Board of Directors of the
Company, enter into a joint venture with another entity, or amend the Company's
Articles of Incorporation or Bylaws in certain respects. The foregoing
description of the Purchase Agreement is qualified in its entirety by the full
text thereof set forth in Exhibit 1 hereto which is incorporated herein by
reference.
Item 5. Interest in Securities of the Issuer.
(a) The Reporting Person beneficially owns 6,856,176 shares of the
outstanding Common Stock of the Company, with such beneficial
ownership consisting of (i) 4,098,742 of shares of Common
Stock; (ii) the Note which is immediately convertible into
1,724,138 shares of Common Stock; and (iii) the Warrant which
is immediately exercisable to purchase 1,033,296 shares of
Common Stock. The
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6,856,176 shares constitute 29.87% of the outstanding Common
Stock, based on a total of 20,200,000 shares of Common Stock
outstanding as of September 30, 1999 (as stated on the
Company's Form 10QSB filed with the Securities Exchange
Commission on November 15, 1999).
(b) The Reporting Person has the sole power to vote and dispose of
the 6,856,176 shares of Common Stock.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Pursuant to the Purchase Agreement, subject to certain conditions, the
Reporting Person has preemptive rights to subscribe for and purchase the same
percentage of the securities offered by the Company in an offering, as the
percentage of the outstanding securities of the Company held by the Reporting
Person at the time of the offering. In addition, pursuant to the Purchase
Agreement, subject to customary restrictions, the Reporting Person has the right
to require the Company to register under federal and state securities laws the
securities of the Company held by the Reporting Person. The Note and the Warrant
also contain customary anti-dilution protections in the event the Company issues
shares of its Common Stock or equivalents at a price per share below the then
current conversion price of the Note or the exercise price of the Warrant
(initially set at $2.90 in both cases). The foregoing descriptions of the
Purchase Agreement, Note and Warrant are qualified in their entirety by the full
text thereof set forth in Exhibits 1, 2 and 3 hereto, respectively, which are
incorporated herein by reference.
Other than as described in the foregoing paragraph and under Items 3
and 4 above, the Reporting Person does not have any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities of the Company, including, but not limited to,
transfer or voting of any securities, finder's fees, joint ventures, loan or
option arrangements, put or calls, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: Purchase Agreement
Exhibit 2: Note
Exhibit 3: Warrant
Exhibit 4: Letter Agreement
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Dated: December 30, 1999
SportsLine.com, Inc.
By: /s/ Kenneth W. Sanders
-------------------------------------
Kenneth W. Sanders
Senior Vice President and
Chief Financial Officer
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SCHEDULE 1
EXECUTIVE OFFICERS
NAME OFFICE AND ADDRESS OF EMPLOYMENT
- ---- --------------------------------
Michael Levy Chairman of the Board, President and Chief
Executive Officer
SportsLine.com, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
Mark J. Mariani President of Sales and Marketing
SportsLine.com, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
Andrew S. Sturner President of Corporate and Business Development
SportsLine.com, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
Kenneth W. Sanders Senior Vice President and Chief Financial Officer
SportsLine.com, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
Dan Leichtenschlag Senior Vice President of Operations
SportsLine.com, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
DIRECTORS
PRESENT PRINCIPAL OCCUPATION AND
NAME ADDRESS OF EMPLOYMENT
- ---- ---------------------
Thomas Cullen President
MediaOne Interactive Services, Inc.
9000 East Nichols Avenue, Suite 100
Englewood, CO 80112
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Gerry Hogan Chairman and Chief Executive Officer
Cygnus Publishing, Inc.
405 Central Avenue, Suite 600
St. Petersburg, FL 33701
Richard B. Horrow President
Horrow Sports Ventures, Inc.
6800 SW 40th Street, Suite 174
Miami, FL 33155
Joseph Lacob Partner
Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park , CA 94025
Sean McManus President
CBS Sports
51 West 52nd Street, 36th Floor
New York, NY 10019
Andrew Nibley President & CEO
GetMusic LLC
1540 Broadway, 26th Floor
New York, NY 10036
Fredric G. Reynolds Executive Vice President and Chief Financial Officer
CBS Corporation
51 West 52nd Street
New York, NY 10019
Michael P. Schulhof Private Investor
375 Park Avenue, Suite 1506
New York, NY 10152
James C. Walsh Attorney
Planned Licensing, Inc.
300 east 51st Street, #11A
New York, NY 10022
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EXHIBIT INDEX
Exhibit Number Title
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Exhibit 1 Purchase Agreement
Exhibit 2 Note
Exhibit 3 Warrant
Exhibit 4 Letter Agreement
9
Exhibit 1
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SECURITIES PURCHASE AGREEMENT
BETWEEN
SPORTSLINE.COM, INC.
AND
INTERNET SPORTS NETWORK, INC.
DECEMBER 21, 1999
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<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - ISSUANCE AND SALE OF THE SECURITIES...............................1
1.1 Securities Purchase.............................................1
1.2 Closing Transactions............................................1
ARTICLE II - CONDITIONS TO CLOSING............................................2
2.1 Conditions To SPLN's Obligation.................................2
2.2 Conditions To The Company's Obligations.........................3
ARTICLE III - COVENANTS.......................................................4
3.1 Affirmative Covenants of the Company............................4
3.2 Negative Covenants of the Company...............................5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................8
4.1 Organization and Corporate Power................................8
4.2 Authorization of Transactions...................................8
4.3 Capitalization..................................................9
4.4 Absence of Conflicts...........................................10
4.5 Financial Statements...........................................10
4.6 Absence of Undisclosed Liabilities.............................11
4.7 Absence of Material Adverse Change.............................11
4.8 Absence of Certain Developments................................11
4.9 Title to Properties............................................12
4.10 Tax Matters....................................................13
4.11 Litigation; Proceedings........................................13
4.12 Brokerage......................................................13
4.13 Governmental Licenses and Permits..............................13
4.14 Insurance......................................................14
4.15 Affiliate Transactions.........................................14
4.16 Compliance With Laws...........................................14
4.17 Governmental Consent, Etc......................................15
4.18 Disclosure.....................................................15
4.19 Exemption From Registration; Restrictions on Offer and Sale
of Same or Similar Securities................................15
4.20 Authority Relative to this Agreement...........................15
4.21 Intangible Rights..............................................16
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SPLN...........................16
5.1 Organization and Power.........................................16
5.2 Authorization..................................................16
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Page
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5.3 No Violation...................................................16
5.4 Brokerage......................................................16
5.5 Investment Representations.....................................16
ARTICLE VI - DEFINITIONS.....................................................17
ARTICLE VII - VOTING RIGHTS..................................................20
7.1 Voting.........................................................20
ARTICLE VIII - REGISTRATION RIGHTS...........................................21
8.1 Demand Registrations...........................................21
8.2 Piggyback Registration.........................................24
8.3 Registration Procedures........................................25
8.4 Expenses.......................................................26
8.5 Indemnification and Contribution...............................26
8.6 Damages........................................................28
ARTICLE IX - ADDITIONAL AGREEMENTS...........................................28
9.1 Survival.......................................................28
9.2 Indemnification................................................28
9.3 Indemnification Procedure......................................29
9.4 Press Releases and Announcements...............................30
9.5 Further Transfers..............................................30
9.6 Specific Performance...........................................31
9.7 Transfer of Securities.........................................31
ARTICLE X - MISCELLANEOUS 32
10.1 Amendment and Waiver...........................................32
10.2 Notices........................................................32
10.3 Binding Agreement; Assignment..................................33
10.4 Severability...................................................34
10.5 No Strict Construction.........................................34
10.6 Headings; Interpretation.......................................34
10.7 Entire Agreement...............................................34
10.8 Counterparts...................................................34
10.9 Governing Law..................................................34
10.10 Parties in Interest............................................34
ii
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EXHIBITS
Exhibit A - Form of Convertible Note
Exhibit B - Form of Warrant
Exhibit C - Financial Disclosure
iii
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LIST OF SCHEDULES
Schedule 4.1 - Subsidiaries
Schedule 4.3(a) - Company Capitalization Schedule
Schedule 4.7 - Material Adverse Change
Schedule 4.8 - Certain Developments
Schedule 4.9 - Security Interests
Schedule 4.11 - Litigation; Proceedings
Schedule 4.14 - D&O Insurance
iv
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of December
21, 1999 by and between SportsLine.com, Inc., a Delaware corporation ("SPLN"),
and Internet Sports Network, a Florida corporation (the "Company"). Except as
otherwise indicated herein, capitalized terms used herein are defined in Article
VI hereof.
Subject to the terms and conditions set forth herein, SPLN desires to
purchase from the Company, and the Company desires to issue to SPLN, (a) a
Convertible Promissory Note in the principal amount of $5,000,000 (the "Note"),
convertible at any time after the date of issuance into shares of the Company's
common stock, par value $0.001 per share (the "Common Stock"), under
circumstances as described herein; and (b) a warrant (the "Warrant") to purchase
at any time after the Closing Date shares of Common Stock under the
circumstances as described herein. The Note, Underlying Common Stock, and the
Warrant are sometimes referred to herein as the "Securities."
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties hereto agree
as follows:
ARTICLE I
ISSUANCE AND SALE OF THE SECURITIES
1.1 Securities Purchase. On the terms and subject to the conditions of
this Agreement, at the Closing:
(a) The Company shall authorize the issuance and sale to SPLN
of the Note having the rights and preferences set forth in Exhibit A attached
hereto, which will initially be convertible into an aggregate of 1,722,160
shares of Common Stock. The total purchase price of the Note will be $5,000,000.
(b) In consideration of $10.00 and in order to induce the
transactions contemplated hereby, the Company shall authorize the issuance and
sale to SPLN of the Warrant, having the rights and preferences set forth in
Exhibit B attached hereto, initially exercisable to purchase up to an aggregate
of 1,033,296 shares of Common Stock at an initial exercise price per share equal
to $2.90.
1.2 Closing Transactions. The closing of the transactions contemplated
by this Agreement (the "Closing") will take place at the offices of Greenberg
Traurig, P.A., 1221 Brickell Avenue, Suite 2200, Miami, Florida 33131
immediately after the execution of this Agreement. The Company shall issue and
deliver to SPLN, (i) the Note duly registered in the name of SPLN, against
payment by SPLN of $5,000,000 and (ii) the Warrant duly registered in the name
of SPLN (each of the foregoing are collectively referred to herein as the
"Closing Transactions").
<PAGE>
ARTICLE II
CONDITIONS TO CLOSING
2.1 Conditions To SPLN's Obligation. The obligation of SPLN to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions:
(a) the representations and warranties set forth in Article IV
hereof and in any writing delivered pursuant hereto are true and correct;
(b) except as set forth on Schedule 4.7, since September 30,
1999, there has been no change, circumstance or event which, individually or
collectively with each other such change, circumstance or event, has had or
which could be expected to have a Material Adverse Effect;
(c) all consents and waivers by third parties that are
required for the consummation of the transactions contemplated hereby including,
without limitation, any consents required pursuant to any leases or subleases
and any consents or waivers that are required in order that the transactions
contemplated hereby do not constitute a breach of or a default under or a
termination or modification any material agreement to which the Company or any
of its Subsidiaries is a party or to which any material property of the Company
or any of its Subsidiaries is subject, have been obtained on terms reasonably
satisfactory to SPLN;
(d) all governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby,
if any, have been duly made and obtained and all waiting periods have expired on
terms reasonably satisfactory to SPLN other than those filings, authorizations
or approvals the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect;
(e) the Company's board of directors (the "Board of
Directors") has taken all such action as is necessary and sufficient to ensure
that, effective as of the Closing, the Board of Directors shall be comprised of
seven members, including Andrew A. DeFrancesco, Ken Crema, Geoff Ford, Brett
Lindros, two individuals designated by SPLN and one vacancy to be filled in
accordance with Section 3.2(g) hereof;
(f) SPLN has received an opinion, dated the date hereof, of
counsel to the Company, which counsel is experienced in transactions of the type
contemplated hereby and is reasonably satisfactory to SPLN, in form and
substance reasonably satisfactory to SPLN and their counsel;
(g) The Company has delivered to SPLN all of the following:
(i) an Officer's Certificate of the Company, dated
the date hereof, stating that the conditions specified in Sections
2.1(a)-(f) above, inclusive, have been satisfied;
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(ii) certified copies of the resolutions of the Board
of Directors approving the transactions contemplated by this Agreement;
(iii) certified copies of the articles of
incorporation (the "Articles of Incorporation") and bylaws (the
"Bylaws") of the Company as in effect as of the date hereof;
(iv) copies of all third party and governmental
consents, approvals and filings required in connection with the
consummation of the transactions contemplated herein;
(v) such other documents or instruments as SPLN may
reasonably request to effect the transactions contemplated hereby;
(h) all proceedings to be taken by the Company in connection
with the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents, including customary representations, warranties, covenants,
conditions and remedies for breach, required to be delivered by the Company to
effect the transactions contemplated hereby are reasonably satisfactory in form
and substance to SPLN.
Any condition to the obligations of SPLN specified in this Section 2.1
may be waived by SPLN in its sole discretion.
2.2 Conditions To The Company's Obligations. The obligation of the
Company to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following conditions on or before the date hereof:
(a) the representations and warranties set forth in Article V
hereof and in any writing delivered pursuant hereto are true and correct;
(b) all consents and waivers by third parties that are
required for the consummation of the transactions contemplated hereby including,
without limitation, any consents required pursuant to any leases or subleases or
that are required in order that the transactions contemplated hereby do not
constitute a breach of or a default under or a termination or modification of
any material agreement to which the Company or any of its Subsidiaries is a
party or to which any material property of the Company or any of its
Subsidiaries is subject, have been obtained on terms reasonably satisfactory to
the Company; and
(c) all governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby,
if any, have been duly made and obtained and all waiting periods have expired on
terms reasonably satisfactory to the Company other than those filings,
authorizations or approvals the absence of which would not, individually or in
the aggregate, have a Material Adverse Effect.
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The conditions specified in this Section 2.2 may be waived by the
Company, in its sole discretion.
ARTICLE III
COVENANTS
3.1 Affirmative Covenants of the Company. From the date hereof and
thereafter (unless otherwise indicated), the Company covenants and agrees that
it will and will cause each of its Subsidiaries to:
(a) cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of its business or the
business of any of its Subsidiaries to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Board of Directors may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; provided, however, that the foregoing shall not prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Board of Directors, desirable in the conduct of its
business or the business of any of its Subsidiaries and is not disadvantageous
in any material respect to the Company's shareholders;
(b) preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises of the
Company and each of its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Subsidiaries as a whole
and that the loss thereof is not disadvantageous in any material respect to the
Company's shareholders; and provided, further, that the foregoing shall not
prohibit a sale, transfer or conveyance of a Subsidiary of the Company or any of
its assets which is not otherwise prohibited by the terms of this Agreement and
is in accordance with the Company's Charter;
(c) maintain the books, accounts and records of the Company
and its Subsidiaries in accordance with past custom and practice as used in the
preparation of the Financial Statements (as defined in Section 4.5) except to
the extent permitted or required by GAAP;
(d) keep all of its and its Subsidiaries' properties which are
of an insurable nature insured with insurers, believed by the Company in good
faith to be financially sound and responsible, against loss or damage to the
extent that property of similar character is usually so insured by corporations
similarly situated and owning like properties (which may include self-insurance,
if reasonable and in comparable form to that maintained by companies similarly
situated);
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(e) comply with all material legal requirements and material
contractual obligations applicable to the operations and business of the Company
and its Subsidiaries and pay all applicable Taxes as they become due and
payable;
(f) permit representatives of SPLN and its agents (including
its counsel, accountants and consultants) to have reasonable access during
business hours to the Company's books, records, facilities, key personnel,
officers, directors, customers, independent accountants and legal counsel;
(g) assert and enforce all, and shall not (except with Super
Majority Board Vote) amend or waive any of the Company's rights under, all
agreements between the Company and any of its directors, executive officers and
other Affiliates, and shall pursue all remedies available to it with diligence
and in good faith in connection with the enforcement of any such rights;
(h) at all times file all reports (including annual reports,
quarterly reports and the information, documentation and other reports) required
to be filed by the Company under the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and the Company shall use its best efforts to
file each of such reports on a timely basis, and take such further action as any
holder or holders of Securities may reasonably request, all to the extent
required to enable such holders to sell Securities pursuant to Rule 144 adopted
by the SEC under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the SEC and to
enable the Company to register securities with the SEC;
(i) permit SPLN, to elect two directors to the Board of
Directors and to designate one of such directors as an observer to attend each
meeting of any committees of the Board of Directors, including each telephonic
meeting thereof to the extent that one of such directors is not a member of any
such committee;
(j) if the Company ceases to be a reporting Company under the
Exchange Act or to comply with its reporting obligations thereunder, make
available, upon request, to any holder of the Securities, so long as the
Securities remain outstanding, the information set forth on Exhibit C attached
hereto; and
(k) prior to effecting any offering of securities, coverage
for liabilities in respect of which offering is not included under the Company's
director and officer liability insurance policies, the Company shall purchase an
endorsement or an additional policy of insurance reasonably satisfactory to
SPLN, providing for such coverage in respect of such offering.
3.2 Negative Covenants of the Company. From the date hereof and
thereafter (unless otherwise indicated), the Company agrees that it will not,
and will cause each of its Subsidiaries not to:
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(a) (A) except for a sale of Common Stock pursuant to an
underwritten public offering registered pursuant to the Securities Act, issue or
sell or otherwise transfer for consideration (an "Issuance") Stock of the
Company unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies SPLN in writing of the Issuance (including the
price, the purchaser(s) thereof and the other terms thereof) and grants to SPLN
the right (the "Right") to subscribe for and purchase such additional shares or
other securities so issued at the same price and on the same terms (except as
set forth in paragraph (B) below) as issued in the Issuance such that, after
giving effect to the Issuance and exercise of the Right, the Securities owned by
SPLN (after giving effect to the conversion or exercise thereof) shall represent
the same percentage of the outstanding Common Stock (including, for purposes of
this calculation, all Common Stock and assuming the issuance of Common Stock
upon conversion, exchange or exercise of any security so convertible,
exchangeable or exercisable issued in the Issuance or subject to the Right) as
was owned by SPLN prior to the Issuance, or such lesser amount designated by
SPLN. The Right may be exercised by SPLN at any time by written notice to the
Company received by the Company within 20 days after receipt of notice by SPLN
from the Company of the Issuance. The closing of the purchase and sale pursuant
to the exercise of the Right shall occur at least 5 days after the Company
receives notice of the exercise of the Right and concurrently with the closing
of the Issuance. Notwithstanding the foregoing, the Right shall not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of, or other distribution in respect of, the
Common Stock, (ii) issuances of Common Stock upon exercise or conversion of
options, warrants and other rights to acquire Common Stock outstanding on the
date hereof, in each case issued in accordance with the terms thereof as in
effect on the date hereof, and (iii) issuances of Common Stock pursuant to the
terms approved by a Super Majority Board Vote in connection with the acquisition
of interests in another company or business as contemplated by paragraph (d) or
(h) below (irrespective of whether such paragraph (h) would require a Super
Majority Board Vote).
(B) Notwithstanding the foregoing, if an Issuance is in
connection with an Acquisition (as defined in paragraph (h) below), SPLN shall
pay cash to the Company in payment for the additional shares or securities to be
purchased by SPLN upon exercise of its Right and price of the shares or
securities so purchased shall be the lesser of (i) the value therefor indicated
in such Acquisition and (ii) the Fair Market Value of such shares or securities;
(b) without a Super Majority Board Vote, enter into any
transaction or series of transactions with any stockholder, director, officer,
employee or Affiliate which would require disclosure pursuant to Rule 404 of
Regulation S-K under the Securities Act;
(c) except as expressly contemplated by this Agreement,
authorize, issue or enter into any agreement providing for the issuance
(contingent or otherwise) of, (i) any notes or debt securities containing equity
features or issued with capital stock (including, without limitation, any notes
or debt securities convertible into or exchangeable for capital stock or other
equity securities, issued in connection with the issuance of capital stock or
other equity securities or containing profit participation features), (ii) any
capital stock or other equity securities (or any
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securities convertible into or exchangeable for any capital stock or other
equity securities) or issue any Stock which votes generally in the election of
the Company's directors, or (iii) stock appreciation rights or phantom stock
rights;
(d) without a Super Majority Board Vote, merge or consolidate
with any Person or, except as permitted by subparagraph (h) below, permit any
Subsidiary to merge or consolidate with any Person (other than a wholly-owned
Subsidiary);
(e) without a Super Majority Board Vote, sell, lease or
otherwise dispose of, or permit any Subsidiary to sell, lease or otherwise
dispose of, assets of the Company and its Subsidiaries, in one transaction or
series of related transactions involving aggregate value (computed on the basis
of book value, determined in accordance with GAAP consistently applied, or fair
market value, determined by the Board of Directors in its reasonable good faith
judgment) or consideration in excess of $2,000,000 in any transaction or series
of related transactions (other than sales of inventory in the ordinary course of
business);
(f) without a Super Majority Board Vote, liquidate, dissolve
or effect a recapitalization or reorganization of the Company in any form of
transaction (including, without limitation, any reorganization into a limited
liability company, a partnership or any other non-corporate entity which is
treated as a partnership for federal income tax purposes);
(g) without a Super Majority Board Vote, create or fill any
vacancy on the Board of Directors; provided that, upon the resignation of Geoff
Ford and Brett Lindros, this section 3.2(g) shall not apply to the appointment
of Rocco Rossi, Dean Gilbert and Greg O'Hara to fill the current vacancy and the
vacancies caused by such resignations on the Board of Directors;
(h) without a Super Majority Board Vote, acquire, or permit
any Subsidiary to acquire, any interest in any company or business (whether by a
purchase of assets, purchase of stock, merger or otherwise), or enter into any
joint venture (collectively, an "Acquisition"), involving an aggregate
consideration (including, without limitation, the assumption of liabilities
whether direct or indirect and valuing any Common Stock issued as consideration
at the Fair Market Value thereof determined on the date of issuance thereof)
exceeding $2,500,000 in any one transaction or series of related transactions or
exceeding $5,000,000 in any twelve-month period;
(i) effect, permit or suffer to occur or take any steps to
cause a Fundamental Change. For purposes hereof "Fundamental Change" means (i)
any sale or transfer of more than 40% of the assets of the Company and its
Subsidiaries on a consolidated basis (measured either by book value in
accordance with GAAP consistently applied or by fair market value determined in
the reasonable good faith judgment of the Board of Directors) in any transaction
or series of transactions (other than sales in the ordinary course of business)
and (ii) any merger or consolidation to which the Company is a party; or
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(j) without a Super Majority Board Vote, amend the Company's
Articles of Incorporation or Bylaws in any manner which (i) adversely affects
the exculpation or indemnification of directors of the Company, or (ii) affects
the number, qualifications, election or removal, of directors of the Company.
For purposes hereof, a "Super Majority Board Vote" means approval at a
meeting of the Board of Directors by a vote of at least 85% of each of the
directors then serving on the Board of Directors excluding for purposes of
subparagraph (b) a director interested in the subject matter of such approval.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to SPLN to enter into this Agreement, the
Company hereby represents and warrants to SPLN that:
4.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and is qualified to do business in every jurisdiction in which the
ownership of its property or conduct of its business requires such qualification
except where the failure to be qualified, individually or in the aggregate,
would not have a Material Adverse Effect. The Company has full corporate power
and authority and has all licenses, permits and authorizations necessary to own
and operate its properties and to carry on its business as now conducted and
presently proposed to be conducted, except where the failure to have such
licenses, permits and authorizations would not, individually or collectively,
have a Material Adverse Effect. The copies of the Articles of Incorporation and
Bylaws furnished to SPLN pursuant to Section 2.1(g)(iii) reflect all amendments
made thereto at any time prior to the date of this Agreement and are correct and
complete. To the Company's knowledge, the minute books containing the records of
meetings of the stockholders and board of directors, the stock certificate books
and the stock record books of the Company are correct and complete. The Company
is not in default under or in violation of any provision of its articles of
incorporation or bylaws. Schedule 4.1 sets forth the names of all Subsidiaries
and the jurisdictions where they are incorporated and such Subsidiaries are the
only Subsidiaries of the Company and are the only entities in which the Company
or any of its Subsidiaries has an equity investment. The Company owns no stock
or equity interest in any other entity. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has full corporate power and authority necessary to
own its properties and to carry on its businesses as now being conducted and as
presently proposed to be conducted and is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of business
requires such qualification except where the failure to be so qualified,
individually or collectively, would not have a Material Adverse Effect.
4.2 Authorization of Transactions. The Company has full corporate power
and authority to execute and deliver this Agreement, the agreements and
documents attached hereto
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as Exhibits and the other agreements and documents contemplated hereby. The
Board of Directors has duly approved this Agreement and has duly authorized the
execution and delivery of this Agreement, the agreements and documents attached
hereto as Exhibits and the other agreements and documents contemplated hereby
and the consummation of the transactions contemplated hereby and thereby. No
other corporate proceedings on the part of the Company are necessary to approve
and authorize the execution and delivery of this Agreement, the agreements and
documents attached hereto as Exhibits and the other agreements and documents
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby. This Agreement, the agreements and documents attached hereto as
Exhibits and the other agreements and documents contemplated hereby have been
duly executed and delivered by the Company and constitute valid and binding
agreements of the Company, enforceable against the Company in accordance with
their terms, except (i) as limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect of
relating to or affecting the rights and remedies of creditors, and (ii) as
limited by the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or at law.
4.3 Capitalization.
(a) The authorized, issued and outstanding capital stock of
the Company is as set forth on Schedule 4.3(a) attached hereto. All of the
issued and outstanding shares of capital stock of the Company have been duly
authorized, are validly issued, fully paid and nonassessable, are not subject
to, nor were they issued in violation of, any preemptive rights. Other than as
contemplated by this Agreement, and as set forth on Schedule 4.3(a) attached
hereto, there are no outstanding or authorized securities with profit
participating features or profit interests, or options, warrants, rights or
other agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance, disposition or acquisition
of any of its capital stock or any such securities or interests (collectively
"Options") and Schedule 4.3(a) accurately sets forth the number of shares,
exercise prices and expiration date of each Option. Other than as set forth in
Schedule 4.3(a) attached hereto, there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company. There
are no voting trusts, proxies or any other agreements or understandings with
respect to the voting of the capital stock of the Company. The Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any Options. Other than
piggyback registration rights with regard to 5,683,468 shares of Common Stock,
there are no other registration rights to register the securities of the
Company.
(b) The authorized, issued and outstanding capital stock of
each Subsidiary is as set forth on Schedule 4.1. All of the issued and
outstanding shares of capital stock of each Subsidiary are validly issued, fully
paid and nonassessable and are not subject to, nor were they issued in violation
of, any preemptive rights. Other than as set
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forth on Schedule 4.1, there are no Options to which any Subsidiary is a party
or which are binding upon any Subsidiary providing for the issuance, disposition
or acquisition of any of its capital stock. Other than as set forth on Schedule
4.1, there are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to any of the Subsidiaries. Other than as set forth
on Schedule 4.1, there are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the capital stock of any of the
Subsidiaries. Other as set forth on Schedule 4.1, no Subsidiary is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any of its Stock. Other than, there are no registration rights to
register the securities of any of the Subsidiaries.
4.4 Absence of Conflicts. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not (a) conflict with or result in a breach of any of the
provisions of, (b) constitute a default under, (c) result in a violation of, (d)
give any third party the right to terminate or to accelerate any obligation
under, (e) result in the creation of any lien, security interest, charge or
encumbrance upon the Common Stock or (f) require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the articles of incorporation or
bylaws of the Company or any of the Subsidiaries or any material indenture,
mortgage, lease, license, loan agreement or other agreement or instrument to
which the Company or any of the Subsidiaries is bound or affected, or any law,
statute, rule or regulation or any judgment, order or decree to which the
Company or any of the Subsidiaries is subject except for those with which the
failure to comply, individually or collectively, would not have a Material
Adverse Effect.
4.5 Financial Statements. The Company has furnished SPLN with copies of
its (a) unaudited consolidated balance sheet as of September 30, 1999 (the
"Latest Balance Sheet") and the related consolidated statements of income and
cash flow for the 6-month period ended September 30, 1999 and (b) audited
balance sheets and statements of income and cash flow for the periods ended
April 30, 1998 and March 31, 1999. Each of the foregoing financial statements
(including in all cases the notes thereto, if any) (the "Financial Statements")
is accurate and complete in all material respects, is consistent with the
Company's books and records (which, in turn, are accurate and complete in all
material respects), presents fairly the Company's consolidated financial
condition, consolidated results of operations and consolidated cash flows as of
the dates and for the periods referred to therein, and has been prepared in
accordance with GAAP consistently applied, subject in the case of unaudited
financial statements to changes, which are immaterial in the aggregate,
resulting from normal year-end adjustments and to the absence of footnote
disclosure.
(a) The audited consolidated financial statements and related
schedules and notes included in the SEC Documents comply in all material
respects with requirements of the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder. The Financial Statements which are
not audited comply in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations of the SEC
thereunder (assuming for such purposes that such requirements are applicable
thereto).
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4.6 Absence of Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries have any obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known, whether due or to
become due and regardless of when asserted) except (a) obligations under
contracts and commitments, (b) liabilities reflected on the Latest Balance Sheet
and (c) liabilities which have arisen after the date of the Latest Balance Sheet
in the ordinary course of business (which liabilities in the aggregate could not
reasonably be expected to have a Material Adverse Effect).
4.7 Absence of Material Adverse Change. Except as set forth on Schedule
4.7, since March 31, 1999, there has been no change or event resulting in or
which could reasonably be expected to have a Material Adverse Effect, whether
individually or collectively with any other change or event since such date.
4.8 Absence of Certain Developments. Except as set forth on Schedule
4.8, since September 30, 1999, neither the Company nor any of the Subsidiaries
has:
(a) issued, sold or transferred any notes, bonds or other debt
securities or any equity securities, securities convertible, exchangeable or
exercisable into equity securities, or warrants, options or other rights to
acquire equity securities, of the Company or any of the Subsidiaries;
(b) borrowed any amount or incurred or become subject to any
liabilities, except liabilities incurred in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance or paid
any obligation or liability, other than liabilities paid in the ordinary course
of business, or prepaid any amount of indebtedness for borrowed money;
(d) mortgaged, pledged or subjected to any lien, charge or any
other encumbrance, any portion of its properties or assets other than in the
ordinary course of business;
(e) sold, leased, assigned or transferred any portion of its
tangible assets or cancelled any debts or claims owing to or held by it in any
such case without fair consideration;
(f) sold, assigned or transferred any Proprietary Rights or
disclosed any proprietary confidential information to any Person, or granted any
license or sublicense of any rights under or with respect to any Proprietary
Rights;
(g) suffered any extraordinary losses or waived any single
right of value which has a value in excess of $50,000 or any rights of value
which have an aggregate value of $100,000 whether or not in the ordinary course
of business or consistent with past custom and practice;
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(h) suffered any theft, taking by power of eminent domain,
damage, destruction or casualty loss in excess of $50,000 to its tangible
assets, whether or not covered by insurance or suffered any substantial
destruction of the Company's books and records;
(i) other than in the ordinary course of business, entered
into, amended or terminated any material lease, license, contract, agreement or
commitment, or taken any other action or entered into any other transaction, or
changed any material business practice or manner of dealing with any customer,
supplier, subcontractor, insider, sales representative, or other person or
entity with whom the Company or any of the Subsidiaries engage in any business
activity, or entered into any other transaction;
(j) entered into any employment contract or collective
bargaining agreement, written or oral, or changed in any other material respect
employment terms for, or made or granted any bonus or any wage, salary or
compensation increase to any director or executive officer or, except in the
ordinary course of business, to any other employee, agent or sales
representative, group of employees or consultant or made or granted any increase
in any employee benefit plan or arrangement, or amended or terminated any
existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement;
(k) incurred intercompany charges or conducted its cash
management customs and practices (including the collection of receivables,
inventory control and payment of payables) other than in the usual and ordinary
course of business in accordance with past custom and practice;
(l) made any capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(m) made any loans or advances to, or guarantees for the
benefit of, any Person that aggregate in excess of $100,000;
(n) delayed or postponed (beyond its normal custom and
practice) the payment of accounts payable and other liabilities;
(o) made any charitable contributions or pledges in excess of
$25,000; or
(p) changed or authorized any change in its articles of
incorporation or bylaws.
4.9 Title to Properties. The buildings, machinery, equipment, vehicles
and other tangible assets of the Company and the Subsidiaries are in good
operating condition and repair and are usable in the ordinary course of
business, reasonable wear and tear excepted. The Company and the Subsidiaries
own or lease under valid leases all buildings, machinery, equipment and other
tangible assets necessary for the conduct of their business or used in the
conduct of their business. Except as set forth on Schedule 4.9, none of the
assets of the Company or any of its Subsidiaries, including, without limitation,
any assets constituting
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Intangible Rights (as defined below), are subject to any mortgage, lien, pledge,
hypothecation or other security interest or encumbrance.
4.10 Tax Matters. Each of the Company and its Subsidiaries has filed
all Tax Returns that it was required to file on or before the date hereof other
than those returns which if not filed would not, individually or in the
aggregate, have a Material Adverse Effect. All such Tax Returns were correct and
complete in all material respects. As of the time of filing, all Taxes owed by
any of the Company and its Subsidiaries (whether or not shown on any Tax
Return), with respect to the taxable periods ending on or before the Closing
Date, have been paid, except where the failure to withhold, pay or deposit
(individually or collectively) would not have a Material Adverse Effect and
except with respect to taxes which are being contested in good faith and by
appropriate proceedings and with respect to which adequate reserves have been
established on the Company's books and which disputes have been disclosed to
SPLN in writing. None of the Company and its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return. No
claim in writing has been received by the Company from an authority in a
jurisdiction where any of the Company and its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no security interests on any of the assets of the Company or any of the
Subsidiaries that arose, other than for current taxes not yet due and payable in
connection with any failure (or alleged failure) to pay any Tax. Each of the
Company and its Subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party.
4.11 Litigation; Proceedings. Except as set forth on Schedule 4.11,
there are no actions, suits, proceedings, orders or investigations pending or,
to the Company's knowledge, threatened against the Company or the Subsidiaries
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which, individually or collectively, if determined adversely
to the Company and its Subsidiaries would have a Material Adverse Effect, and
there is no basis for any of the foregoing.
4.12 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of the
Company or the Subsidiaries.
4.13 Governmental Licenses and Permits.
(a) The Company and its Subsidiaries hold all permits,
licenses, certificates of occupancy, franchises, certificates, approvals and
other authorizations of foreign, federal, state and local governments or other
similar rights (collectively, the "Licenses") necessary in and for the conduct
of their respective businesses, and such Licenses are in full force and effect
except where the failure to hold such License or for such License to be valid
and in full force and effect, would not have a Material Adverse Effect and would
not adversely effect any contracts or arrangements of the Company. The Company
has duly performed in all respects all of its
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obligations under, and is in full compliance with, the Licenses, except for the
failure of which would not have a Material Adverse Effect and would not
adversely effect any contracts or arrangements of the Company. There is not now
pending or, to the Company's knowledge, threatened any litigation, proceeding or
investigation which reasonably might result in a termination of any of the
Licenses except for litigation, proceedings or investigations which would not
individually or in the aggregate have a Material Adverse Effect and would not
adversely effect any contracts or arrangements of the Company.
(b) No event has occurred and no agreement has been entered
into by the Company, which now, or after notice or lapse of time or both, might
reasonably be expected to cause or permit cancellation, revocation or
termination of the Licenses, or would result in any actions, which individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect, and there is no pending or threatened action or matters that would
suggest that any of the Licenses could reasonably be expected not to be renewed
in the ordinary course.
(c) There is not pending any application, petition, objection
or other pleading which questions the validity of or contests any of the
Licenses except for those that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(d) The consummation of the transactions contemplated by this
Agreement will not cause any forfeiture or impairment of the Licenses except for
those that could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
4.14 Insurance. The insurance coverage of the Company and the
Subsidiaries is adequate and is customary for corporations of similar size
engaged in similar lines of business. Attached hereto as Schedule 4.14 are
directors' and officers' liability insurance polices which policies are in full
force and effect and the premiums of which have been fully paid. There are no
claims currently pending against such policies nor is the Company aware of any
facts which would give rise to any such claim. The Company has not received any
notice of cancellation of such polices nor does the Company have any reason to
believe that such policies will be the subject of a refusal to renew by the
carriers under such policies.
4.15 Affiliate Transactions. Except as disclosed in any SEC Document,
the Company and its Subsidiaries have not entered into any transaction or series
of transactions with any stockholder, director, officer, employee or Affiliate
of the Company which would require disclosure pursuant to Rule 404 of Regulation
S-K under the Securities Act.
4.16 Compliance With Laws. The Company, the Subsidiaries and their
officers, directors, agents and employees have complied with all applicable laws
and regulations of foreign, federal, state and local governments and all
agencies thereof (including, without limitation, the Securities Act and the
Exchange Act) which affect the business, business practices (including, but not
limited to, any of the Company's and the Subsidiaries' marketing, sales and
distribution of its products and services), the business operations or any
leased properties of any of the Company and the Subsidiaries and to which the
Company and the Subsidiaries may be
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subject, and, to the Company's knowledge, no claims have been filed against any
of the Company and its Subsidiaries alleging a violation of any such laws or
regulations except for those the failure to comply with would not, individually
or in the aggregate, have a Material Adverse Effect.
4.17 Governmental Consent, Etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority or any other party or person is required to be obtained by
the Company in connection with its execution, delivery and performance of this
Agreement, other agreements or the consummation of any other transactions
contemplated hereby except for those which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.18 Disclosure. As of its filing date, each SEC Document filed, and
each SEC Document that was filed by the Company pursuant to the Securities Act
and/or the Exchange Act (i) complied in all material respects with the
applicable requirements of the Securities Act and/or Exchange Act and (ii) did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each
final registration statement filed with the SEC by the Company pursuant to the
Securities Act, as of the date such statement or amendment became effective (i)
complied in all material respects with the applicable requirements of the
Securities Act and (ii) did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of any prospectus, in
light of the circumstances under which they were made).
4.19 Exemption From Registration; Restrictions on Offer and Sale of
Same or Similar Securities. Assuming the representations and warranties of SPLN
set forth in Article V hereof are true and correct in all material respects, the
offer and sale of the Securities made pursuant to this Agreement will be exempt
from the registration requirements of the Securities Act. Neither the Company
nor any Person acting on its behalf has, in connection with the offering of the
Securities, engaged in (A) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Securities Act), (B) any action involving a public offering within the meaning
of Section 4(2) of the Securities Act, or (C) any action that would require the
registration under the Securities Act of the offering and sale of the Securities
pursuant to this Agreement or that would violate applicable state securities or
"blue sky" laws. The Company has not made and will not prior to the Closing
make, directly or indirectly, any offer or sale of the Securities or of
securities of the same or a similar class as the Securities if as a result the
offer and sale of the Securities contemplated hereby could fail to be entitled
to exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(c)
of the Securities Act.
4.20 Authority Relative to this Agreement. The Board of Directors of
the Company has approved this Agreement and the transactions contemplated
thereby, and such approval is
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sufficient to render inapplicable to this Agreement and the transactions
contemplated thereby the provisions of Sections 607.0901 and 607.0902 of the
Florida Business Corporation Act.
4.21 Intangible Rights. The Company owns or has the valid right to use
any and all Proprietary Rights that are necessary or customarily used by the
Company for the ownership, management or operation of its business as presently
conducted or as presently contemplated to be conducted ("Intangible Rights").
There have been no claims made against the Company and the Company has not
received any notices asserting the invalidity, abuse, misuse, or
unenforceability of any of the Intangible Rights and no grounds for any such
claims exist.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SPLN
As a material inducement to the Company to enter into this Agreement,
SPLN hereby represents and warrants to the Company that:
5.1 Organization and Power. SPLN is a corporation, duly organized,
validly existing and in good standing under the laws of the state of Delaware,
with full corporate power and authority to enter into this Agreement and perform
its obligations hereunder.
5.2 Authorization. The execution, delivery and performance of this
Agreement by SPLN and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all requisite corporate action on the
part of SPLN, and no other corporate proceedings on its part are necessary to
authorize the execution, delivery or performance of this Agreement. This
Agreement constitutes a valid and binding obligation of SPLN, enforceable
against SPLN in accordance with its terms.
5.3 No Violation. SPLN is not subject to or obligated under its
certificate of incorporation, its bylaws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement.
5.4 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by SPLN.
5.5 Investment Representations. SPLN represents that it is an
"Accredited Investor" within the meaning of the Securities Act. SPLN understands
that the Securities constitute "Restricted Securities" within the meaning of
Rule 144 under the Securities Act. SPLN hereby represents that it is acquiring
the restricted securities purchased hereunder or acquired pursuant hereto for
its own account with the present intention of holding such securities for
purposes of investment, and that it has no intention of selling such securities
in a public distribution in violation of the federal securities laws or any
applicable state securities Laws; PROVIDED that
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nothing contained herein shall prevent SPLN and subsequent holders of restricted
securities from transferring such securities in compliance with the provisions
of Section 9.7. SPLN understands that the restricted securities are being
offered and sold in reliance on exemptions from the registration requirements of
federal and state securities laws and that the Company is relying upon the truth
and accuracy of SPLN's representations, warranties, agreements, acknowledgments
and understandings set forth herein to determine its suitability to acquire the
restricted securities. Each instrument or certificate for restricted securities
shall be imprinted with a legend in substantially the following form:
ARTICLE VI
DEFINITIONS
"Affiliate" means with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or indirect
control with such specified Person, (ii) related by blood or marriage to any
such specified Person or any Affiliate of such specified Person, (iii)
controlled by any Person described in clause (ii) foregoing or (iv) in the case
of any limited liability company, each member.
"Affiliated Group" shall mean an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign Tax law) of which any of the Company or
the Subsidiaries is or has been a member.
"Audit" means any audit, assessment of Taxes, or other examination by
any taxing authority, proceedings, or appeal of such proceedings relating to
Taxes.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed or as reported on the NASDAQ National Market,
or, if there has been no sales on any such exchange or reported on the NASDAQ
National Market on any day, the average of the highest bid and lowest asked
prices on all such exchanges or reported at the end of such day, or, if on any
day such security is not so listed or included in the NASDAQ National Market,
the average of the representative bid and asked prices quoted in the NASDAQ
Stock Market as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which "Fair Market Value" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ National Market, the
NASDAQ Stock Market or the over-the-counter market, the
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"Fair Market Value" shall be determined in good faith by the Board of Directors
of the Company and such determination shall be delivered in writing to SPLN. In
the event that SPLN disputes such determination of Fair Market Value, SPLN shall
so inform the Company in writing within 10 days after receipt of the Company's
determination and the Company and SPLN shall negotiate in good faith to
determine a mutually acceptable Fair Market Value. If such parties are unable to
reach agreement within 30 days after SPLN has given the Company written notice
of its dispute, the Fair Market Value of such security shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Company and SPLN. The determination of such appraiser shall be final and binding
upon the parties, and the fees and expenses of such appraiser shall be borne by
the Company.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Material Adverse Effect" means (i) a material adverse change in the
assets, earnings, financial condition, operating results, customer, supplier,
employee or sales representative relations or business prospects of the Company
and the Subsidiaries taken as a whole, (ii) material casualty loss, destruction
or damage to the assets or properties of the Company and the Subsidiaries taken
as a whole, whether or not covered by insurance or (iii) any action or
proceeding before any court or government body wherein an unfavorable judgment,
decree, injunction or order would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded, or
might adversely affect the right of the Purchasers to purchase, own or control
the Securities.
"Officer's Certificate" of any Person means a certificate signed by the
chief executive officer, vice president, secretary or Chief Financial Officer of
such Person stating that (i) the officer signing such certificate has made or
has caused to be made such investigations as are necessary in order to permit
such person to verify the accuracy of the information set forth in such
certificate, and (ii) to the best of such officer's knowledge, such certificate
does not misstate any material fact and does not omit to state any fact
necessary to make the certificate not misleading.
"Person" means an individual, a partnership (including a limited
partnership), a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Proprietary Rights" means all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names; all registered and unregistered statutory and common law
copyrights; all registrations, applications and renewals for any of the
foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information,
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drawings, specifications, designs, plans, improvements, proposals, technical and
computer data, documentation and software, financial business and marketing
plans, customer and supplier lists and related information and all other
proprietary rights.
"Registrable Securities" means (i) the Shares (ii) the Underlying
Common Stock and (iii) any shares of capital stock of the Company issued or
issuable with respect to the securities referred to in clause (i) or (ii) by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been (x) distributed to the public
pursuant to an offering registration under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act unless such securities are held at such time by a
holder of other Registrable Securities or (y) repurchased by the Company or any
Subsidiary. For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right to acquire
directly or indirectly such Registrable Securities (upon conversion or exercise
in connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"SEC" means the United States Securities and Exchange Commission and
any successor to the functions thereof.
"SEC Documents" means all documents (including any annual reports)
filed by the Company with the SEC (including all exhibits and schedules thereto
and documents incorporated by reference therein) but shall not include any
portion of any document which is not deemed to be filed under applicable SEC
rules and regulations.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the 4,098,742 shares of Common Stock issued to SPLN
pursuant to the Promotion Agreement of even date herewith between the Company
and SPLN.
"Stock" of any Person means any shares, equity or profits interests,
participations or other equivalents (however designated) of capital stock,
whether voting or nonvoting, including any securities with profit participation
features, and any rights, warrants, options or other securities convertible into
or exercisable or exchangeable for any such shares, equity or profits interests,
participations or other equivalents, or such other securities, directly or
indirectly (or any equivalent ownership interests, in the case of a Person which
is not a corporation).
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
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Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Tax" or "Taxes" shall mean any federal, state, local or foreign
income, estimated, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including without limitation taxes under Section 59A of the Code), customs
duties, capital stock, franchise, employees' income withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum or other
tax, of any kind whatsoever, including any interest, penalties or additions to
tax or additional amounts in respect of the foregoing.
"Tax Returns" shall mean returns, declarations, reports, claims for
refund and information returns or statements relating to Taxes, including any
schedules or attachments thereto.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
upon conversion of the Note or exercise of the Warrant, and (ii) any Common
Stock issued or issuable with respect to the securities referred to above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Any Person who
holds the Note or Warrant shall be deemed to be the holder of the Underlying
Common Stock obtainable upon exercise of such Note or Warrant. As to any
particular shares of Underlying Common Stock, such shares shall cease to be
Underlying Common Stock when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
ARTICLE VII
VOTING RIGHTS
7.1 Voting. From and after the Closing and until the provisions of this
Article VII cease to be effective, the Company shall take all necessary or
desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that, subject to the remainder of
this Article VII:
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(a) the authorized number of directors on the Board of
Directors of the Company shall be established at seven directors;
(b) two representatives will be designated by SPLN (the
"Investor Directors"), who shall initially be Mark Mariani and Andrew Sturner;
The Company will include in each proxy statement pursuant to which the members
of the Board of Directors are to be elected such designees and recommend to the
shareholders the election of such designees. In the event that the shareholders
of the Company fail to elect or reelect an Investor Director, the Company shall
create, to the extent necessary, a vacancy on the Board of Directors and elect
such Investor Director to fill such vacancy;
(c) subject to clause (d) below, the composition of the board
of directors of each of the Company's Subsidiaries (a "Sub Board") shall be the
same as that of the Board;
(d) any committees of the Board or a Sub Board shall be
created and the composition thereof determined only upon a Super Majority Board
Vote;
(e) the removal from the Board or a Sub Board (with or without
cause) of any representative designated by SPLN shall be at the written request
of SPLN, but only upon such written request and under no other circumstances and
the Company shall take no actions to cause or encourage the removal of an
Investor Director, whether by shareholder vote or otherwise; and
(f) in the event that any representative designated by SPLN
ceases to serve as a member of the Board or a Sub Board during his or her term
of office, the resulting vacancy on the Board or the Sub Board shall be filled
by a representative designated by SPLN as provided hereunder.
(g) The Company shall pay the reasonable out-of-pocket
expenses incurred by each Investor Director in connection with attending the
meetings of the Board, any Sub Board and any committee thereof. Each Investor
Director shall be paid the same compensation paid to other non-employee
directors. So long as any Investor Director serves on the Board and for three
years thereafter, the Company shall obtain and maintain directors and officers
indemnity insurance in an amount and scope of coverage not less than that in
effect on the date hereof and the Company's articles of incorporation and bylaws
shall provide for indemnification and exculpation of directors to the fullest
extent permitted under applicable law. The Company shall give SPLN prompt notice
of the Company's receipt of any notice of cancellation, termination, non-renewal
or modification of any such policy, nor shall the Company agree to any
modification of any such policy unless SPLN shall consent.
ARTICLE VIII
REGISTRATION RIGHTS
8.1 Demand Registrations.
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(a) Requests for Registration. Subject to Sections 8.1(b) and
(c) below, (i) at any time and from time to time, SPLN may request registration,
whether underwritten or otherwise, under the Securities Act of all or any
portion of the Registrable Securities which SPLN requests to be so registered on
Form S-1 or any similar long-form registration ("Long-Form Registrations") or on
Form S-2 or S-3 or any similar short-form registration ("Short-Form
Registrations") if available to the Company which Short Form Registrations may
be for continuous offerings pursuant to Rule 415 under the Securities Act. Each
request for a Long-Form Registration or Short-Form Registration shall specify
the approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering. Within 10 days after
receipt of any such request for a Long-Form Registration or Short-Form
Registration, the Company will give written notice of such requested
registration to all other holders of Registrable Securities and will include
(subject to the provisions of this Agreement) in such registration, all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 20 days after the receipt of the Company's
notice. All registrations requested pursuant to in this Section 8.1(a) are
referred to herein as "Demand Registrations".
(b) Long-Form Registrations. SPLN will be entitled to request
up to two (2) Long-Form Registrations. A registration will not count as the
second and final Long-Form Registration until it has become effective and unless
SPLN is able to register and sell at least 90% of the Registrable Securities
requested to be included in such registration within a price range reasonably
acceptable to SPLN.
(c) Short-Form Registrations. SPLN will be entitled to request
up to one (1) Short-Form Registration per year. Demand Registrations will be
Short-Form Registrations whenever the Company is permitted to use any applicable
short form.
In addition, SPLN will be entitled to an unlimited number of Long-Form
Registration and Short-Form Registrations at the expense of SPLN; provided,
however, that the Company shall in no event be requested to effect more than two
registrations pursuant to this agreement in any 12 month period.
(d) Priority on Demand Registrations. The Company will not
include in any Long-Form Registration or Short-Form Registration any securities
which are not Registrable Securities without the prior written consent of the
holders of a majority of the Registrable Securities included in such
registration, except that shares of Common Stock may be included as required
pursuant to Existing Registration Rights (as defined below) so long as the
number of such securities so included, when combined with the number of
Registrable Securities proposed to be included therein, does not exceed the
number which, in the reasonable judgment of the managing underwriter thereof,
can be sold at the price and on the terms substantially as proposed by the
holders of a majority of the Registrable Securities requested to be included
therein. For purposes hereof, "Existing Registration Rights" means rights in
effect on the Closing Date, set forth in the agreements listed on Schedule
4.3(a) or 4.3(b) attached hereto and held on the Closing Date (x) by
stockholders of the Company, to cause the Company to register shares of
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Common Stock held by such holders on the Closing Date, and (y) by other Persons,
to cause the Company to register shares of Common Stock issuable to such Persons
under, and subject to the then existing terms of, options, warrants or other
rights held by such Persons on the Closing Date. If a Long-Form Registration or
a Short-Form Registration is an underwritten offering and the managing
underwriter(s) advise the Company in writing that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities requested
to be included in such offering, exceeds the number of Registrable Securities
and other securities, if any, which can be sold therein without adversely
affecting the marketability of the offering then, subject to the first sentence
of this paragraph, the Company will include in such registration (i) first, the
number of Registrable Securities requested to be included in such registration
pro rata, if necessary, among the holders of Registrable Securities based on the
number of shares of Registrable Securities owned by each such holder and (ii)
second, other securities of the Company requested to be included in such
registration pursuant to Existing Registration Rights pro rata, if necessary, on
the basis of the number of shares of such other securities owned by each such
holder.
(e) Restrictions on Demand Registrations. The Company will not
be obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration. The Company may postpone for
no more than 90 days in each 360-day period, the filing or the effectiveness of
a registration statement for a Demand Registration if the Board of Directors of
the Company, acting in good faith, determines that such Demand Registration
might reasonably be expected to have a material and adverse effect on any
proposal or plan to engage in any acquisition or disposal of stock or assets or
any merger, consolidation, tender offer or similar transaction; provided, that
in such event, the holders of Registrable Securities requesting such Demand
Registration will be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration will not count as a Demand Registration.
(f) Selection of Underwriters. In the case of a Demand
Registration for an underwritten offering, SPLN and the Company shall mutually
select the investment banker(s) and manager(s) to administer the offering.
(g) 415 Registrations.
(i) After the Company receives a written notice of a
request for a Short Form Registration pursuant to Rule 415 under the
Securities Act (a "415 Registration"), the Company shall file with the
SEC a registration statement under the Securities Act for the 415
Registration. The Company shall use its best efforts to cause the 415
Registration to be declared effective under the Securities Act as soon
as practicable after filing and, once effective, the Company shall
(subject to the provisions of clause (ii) below) cause such 415
Registration to remain effective for such time period as is specified
in such request, but for no time period longer than the period ending
on the earlier of (x) the third anniversary of the date of filing of
the 415 Registration or (y) the
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date on which all Registrable Securities have been sold pursuant to the
415 Registration or (iii) the date as of which there are no longer any
Registrable Securities in existence.
(ii) If SPLN notifies the Company in writing that it
intends to effect the sale of all or substantially all of the
Registrable Securities held by it pursuant to a single integrated
offering pursuant to a then effective registration statement for a 415
Registration (a "Takedown"), the Company and SPLN shall not effect any
public sale or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for its equity
securities, during the 90-day period beginning on the date such notice
of a Takedown is received.
(iii) SPLN shall have the right to retain and select
an investment banker and manager to administer the 415 Registration and
any Takedown pursuant thereto, subject to the Company's approval which
will not be unreasonably withheld.
8.2 Piggyback Registration. If, after the date of this Agreement, the
Company determines to register any Registrable Securities under the Securities
Act for sale to the public, whether for its own account or for the account of
any security holder or both (except with respect to registration statements on
Form S-8 or its then equivalent, or in connection with a Rule 145 transaction on
Form S-4 or its equivalent, or another form not available for registering the
Registrable Securities for sale to the public), each such time it will give
prompt written notice to SPLN of its intention so to do and of the proposed
method of distribution of such securities. Upon the written request of SPLN,
received by the Company within twenty (20) days after the giving of any such
notice by the Company, to include in the registration any Registrable
Securities, the Company will use commercially reasonable efforts to cause the
Registrable Securities as to which registration shall have been so requested to
be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent and under the conditions
such registration is permitted under the Securities Act. In the event that any
registration pursuant to this Section 8.2 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of
Registrable Securities to be included in such an underwriting may be reduced
(pro rata among the requesting holders based upon the number of shares of
Registrable Securities owned by such holders) if and to the extent that the
managing underwriter shall be of the opinion that the inclusion of some or all
of the Registrable Securities would adversely affect the marketing of the
securities to be sold by the Company therein. Any such limitation shall be
imposed in such manner so as to avoid any diminution in the number of shares the
Company may register for sale by giving first priority for the shares to be
registered for issuance and sale by the Company, by giving second priority for
the shares to be registered for issuance and sale by SPLN, and by giving third
priority for the shares to be registered for sale by any other holder of
Registrable Securities (and other securities with pari passu registration
rights). Notwithstanding the foregoing provisions, the Company may, in its sole
discretion, terminate or withdraw any registration statement referred to in this
Section 8.2 without thereby incurring any liability to SPLN.
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8.3 Registration Procedures. If and whenever the Company is required by
the provisions of Section 8.1 or 8.2 to effect the registration of any
Registrable Securities under the Securities Act, the Company will, at its cost
and expense (including without limitation, payment of the costs and expenses
described in Section 8.4), as expeditiously as reasonably practicable:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided);
(b) prepare and file as expeditiously as reasonably
practicable and in any event within ninety (90) days with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for the period specified in Section 8.3(a) above and comply
with the provisions of the Securities Act with respect to the disposition the
Registrable Securities covered by such registration statement in accordance with
the sellers' intended method of disposition set forth in such registration
statement for such period;
(c) furnish to SPLN such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) as SPLN may request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such registration
statement;
(d) use all reasonable efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as SPLN shall request;
(e) use all reasonable efforts to list the Registrable
Securities covered by such registration statement with NASDAQ or any securities
exchange on which the Common Stock of the Company is then listed;
(f) immediately notify SPLN 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 contained 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 light of the
circumstances then existing; and
(g) notify SPLN under such registration statement of (i) the
effectiveness of such registration statement, (ii) the filing of any
post-effective amendments to such registration statement, or (iii) the filing of
a supplement to such registration statement.
(h) cause to be furnished to SPLN an opinion of counsel
reasonably acceptable to SPLN covering such matters as are customarily covered
in opinions of counsel to
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underwriters with respect to comparable issuers and a "cold comfort" letter of
the Company's independent auditors with respect to the Company's financial
statements included in such registration statement and other financial data set
forth therein.
For purposes of Section 8.3(a) and 8.3(b), the period of distribution
in a firm commitment underwritten public offering shall be deemed to extend
until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution in any other registration shall
be deemed to extend until the earlier of the sale of all securities covered
thereby and one hundred eighty (180) days after the effective date thereof, with
reasonable extensions to be granted for suspensions thereof.
In connection with and as a condition to each registration hereunder,
SPLN shall (a) provide such information and execute such documents as may
reasonably be required in connection with such registration, (b) agree to sell
securities on the basis provided in any underwriting arrangements, and (c)
complete and execute all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required or requested
under the terms of such underwriting arrangements.
In connection with each registration pursuant to Section 8.1 or 8.2,
covering an underwritten public offering, the Company and SPLN agree to enter
into a written agreement with the managing underwriter selected in the manner
herein provided in such form and containing such provisions as are customary in
the securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
8.4 Expenses. All expenses incurred by the Company in complying with
Sections 8.1 or 8.2, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
transfer taxes, fees of transfer agents and registrars, and the fees and
disbursements counsel for the Company will be paid by the Company. In addition,
the Company shall pay the fees and expenses of counsel to SPLN in connection
with any registration and sale hereunder.
8.5 Indemnification and Contribution.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 8.1 or 8.2, the Company
will indemnify and hold SPLN harmless from and against any losses, claims,
damages or liabilities, to which SPLN may become subject under the Securities
Act or under any other statute or at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
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material fact required to be stated therein or necessary to make the statements
therein not misleading or any violations of applicable law relating to such
registration, and will pay the legal fees and other expenses of SPLN in
connection with investigating or defending any action whether or not resulting
in any liability insofar as such loss, claim, damage, liability or action
results from the foregoing.
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 8.1 or 8.2, SPLN will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Registrable Securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon 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, provided, however, that
SPLN will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information furnished in writing to
the Company by SPLN specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of SPLN hereunder
shall be limited to the amount of net proceeds received by SPLN in connection
with such registration.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability that it may have
to such indemnified party under this Section 8.5 except and only to the extent
the indemnifying party is prejudiced by such omission. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 8.5 for
any legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof; provided, however, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded (based on the advice of
counsel) that there may be reasonable defenses available to it which are
different from or additional to those
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available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel as required by the local rules of such jurisdiction) at any time for all
such indemnified parties.
(d) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
8.6 Damages. The Company recognizes and agrees that SPLN will suffer
irreparable harm and will not have an adequate remedy at law if the Company
fails to comply with any provision of this Article VIII, and the Company
expressly agrees that, in the event of such failure, SPLN shall be entitled to
seek specific performance of any and all provisions hereof and may seek to
enjoin the Company from continuing to commit any further breach of this Article
VIII.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 Survival. Notwithstanding any examination made for or on behalf of
SPLN, the knowledge of any of its officers, directors, stockholders, employees
or agents, or the acceptance of any certificate or opinion, all representations
and warranties, set forth in this Agreement or in any writing delivered in
connection with this Agreement shall survive the Closing for a period of two
years after the date hereof and, shall be fully effective and enforceable during
such period.
9.2 Indemnification.
(a) The Company agrees to indemnify and hold harmless SPLN,
including each of its Affiliates, directors, officers, agents and employees
thereof (SPLN and each such other Person, a "SPLN Indemnified Party") from and
against any losses, claims, damages, judgments, assessments, costs and other
liabilities (collectively "Liabilities"), and will reimburse each SPLN
Indemnified Party for all fees and expenses (including the reasonable fees and
expenses of counsel) (collectively, "Expenses") as they are incurred in
investigating, preparing or defending any claim, action, proceeding or
investigation, whether or not in connection with
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<PAGE>
pending or threatened litigation or arbitration and whether or not any SPLN
Indemnified Party is a party thereto (collectively, "Actions"), arising out of
(i) any breach of any of the representations or warranties made by the Company
in this Agreement or any of the agreements or certificates, documents or other
writings delivered pursuant hereto, (ii) any breach or violation of or failure
to fully perform any covenant, agreement or obligation of the Company in this
Agreement or any of the agreements delivered pursuant hereto, or (iii) any
Action by any third party arising out of or in connection with a breach or
violation described in clauses (i) and (ii) above. If multiple claims are
brought against an Indemnified Party (including in an arbitration), with respect
to at least one of which indemnification is permitted under applicable law and
provided for under this Agreement, the Company agrees that any award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for.
(b) SPLN agrees to indemnify and hold harmless the Company,
including each of its Affiliates, directors, officers, agents and employees
thereof (the Company and each such other Person, a "Company Indemnified Party")
from and against any Liabilities, and will reimburse each Company Indemnified
Party for all Expenses as they are incurred in investigating, preparing, or
defending any Actions and whether or not any Company Indemnified Party is a
party thereto, arising out of (i) any breach of any of the representations or
warranties made by SPLN in this Agreement or any of the agreements or
certificates, documents or other writings delivered pursuant hereto, (ii) any
breach or violation of or failure to fully perform any covenant, agreement or
obligation of SPLN in this Agreement or any of the agreements delivered pursuant
hereto, or (iii) any Action by any third party arising out of or in connection
with a breach or violation described in clauses (i) and (ii) above. If multiple
claims are brought against a Company Indemnified Party (including in an
arbitration), with respect to at least one of which indemnification is permitted
under applicable law and provided for under this Agreement, SPLN agrees that any
award shall be conclusively deemed to be based on claims as to which
indemnification is permitted and provided for.
(c) The liability of each of the Company and SPLN under this
Section 9.2 shall in no event exceed $10,000,000 and neither party shall have
any liability for indemnification until the cumulative and aggregate amount of
the damages suffered by the party seeking indemnification exceeds fifty thousand
dollars ($50,000) (the "Indemnification Threshold"), and then only for the
amount by which such damages exceed the Indemnification Threshold.
9.3 Indemnification Procedure. If an Indemnified Party seeks
indemnification pursuant to Section 9.2, such party shall give prompt written
notice to the party from whom indemnification is sought (the "Indemnifying
Party") of the facts and circumstances giving rise to the claim. Any Indemnified
Party asserting a right of indemnification provided for under this Agreement in
respect of, arising out of or involving a claim or demand made by any person,
firm, governmental authority or corporation against the Indemnified Party (a
"Third Party Claim") shall notify the Indemnifying Party in writing of the Third
Party Claim. As part of such notice, the Indemnified Party shall furnish the
Indemnifying Party with copies of any pleadings, correspondence or other
documents relating thereto that are in the Indemnified Party's
29
<PAGE>
possession. The Indemnified Party's failure to notify the Indemnifying Party of
any such claim shall not release the Indemnifying Party, in whole or in part,
from its obligations under Section 9.2 except to the extent that the Indemnified
Party's ability to defend against such claim is actually materially prejudiced
thereby. The Indemnifying Party shall have the right to elect to assume and
control the defense of any such Third party Claims so long as (i) the counsel
employed by the Indemnifying Party is reasonably satisfactory to the Indemnified
Party, (ii) before undertaking such defense the Indemnifying Party acknowledges
in writing that the Indemnifying Party will be solely responsible for all
Liabilities and Expenses arising from such Third Party Claim, and (iii) the
Indemnified Party is reasonably satisfied that the Indemnifying Party will have
financial resources, or valid insurance, available to satisfy such Liabilities.
If the Indemnifying Party elects to assume and control the defense of the Third
Party Claim, the Indemnified Party shall have the right to employ counsel
separate from counsel employed by such Indemnifying Party in any such action and
to participate in the defense thereof. The fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (i) the employment thereof has been specifically authorized by such
Indemnifying Party in writing, (ii) the Indemnifying Party has failed to
promptly assume the defense and employ counsel or the Indemnifying Party or its
counsel has failed to provide an adequate defense to such claim in a timely
manner or (iii) the Indemnifying Party is a party to such claim and the
Indemnified Party has been advised by counsel that there are additional or
separate defenses, or there is otherwise a conflict of interest, between the
Indemnified Party and the Indemnifying Party. In any such case the fees and
expenses of the Indemnified Party's counsel shall be paid by the Indemnifying
Party, provided that the Indemnifying Party shall not in such event be
responsible hereunder for the fees and expenses of more than one firm or
separate counsel in connection with any such action in the same jurisdiction, in
addition to any local counsel. The Indemnifying Party shall not be liable for
any settlement of any claims effected without its written consent (which shall
not be unreasonably withheld). In addition, the Indemnifying Party will not,
without prior written consent of SPLN, settle, compromise or consent to the
entry of any judgment or otherwise seek to terminate any pending or threatened
claims in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Party from all liabilities arising out of such claim.
9.4 Press Releases and Announcements. Except as may be required by law,
the Company will not disclose the transactions contemplated hereby, including by
making any press release related to this Agreement or the transactions
contemplated herein, or other announcement to the employees, customers or
suppliers of the Company and the Subsidiaries, without the prior written
approval of SPLN. In any event, the Company shall make a good faith effort to
consult with SPLN prior to making any such disclosure.
9.5 Further Transfers. The Company (at its own expense) will execute
and deliver such further instruments of conveyance and transfer and take such
additional action as SPLN may request to effect, consummate, confirm or evidence
the transfer to SPLN of the Securities
30
<PAGE>
and any other transactions contemplated hereby. The Company will execute such
documents as may be necessary to assist SPLN in preserving or perfecting its
rights in the Securities and will also do such acts as are necessary to perform
its representations, warranties and agreements herein, including by, after the
Closing, making all registrations, filings and applications, giving all notices
and obtaining all governmental (including, without limitation, FCC), third party
or other consents, transfers, approvals, orders, qualifications and waivers
desirable for the consummation of the transactions contemplated hereby which,
for any reason, had not been made, given or obtained prior to the Closing.
9.6 Specific Performance. The Company acknowledges that the business of
the Company and the Subsidiaries and the Securities are unique and recognize and
affirm that in the event of a breach of this Agreement by the Company, money
damages may be inadequate and SPLN may have no adequate remedy at law.
Accordingly, the Company agrees that SPLN shall have the right, in addition to
any other rights and remedies existing in its favor at law or in equity, to
enforce its rights and the Company's obligations hereunder not only by an action
or actions for damages but also by an action or actions for specific
performance, injunctive and/or other equitable relief (without posting of bond
or other security).
9.7 Transfer of Securities.
(a) General Provisions. The Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A of the Securities Act (or any similar rule or rules then in
force) if such rule is available or (iii) subject to the conditions specified in
Section 9.8 below, any other legally available means of transfer.
(b) Opinion Delivery. In connection with the transfer of any
Securities (other than a transfer described in subsection 9.7(a)(i) or (ii)
above and other than a transfer to an Affiliate of SPLN), SPLN shall deliver
written notice to the Company describing in reasonable detail the transfer or
proposed transfer, together with an opinion, in form and substance reasonably
satisfactory to the Company and its counsel to the effect that such transfer of
Securities may be effected without registration of such Securities under the
Securities Act. In addition, if SPLN delivers to the Company an opinion of
counsel that, in form and substance reasonably satisfactory to the Company and
its counsel, no subsequent transfer of such Securities shall require
registration under the Securities Act, the Company shall promptly upon such
contemplated transfer deliver new certificates for such Securities which do not
bear the Securities Act legend set forth in Section 9.8. If the Company is not
required to deliver new certificates for such Securities not bearing such
legend, SPLN shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this Section and Section 9.8.
(c) Rule 144A. Upon the request of SPLN, the Company shall
promptly supply to SPLN or its prospective transferees all information regarding
the Company required to be delivered in connection with a transfer pursuant to
Rule 144A of the Securities Act.
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<PAGE>
(d) Removal of Legend. If any Securities are eligible for sale
pursuant to Rule 144(k), the Company shall, upon the request of the holder of
such Securities, remove the legend set forth in Section 9.8 from the
certificates for such Securities.
9.8 Legend. All certificates representing the Securities shall have
conspicuously endorsed thereon a legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON DECEMBER 21, 1999, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE
AGREEMENT, DATED AS OF DECEMBER 21, 1999, BETWEEN THE ISSUER
(THE "COMPANY") AND SPORTSLINE.COM, INC., AND THE COMPANY
RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE."
ARTICLE X
MISCELLANEOUS
10.1 Amendment and Waiver. This Agreement may be amended and any
provision of this Agreement may be waived, provided that, subject to the last
sentence of Section 2.1 and the last sentence of Section 2.2, any such amendment
or waiver will be binding upon a party only if such amendment or waiver is set
forth in a writing executed by each of the Company and SPLN. No course of
dealing between or among any persons having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any party under or by reason of this Agreement.
10.2 Notices. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered, three days after being mailed by first
class mail, return receipt requested, or delivered by express courier service or
telecopied (subject to receipt of written confirmation). Notices, demands and
communications to the Company and SPLN will, unless another address is specified
in writing, be sent to the address indicated below:
32
<PAGE>
Notices To The Company:
Internet Sports Network, Inc.
225 Richmond Street West, Suite 403
Toronto, Ontario, Canada M5V1W2
Attention: President
Telephone (416) 599-8800
Telecopy: (416) 599-8228
With a Copy to:
Stikeman, Elliot
199 Bay Street
Suite 5300, Commerce Court West
Toronto, Ontario, Canada M5L 1B9
Attention: Curtis Cusinato
Telephone: (416) 869-5221
Telecopy: (416) 947-0866
Notices to SPLN:
SportsLine.com, Inc.
6340 NW 5th Way
Ft. Lauderdale, Florida 33309
Attention: President
Telephone: (954) 351-2120
Telecopy: (954) 351-9175
With a Copy to:
Greenberg Traurig, P.A.
1221 Brickell Avenue, Suite 2200
Miami, Florida 33131
Attention: Kenneth C. Hoffman, Esq.
Telephone: (305) 579-0809
Telecopy: (305) 579-0717
10.3 Binding Agreement; Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto, but neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by either party provided that SPLN may
freely assign this Agreement to an Affiliate or, the benefits of Article VIII to
any other transferee of Registrable Securities.
33
<PAGE>
10.4 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
10.5 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
Person.
10.6 Headings; Interpretation. The headings used in this Agreement are
for convenience of reference only and do not constitute a part of this Agreement
and will not be deemed to limit, characterize or in any way affect any provision
of this Agreement, and all provisions of this Agreement will be enforced and
construed as if no caption had been used in this Agreement. Whenever the term
"including" is used in this Agreement (whether or not that term is followed by
the phrase "but not limited to" or "without limitation" or words of similar
effect) in connection with a listing of one or more items or matters, that
listing will be interpreted to be illustrative only and will not be interpreted
as a limitation on, or an exclusive listing of, such items or matters.
10.7 Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement between the parties and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
10.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument.
10.9 Governing Law. This agreement and the exhibits and schedules
hereto shall be governed by the internal law of the state of Florida, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the state of Florida or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the state of Florida.
10.10 Parties in Interest. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
* * * * *
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
INTERNET SPORTS NETWORK, INC.
By: /s/ Andrew DeFrancesco
--------------------------------
Name: Andrew DeFrancesco
Title: Chairman and CEO
SPORTSLINE.COM, INC.
By: /s/ Michael Levy
--------------------------------
Name: Michael Levy
Title: President
35
Exhibit 2
THIS NOTE WAS ORIGINALLY ISSUED ON DECEMBER 21, 1999 AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS NOTE. THIS NOTE IS ALSO SUBJECT TO SECURITIES PURCHASE AGREEMENT DATED AS
OF DECEMBER 21, 1999 BETWEEN INTERNET SPORTS NETWORK, INC. (THE "COMPANY") AND
SPORTSLINE.COM, INC. (THE "PURCHASE AGREEMENT"). A COPY OF THE PURCHASE
AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF
UPON REQUEST.
INTERNET SPORTS NETWORK, INC.
CONVERTIBLE PROMISSORY NOTE
Date of Issuance: December 21, 1999 $5,000,000.00
Internet Sports Network, Inc., a Florida corporation (the "Company"),
for value received, promises to pay to the order of SportsLine.com, Inc.,
Delaware corporation ("SportsLine"), or its permitted assigns (SportsLine or
such permitted assigns, the "Holder"), the sum of FIVE MILLION DOLLARS
($5,000,000.00), plus simple interest thereon from the Date of Issuance until
paid at an annual interest rate, calculated on the basis of a 360 day year,
equal to 5%. The principal hereof, and the interest thereon, shall be payable by
mail to the registered address of the Holder on the date (the "Maturity Date")
which is the fourth anniversary of the Effective Date (as defined in the
Promotion Agreement) of the Promotion Agreement; provided, however, that if the
Promotion Agreement is terminated by SportsLine pursuant to Section 19(a) of the
Promotion Agreement (material breach by the Company) or Section 19(b) of the
Promotion Agreement (Change in Control of Company), then the Maturity Date shall
be the date that any such termination becomes effective. Notwithstanding the
foregoing, no payment of principal or interest shall be required to the extent
that such principal and interest is or has been converted into equity securities
of the Company pursuant to the terms hereof. This Note may not be prepaid
without the consent the Holder.
Certain capitalized terms used herein are defined in Section 8 hereof.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder, by the
acceptance of this Note, agrees:
SECTION 1. Conversion of Note.
1A. Conversion. So long as this Note is outstanding (the "Exercise
Period") at any time and from time to time, the Holder may convert all or any
portion of the outstanding principal hereof and unpaid interest thereon (the
"Debt"), and upon the occurrence of a Qualified Public
<PAGE>
Offering all of the Debt shall be automatically converted into, a number of
shares of Conversion Stock (including any fraction of a share) computed by
dividing the portion of the Debt to be converted by the Conversion Price then in
effect. At the time of any conversion of the Debt or a portion thereof, the
rights of the Holder with respect to such portion of the Debt so converted shall
cease and the Holder so converting shall be deemed to have become the record
holder of the shares of Conversion Stock issuable upon such conversion.
1B. Conversion Procedure. (i) Except as otherwise provided herein, each
conversion of the Debt or a portion thereof shall be deemed to have occurred
when all of the following items have been delivered to the Company during the
Exercise Period (the "Conversion Time"):
(a) a completed Conversion Agreement, as described in Section 1C below,
executed by the Holder;
(b) this Note; and
(c) if the Holder is not SportsLine, an Assignment or Assignments in
the form set forth in Exhibit II hereto evidencing the assignment of this Note
to the Holder;
(ii) Certificates for shares of Conversion Stock issuable by reason of
such conversion shall be delivered by the Company to the Holder within three
days after the date of the Conversion Time together with any cash payable in
lieu of a fraction of a share pursuant to Section 13 hereof. Unless this Note
has been paid or converted in full, the Company shall prepare a new Note,
substantially identical hereto, representing the portion of the Debt not being
converted or paid and shall, within such three-day period, deliver such new Note
to the Person designated for delivery in the Conversion Agreement.
(iii) The shares of Conversion Stock issuable upon the conversion of
the Debt or a portion thereof shall be deemed to have been issued to the Holder
at the Conversion Time, and the Holder shall be deemed for all purposes to have
become the registered holder of such shares at the Conversion Time.
(iv) The issuance of certificates for shares of Conversion Stock shall
be made without charge to the Holder for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such conversion and the
related issuance of such shares (other than transfer or other applicable taxes
payable because the Holder is other than SportsLine).
(v) The Company shall not close its books against the transfer of this
Note or of any shares of Conversion Stock issued or issuable upon the conversion
of the Debt or a portion thereof in any manner which interferes with the timely
exercise of the conversion rights under this Note. The Company shall from time
to time take all such action as may be necessary to assure that the par value
per share of the unissued shares of Conversion Stock issuable upon conversion
hereunder is at all times equal to or less than the Conversion Price then in
effect. In the event that the Company fails to comply with its obligations set
forth in the foregoing sentence, the Holder may (but shall not be obligated to)
convert the Debt or a portion thereof at a
<PAGE>
deemed Conversion Price equal to par value, and the Company shall be obligated
to reimburse the Holder for the aggregate amount of consideration paid in
connection with such conversion in excess of the actual Conversion Price then in
effect.
(vi) The Company shall assist and cooperate with any Holder required to
make any governmental filings or obtain any governmental approvals prior to or
in connection with any conversion under this Note (including, without
limitation, making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if the conversion of
any portion of this Note is to be made in connection with a Change of Control or
other transaction affecting the Company, such conversion may at the election of
the Holder be conditioned upon the consummation of such transaction, in which
case such conversion shall not be deemed to be effective until immediately prior
to the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out of
its authorized but unissued Conversion Stock solely for the purpose of issuance
upon the conversion of this Note, the maximum number of shares of Conversion
Stock issuable upon the conversion of this Note. All shares which are so
issuable shall, when issued, be duly and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges. The Company shall
take all such actions as may be necessary to ensure that all such shares may be
so issued without violation by the Company of any applicable law or governmental
regulation or any requirements of any domestic securities exchange or trading
market upon which shares of Conversion Stock or other securities into which this
Note may be converted may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
The Company shall not take any action which would cause the number of authorized
but unissued shares of Conversion Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon conversion of this
Note.
(ix) If the shares of Conversion Stock issuable by reason of conversion
under this Note are at the time of any such conversion convertible into or
exchangeable for any other stock or securities of the Company, the Company
shall, at the Holder's option and upon the conversion of this Note as provided
above, together with any notice, statement or payment required to effect such
conversion or exchange of such shares, deliver to the Holder (or as otherwise
specified by the Holder) a certificate or certificates representing the stock or
securities into which the shares of Conversion Stock issuable by reason of such
conversion are convertible or exchangeable, registered in such name or names and
in such denomination or denominations as such Holder has specified.
(x) The Company shall not, and shall not permit its Subsidiaries to,
directly or indirectly, by any action avoid or seek to avoid the observance or
performance of any of terms of this Note or impair or diminish its value (except
for any action which ratably affects all shares of Conversion Stock), but shall
at all times in good faith assist in the carrying out of all such terms of this
Note. Without limiting the generality of the foregoing, the Company shall (a)
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction
<PAGE>
thereof as may be necessary to enable the Company to perform its obligations
under this Note and (b) not undertake any reverse stock split, combination,
reorganization or other reclassification of its capital stock which would have
the effect of causing a material portion of the conversion rights represented
hereby to become exercisable for less than one share of Conversion Stock.
1C. Conversion Agreement. Upon any conversion under this Note, the
Holder shall deliver to the Company a Conversion Agreement in substantially the
form set forth in Exhibit I hereto, except that if the shares issuable upon such
conversion are not to be issued in the name of the Holder, the Conversion
Agreement shall also state the name of the Person to whom the certificates for
such shares are to be issued, and if the number of such shares to be issued does
not include all of the shares of Conversion Stock issuable hereunder, it shall
also state the name of the Person to whom a new Note is to be issued.
SECTION 2. Adjustment of Conversion Price and Number of Shares.
The initial Conversion Price shall be $2.90. In order to prevent
dilution of the conversion rights granted under this Note, the initial
Conversion Price shall be subject to adjustment from time to time (as so
adjusted, the "Conversion Price") as provided in this Section 2.
2A. Adjustment Formula. If and whenever on or after the Date of
Issuance and prior to the expiration of the Exercise Period the Company issues
or sells, or in accordance with Section 2C is deemed to have issued or sold, any
shares of Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale or deemed issue or sale the Conversion Price
shall be reduced to either (x) the consideration per share of such issuance or
sale or deemed issuance or sale if such issuance or sale or deemed issuance or
sale occurs on or prior to December 21, 2000, or (y) the amount determined by
dividing (i) the sum of (1) the product derived by multiplying the Conversion
Price in effect immediately prior to such issue or sale by the number of shares
of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus
(2) the consideration, if any, received by the Company upon such issue or sale,
by (ii) the number of shares of Common Stock Deemed Outstanding immediately
after such issue or sale, if such issuance or sale or deemed issuance or sale
occurs after December 21, 2000, but prior to the expiration of the Exercise
Period. .
2B. Exceptions. Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Price as a result of any issue or sale (or deemed
issue or sale) of:
(i) shares of Common Stock issuable pursuant to options, warrants,
convertible securities or other rights outstanding on the Date of Issuance, and
(ii) shares of Common Stock as consideration for the acquisition of any
interest in any business or company from a Person other than an Affiliate (A)
which acquisition is not prohibited pursuant to the Purchase Agreement, and (B)
so long as the Fair Market Value of the
<PAGE>
Conversion Stock as of the closing of such acquisition exceeds $2.90 per share
(as such price is proportionately adjusted for subsequent stock splits,
combinations of shares and stock dividends affecting the Conversion Stock).
2C. Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Section 2A, the following shall
be applicable during the Exercise Period:
(1) Issuance of Rights or Options. If the Company in any manner grants
or sells any Options and the price per share for which Common Stock is issuable
upon the exercise of such Options, or upon conversion or exchange of any
Convertible Securities issuable upon exercise of such Options, is less than the
Conversion Price in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Options for such
price per share. For purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (i) the total amount,
if any, received or receivable by the Company as consideration for the granting
or sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Options, plus in
the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(2) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange thereof is less than the
Conversion Price in effect immediately prior to the time of such issue or sale,
then the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (i) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment of the
Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments
<PAGE>
of the Conversion Price had been or are to be made pursuant to other provisions
of this Section 2, no further adjustment of the Conversion Price shall be made
by reason of such issue or sale.
(3) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Conversion Price in effect at the time of such change
shall be immediately adjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2C, if the terms of any Option or Convertible Security
which was outstanding as of the Date of Issuance of this Note are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change; provided that no such change shall at any time cause the
Conversion Price hereunder to be increased.
(4) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued. For purposes of this Section 2C, the expiration or
termination of any Option or Convertible Security which was outstanding as of
the Date of Issuance shall not cause the Conversion Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms of such
Option or Convertible Security caused it to be deemed to have been issued after
the Date of Issuance.
(5) Calculation of Consideration Received. If any Common Stock, Option
or Convertible Security is issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Company shall be the Fair Market Value thereof
as of the date of receipt. If any Common Stock, Option or Convertible Security
is issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving Company, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined in
good faith by the Board of Directors of the Company and such determination shall
be delivered in writing to the Holder. In the event that the Holder disputes
such determination of fair value, the Holder shall so inform the Company in
writing within 10 days after receipt of the Company's determination and the
<PAGE>
Company and such Holder shall negotiate in good faith to determine a mutually
acceptable fair value. If such parties are unable to reach agreement within 30
days after the Holder has given the Company written notice of its dispute, the
fair value of such consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly selected by the
Company and the Holder. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Company.
(6) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Option by the parties thereto, the Option shall be deemed to have been
issued for a consideration of $.001.
(7) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company or any Subsidiary, and the disposition of any shares so owned or
held shall be considered an issue or sale of Common Stock.
(8) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
2D. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Company at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
2E. Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction in
each case which is effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change". Prior to the consummation of any Organic
Change, the Company shall make appropriate provision (in form and substance
satisfactory to the Holder) to ensure that the Holder shall thereafter have the
right to acquire and receive upon conversion hereof, in lieu of or addition to
(as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon conversion hereunder, such shares of stock,
securities or assets as such Holder would have received in connection with such
Organic Change if such holder had converted this Note immediately prior to such
Organic Change. In each such case, the Company
<PAGE>
shall also make appropriate provision (in form and substance satisfactory to the
Holder) to insure that the provisions of this Section 2 and Section 4 hereof
shall thereafter be applicable to this Note (including, in the case of any such
Organic Change in which the successor entity or purchasing entity is other than
the Company, an immediate adjustment of the Conversion Price to the value for
the Common Stock reflected by the terms of such Organic Change and a
corresponding immediate adjustment in the number of shares of Conversion Stock
acquirable and receivable upon conversion under this Note, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
Organic Change). The Company shall not effect any such Organic Change unless,
prior to the consummation thereof, the successor entity (if other than the
Company) resulting from such Organic Change assumes by written instrument (in
form and substance reasonably satisfactory to the Holder) the obligation to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
acquire.
2F. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features other than as
contemplated by Section 2B hereof), then the Company's Board of Directors shall
make an appropriate adjustment in the Conversion Price and the number of shares
of Conversion Stock obtainable upon conversion of this Note so as to protect the
rights of the Holder of this Note; provided that no such adjustment shall
increase the Conversion Price as otherwise determined pursuant to this Section 2
or decrease the number of shares of Conversion Stock issuable upon conversion of
this Note.
2G. Notices. (i) Promptly after any adjustment of the Conversion Price,
the Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment. (ii) The
Company shall give written notice to the Holder at least 20 days prior to the
date on which the Company closes its books or takes a record (a) with respect to
any dividend or distribution upon its Common Stock, (b) with respect to any pro
rata subscription offer to holders of Common Stock or (c) for determining rights
to vote with respect to any Organic Change, dissolution or liquidation. (iii)
The Company shall also give written notice to the Holder at least 20 days prior
to the date on which any Organic Change, dissolution or liquidation shall take
place.
SECTION 3. Liquidating Dividends.
If the Company declares or pays a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Company shall pay to the Holder of this Note at the time of
payment thereof the Liquidating Dividend which would have been paid to such
Holder on the shares of Conversion Stock had the outstanding Debt had been fully
converted immediately prior to the date on which a record is taken for such
Liquidating Dividend reduced by an amount equal to the outstanding Debt under
this Note, or, if no record is taken,
<PAGE>
the date as of which the record holders of Common Stock entitled to such
dividends are to be determined.
SECTION 4. Purchase Rights. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then the Holder hereof shall be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Conversion Stock acquirable upon conversion of
such holder's Notes immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
SECTION 5. No Voting Rights; Limitations of Liability.
This Note shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Holder to acquire shares of Conversion
Stock, and no enumeration herein of the rights or privileges of the Holder shall
give rise to any liability of such Holder for the Conversion Price of shares of
Conversion Stock acquirable by conversion hereof or as a stockholder of the
Company.
SECTION 6. Transferability.
Subject to the transfer conditions referred to in the legend endorsed
hereon and applicable securities laws, this Note and all rights hereunder are
transferable, in whole or in part, without charge to the Holder, upon surrender
of this Note with a properly executed Assignment (in the form of Exhibit II
hereto) at the principal office of the Company, with the prior written consent
of the Company, such consent not to be unreasonably withheld, provided, however,
that no such consent shall be required if any such transfer is to an Affiliate
of SportsLine.
SECTION 7. Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for new Notes of like tenor representing in the aggregate Debt
hereunder, and each of such new Notes shall represent such portion of Debt as is
designated by the Holder at the time of such surrender. At the request of the
Holder (pursuant to a transfer of Notes or otherwise), this Note may be
exchanged for one or more Notes. The date the Company initially issues Notes
pursuant to the Purchase Agreement shall be deemed to be the "Date of Issuance"
regardless of the number of times new Notes shall be issued. All Notes
representing portions of the rights hereunder are referred to herein as the
"Notes."
SECTION 8. Definitions.
The following terms have the meanings set forth below:
<PAGE>
"Affiliate" means with respect to any Person, any other Person directly
or indirectly controlling or controlled by or is under direct or indirect
control with such specified Person.
"Board of Directors" means the board of directors of the Company.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Corporation and its Subsidiaries taken as
a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than SportsLine or a Related Party of SportsLine, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than SportsLine and its Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that in calculating the beneficial ownership of any particular
"person," such "person" shall be deemed to have beneficial ownership of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (iv) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors, (v) the Company consolidates with, or merges with
or into, any Person, or any Person consolidates with, or merges with or into,
the Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance), or (vi) a Change of Control of any Person holding a majority of the
outstanding shares of Voting Stock of the Company. For purposes of this
definition, any transfer of an equity interest of an entity that was formed for
the purpose of acquiring Voting Stock of the Company will be deemed to be a
transfer of such portion of such Voting Stock as corresponds to the portion of
the equity of such entity that has been so transferred.
"Common Stock" means the Company's Common Stock, $.001 par value per
share, or any securities into which such Common Stock is hereafter converted or
exchanged.
<PAGE>
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 2C(1) and
2C(2) hereof.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Date of Issuance or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Conversion Stock" means shares of the Company's Common Stock issuable
upon conversion under this Note; provided, that if the securities issuable upon
such conversion are issued by an entity other than the Company or there is a
change in the class of securities so issuable, then the term "Conversion Stock"
shall mean shares of the security issuable upon such conversion if such security
is issuable in shares, or shall mean the equivalent units in which such security
is issuable if such security is not issuable in shares.
"Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock, other than any
such securities referred to in Section 2B above.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute then in effect.
"Fair Market Value" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed or as reported on the NASDAQ National Market,
or, if there has been no sales on any such exchange or reported on the NASDAQ
National Market on any day, the average of the highest bid and lowest asked
prices on all such exchanges or reported at the end of such day, or, if on any
day such security is not so listed or included in the NASDAQ National Market,
the average of the representative bid and asked prices quoted in the NASDAQ
Stock Market as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which "Fair Market Value" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ National Market, the
NASDAQ Stock Market or the over-the-counter market, the "Fair Market Value"
shall be determined in good faith by the Board of Directors of the Company and
such determination shall be delivered in writing to the Holder. In the event
that the Holder disputes such determination of Fair Market Value, the Holder
shall so inform the Company in writing within 10 days after receipt of the
Company's determination and the Company and such Holder shall negotiate in good
faith to determine a mutually acceptable Fair Market Value. If such parties are
unable to reach agreement within 30 days after the Holder has given the
<PAGE>
Company written notice of its dispute, the Fair Market Value of such security
shall be determined by an independent appraiser experienced in valuing
securities jointly selected by the Company and the Holder. The determination of
such appraiser shall be final and binding upon the parties, and the fees and
expenses of such appraiser shall be borne by the Company.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities other than rights, Notes or
options referred to in Section 2B above.
"Person" means an individual, a partnership (including a limited
partnership), a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Promotion Agreement" means that certain Promotion Agreement of even
date herewith between SportsLine and the Company.
"Qualified Public Offering" means an offering by the Company of its
Common Stock to the public pursuant to an effective registration statement under
the Securities Act of 1933, as amended, or any comparable statement under any
similar federal statute then in effect, providing gross proceeds to the Company
of not less than $20 million, having an initial per share price to the public of
not less than $5.00, and based upon such initial offering price, indicates a
Company valuation of not less than the sum of $80 million plus the gross
proceeds of such offering.
"Related Party" with respect to SportsLine means (A) any controlling
stockholder, Subsidiary, or spouse or immediate family member (in the case of an
individual) of SportsLine or (B) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of SportsLine and/or
such other Persons referred to in the immediately preceding clause (A).
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors or managers thereof is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
SECTION 9. Replacement.
<PAGE>
Upon receipt of evidence reasonably satisfactory to the Company (an
affidavit of the Holder shall be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any certificate evidencing this Note, and in
the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that if the Holder is
SportsLine or a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
SECTION 10. Defaults.
The Holder may by a notice in writing to the Company declare the entire
unpaid principal and accrued interest on this Note immediately due and payable,
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Company, if any of the following events
shall occur:
(i) Failure to make payment of principal of the Note and accrued
interest thereon when due; or
(ii) The institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it under applicable federal or state law, or the
consent by it to, or acquiescence in, the filing of any such petition or the
appointment of a receiver, liquidator, assignee, trustee, or other similar
official, of the Company, or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due; or
(iii) Within 60 days after the commencement of proceedings against the
Company seeking any bankruptcy, insolvency, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such action shall
not have been dismissed or all orders or proceedings thereunder affecting the
operations or the business of the Company stayed, or the stay of any such order
or proceedings shall thereafter be set aside, or, within 60 days after the
appointment without the consent or acquiescence of the Company of any trustee,
receiver or liquidator of the Company or of all or any substantial part of the
properties of the Company, such appointment shall not have been vacated; or
(iv) Any of the representations and warranties of the Company set forth
in the Purchase Agreement is untrue in any material respect and such breach is
not cured within a period of 30 days from the date of receipt of notice from the
Holder; or
(v) The Company fails to perform or observe any material covenant or
agreement set forth in this Note, the Purchase Agreement or the Warrant issued
pursuant to the Purchase
<PAGE>
Agreement; provided however, that if such breach is curable then this Note shall
not be in default until 30 days after the date of receipt of notice from the
Holder as to such breach.
The Company shall pay all expenses of the Holder incurred for the collection of
this Note, including reasonable attorney's fees and legal expenses.
SECTION 11. Notices.
Except as otherwise expressly provided herein, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested, postage prepaid and will be deemed to have been
given when so mailed (i) to the Company, at its principal executive offices and
(ii) to the Holder, at such Holder's address as it appears in the records of the
Company (unless otherwise indicated by such Holder).
SECTION 12. Amendment and Waiver.
No amendment, modification or waiver will be binding or effective with
respect to any provision of this Note without the prior written consent of the
Holder hereof.
SECTION 13. Fractions of Shares.
If any fractional interest in a Conversion Share would, except for the
provisions of this subparagraph, be delivered upon any conversion under of this
Note, at the request of the Holder the Company, in lieu of delivering the
fractional share therefor, shall pay an amount to the Holder thereof equal to
the Fair Market Value of such fractional interest as of the date of conversion.
SECTION 14. Miscellaneous.
(i) This Note may only be transferred in compliance with applicable
state and federal laws. All rights and obligations of the Company and the Holder
shall be binding upon and benefit the successors, assigns, heirs, and
administrators of the parties.
(ii) The descriptive headings of the several Sections and paragraphs of
this Note are inserted for convenience only and do not constitute a part of this
Note. THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS NOTE SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. This Note shall be governed by the laws of the State of
Florida applicable to contracts between Florida residents wholly to be performed
in Florida.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated as of the date hereof.
INTERNET SPORTS NETWORK, INC.
By: /s/ Andrew DeFrancesco
--------------------------------
Name: Andrew DeFrancesco
Title: Chairman and CEO
Exhibit 3
THIS WARRANT WAS ORIGINALLY ISSUED ON DECEMBER 21, 1999 AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS WARRANT. THIS WARRANT IS ALSO SUBJECT TO THE SECURITIES
PURCHASE AGREEMENT DATED AS OF DECEMBER 21, 1999 BETWEEN INTERNET SPORTS
NETWORK, INC. (THE "COMPANY") AND SPORTSLINE.COM, INC. (THE "PURCHASE
AGREEMENT"). A COPY OF THE PURCHASE AGREEMENT WILL BE FURNISHED WITHOUT CHARGE
BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.
STOCK PURCHASE WARRANT
Date of Issuance: December 21, 1999 Certificate No. W-2
This Warrant is being issued pursuant to the Securities Purchase
Agreement dated as of December 21, 1999 (the "Purchase Agreement"), between
Internet Sports Network, Inc. a Florida corporation (the "Company"), and
SportsLine.com, Inc., a Delaware corporation ("SportsLine"), as amended from
time to time in accordance with its terms. For value received, the Company
hereby grants to SportsLine or its registered assigns (the "Registered Holder")
the right to purchase from the Company 1,033,296 shares of the Company's Common
Stock at a price per share equal to $2.90 (the "Initial Exercise Price") (such
price as adjusted and readjusted from time to time in accordance with Section 2
hereof). Certain capitalized terms used herein are defined in Section 8 hereof.
The amount and kind of securities obtainable pursuant to the rights granted
hereunder and the purchase price for such securities are subject to adjustment
pursuant to the provisions contained in this Warrant. This Warrant is subject to
the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this Warrant
may be exercised, in whole or in part, at any time and from time to time from
the date hereof to and including the second anniversary of such date (the
"Exercise Period").
1B. Exercise Procedure. (i) This Warrant shall be deemed to have been
exercised when all of the following items have been delivered to the Company
(the "Exercise Time"):
(a) a completed Exercise Agreement, as described in Section 1C below,
executed by the Person exercising all or part of the purchase rights represented
by this Warrant (the "Purchaser");
(b) this Warrant;
<PAGE>
(c) if the Purchaser is not the Registered Holder, an Assignment or
Assignments in the form set forth in Exhibit II hereto evidencing the assignment
of this Warrant to the Purchaser; and
(d) either (1) a check payable to the Company in an amount equal to the
product of the Exercise Price multiplied by the number of Warrant Shares being
purchased upon such exercise (the "Aggregate Exercise Price"), (2) the surrender
to the Company of shares of Common Stock, shares of Preferred Stock or debt
securities of the Company having a Fair Market Value equal to the Aggregate
Exercise Price of the Warrant Shares being purchased upon such exercise
(provided that for purposes of this subparagraph, the Fair Market Value of any
note or other debt security or any preferred stock shall be deemed to be equal
to the aggregate outstanding principal amount or liquidation value thereof plus
all accrued and unpaid interest thereon or accrued or declared and unpaid
dividends thereon), or (3) a written notice to the Company that the Purchaser is
exercising the Warrant (or a portion thereof) by authorizing the Company to
withhold from issuance a number of Warrant Shares issuable upon such exercise of
the Warrant which when multiplied by the Fair Market Value of one Warrant Share
is equal to the Aggregate Exercise Price (and such withheld shares shall no
longer be issuable under this Warrant).
(ii) Certificates for Warrant Shares purchased upon exercise of this
Warrant shall be delivered by the Company to the Purchaser within three days
after the date of the Exercise Time together with any cash payable in lieu of a
fraction of a share pursuant to Section 13 hereof. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, within such three-day period, deliver such
new warrant to the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time, and
the Purchaser shall be deemed for all purposes to have become the Registered
Holder of such Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares upon exercise of
this Warrant shall be made without charge to the Registered Holder or the
Purchaser for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of Warrant
Shares (other than transfer or any other applicable taxes payable because the
holder of the Warrant Shares is other than the Registered Holder).
(v) The Company shall not close its books against the transfer of this
Warrant or of any Warrant Shares issued or issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
The Company shall from time to time take all such action as may be necessary to
assure that the par value per share of the unissued Warrant Shares acquirable
upon exercise of this Warrant is at all times equal to or less than the Exercise
Price then in effect. In the event that the Company fails to comply with its
obligations set forth in
<PAGE>
the foregoing sentence, the Purchaser may (but shall not be obligated to)
purchase Warrant Shares hereunder at par value, and the Company shall be
obligated to reimburse the Purchaser for the aggregate amount of consideration
paid in connection with such exercise in excess of the Exercise Price then in
effect.
(vi) The Company shall assist and cooperate with the Registered Holder
or any Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including, without limitation, making any filings required to be made
by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise of any
portion of this Warrant is to be made in connection with a Change of Control or
other transaction affecting the Company, such exercise may at the election of
the Registered Holder be conditioned upon the consummation of such transaction,
in which case such exercise shall not be deemed to be effective until
immediately prior to the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out of
its authorized but unissued Common Stock solely for the purpose of issuance upon
the exercise of this Warrant, the maximum number of Warrant Shares issuable upon
the exercise of this Warrant. All Warrant Shares which are so issuable shall,
when issued and upon the payment of the applicable Exercise Price, be duly and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges. The Company shall take all such actions as may be necessary to ensure
that all such Warrant Shares may be so issued without violation by the Company
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange or trading market upon which shares of Common Stock
or other securities constituting Warrant Shares may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance). The Company shall not take any action which would
cause the number of authorized but unissued Warrant Shares to be less than the
number of such shares required to be reserved hereunder for issuance upon
exercise of the Warrant.
(ix) If the Warrant Shares issuable by reason of exercise of this
Warrant are at the time of exercise of this Warrant convertible into or
exchangeable for any other stock or securities of the Company, the Company
shall, at the Purchaser's option and upon surrender of this Warrant by such
Purchaser as provided above together with any notice, statement or payment
required to effect such conversion or exchange of Warrant Shares, deliver to
such Purchaser (or as otherwise specified by such Purchaser) a certificate or
certificates representing the stock or securities into which the Warrant Shares
issuable by reason of such conversion are convertible or exchangeable,
registered in such name or names and in such denomination or denominations as
such Purchaser has specified.
(x) The Company shall not, and shall not permit its Subsidiaries to,
directly or indirectly, by any action avoid or seek to avoid the observance or
performance of any of terms of this Warrant or impair or diminish its value
(except for any action which ratably affects all Warrant
<PAGE>
Shares and shares of Common Stock), but shall at all times in good faith assist
in the carrying out of all such terms of this Warrant. Without limiting the
generality of the foregoing, the Company shall (a) obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant and (b) not undertake any reverse stock split,
combination, reorganization or other reclassification of its capital stock which
would have the effect of causing a material portion of the purchase rights
represented hereby to become exercisable for less than one share of Common
Stock.
1C. Exercise Agreement. Upon any exercise of this Warrant, the
Purchaser shall deliver to the Company an Exercise Agreement in substantially
the form set forth in Exhibit I hereto, except that if the Warrant Shares are
not to be issued in the name of the Registered Holder, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the Warrant
Shares are to be issued, and if the number of Warrant Shares to be issued does
not include all of the Warrant Shares purchasable hereunder, it shall also state
the name of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares.
In order to prevent dilution of the rights granted under this Warrant,
the Initial Exercise Price shall be subject to adjustment from time to time (as
so adjusted, the "Exercise Price"), and the number of Warrant Shares obtainable
upon exercise of this Warrant shall be subject to adjustment from time to time,
each as provided in this Section 2.
2A. Adjustment Formula. If and whenever on or after the Date of
Issuance and prior to the expiration of the Exercise Period the Company issues
or sells, or in accordance with Section 2C is deemed to have issued or sold, any
shares of Common Stock for a consideration per share less than the Exercise
Price in effect immediately prior to the time of such issue or sale, then
immediately upon such issue or sale or deemed issue or sale the Exercise Price
shall be reduced to either (x) the consideration per share of such issuance or
sale or deemed issuance or sale if such issuance or sale or deemed issuance or
sale occurs on or prior to December 21, 2000, or (y) the amount determined by
dividing (i) the sum of (1) the product derived by multiplying the Exercise
Price in effect immediately prior to such issue or sale by the number of shares
of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus
(2) the consideration, if any, received by the Company upon such issue or sale,
by (ii) the number of shares of Common Stock Deemed Outstanding immediately
after such issue or sale, if such issuance or sale or deemed issuance or sale
occurs after December 21, 2000, but prior to the expiration of the Exercise
Period.
2B. Exceptions. Notwithstanding the foregoing, there shall be no
adjustment in the Exercise Price as a result of any issue or sale (or deemed
issue or sale) of:
<PAGE>
(i) shares of Common Stock issuable pursuant to options, warrants,
convertible securities or other rights outstanding on the Date of Issuance, and
(ii) shares of Common Stock as consideration for the acquisition of any
interest in any business or company from a Person other than an Affiliate (A)
which acquisition is not prohibited pursuant to the Purchase Agreement, and (B)
so long as the Fair Market Value of one Warrant Share as of the closing of such
acquisition exceeds $2.90 per share (as such price is proportionately adjusted
for subsequent stock splits, combinations of shares and stock dividends
affecting the Warrant Shares).
2C. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable during the Exercise Period:
(1) Issuance of Rights or Options. If the Company in any manner grants
or sells any Options and the price per share for which Common Stock is issuable
upon the exercise of such Options, or upon conversion or exchange of any
Convertible Securities issuable upon exercise of such Options, is less than the
Exercise Price in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Options for such
price per share. For purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (i) the total amount,
if any, received or receivable by the Company as consideration for the granting
or sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Options, plus in
the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Exercise Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(2) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange thereof is less than the
Exercise Price in effect immediately prior to the time of such issue or sale,
then the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for
<PAGE>
which Common Stock is issuable" shall be determined by dividing (i) the total
amount received or receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Exercise Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Exercise Price had been or
are to be made pursuant to other provisions of this Section 2, no further
adjustment of the Exercise Price shall be made by reason of such issue or sale.
(3) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Exercise Price in effect at the time of such change
shall be immediately adjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2C, if the terms of any Option or Convertible Security
which was outstanding as of the Date of Issuance of this Warrant are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change; provided that no such change shall at any time cause the
Exercise Price hereunder to be increased.
(4) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Exercise Price then in effect hereunder shall be adjusted
immediately to the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Security, to the
extent outstanding immediately prior to such expiration or termination, never
been issued. For purposes of this Section 2C, the expiration or termination of
any Option or Convertible Security which was outstanding as of the Date of
Issuance shall not cause the Exercise Price hereunder to be adjusted unless, and
only to the extent that, a change in the terms of such Option or Convertible
Security caused it to be deemed to have been issued after the Date of Issuance.
(5) Calculation of Consideration Received. If any Common Stock, Option
or Convertible Security is issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
<PAGE>
of consideration received by the Company shall be the Fair Market Value thereof
as of the date of receipt. If any Common Stock, Option or Convertible Security
is issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving Company, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined in
good faith by the Board of Directors of the Company and such determination shall
be delivered in writing to the Registered Holder. In the event that the
Registered Holder disputes such determination of fair value, the Registered
Holder shall so inform the Company in writing within 10 days after receipt of
the Company's determination and the Company and such Registered Holder shall
negotiate in good faith to determine a mutually acceptable fair value. If such
parties are unable to reach agreement within 30 days after the Registered Holder
has given the Company written notice of its dispute, the fair value of such
consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the Company and the
Registered Holder. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Company.
(6) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Option by the parties thereto, the Option shall be deemed to have been
issued for a consideration of $.001.
(7) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company or any Subsidiary, and the disposition of any shares so owned or
held shall be considered an issue or sale of Common Stock.
(8) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
2D. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
shall be proportionately increased, and if the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such
<PAGE>
combination shall be proportionately increased and the number of Warrant Shares
shall be proportionately reduced.
2E. Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction in
each case which is effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change". Prior to the consummation of any Organic
Change, the Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of a majority of the Warrants) to ensure
that each Registered Holder of Warrant(s) shall thereafter have the right to
acquire and receive upon exercise thereof, in lieu of or addition to (as the
case may be) the Warrant Shares immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrant(s), such shares of
stock, securities or assets as such holder would have received in connection
with such Organic Change if such Holder had exercised its Warrants immediately
prior to such Organic Change. In each such case, the Company shall also make
appropriate provision (in form and substance satisfactory to the Registered
Holders of a majority of the Warrants then outstanding) to insure that the
provisions of this Section 2 and Section 4 hereof shall thereafter be applicable
to the Warrants (including, in the case of any such Organic Change in which the
successor entity or purchasing entity is other than the Company, an immediate
adjustment of the Exercise Price to the value for the Common Stock reflected by
the terms of such Organic Change and a corresponding immediate adjustment in the
number of Warrant Shares acquirable and receivable upon exercise of the
Warrants, if the value so reflected is less than the Exercise Price in effect
immediately prior to such Organic Change). The Company shall not effect any such
Organic Change unless, prior to the consummation thereof, the successor entity
(if other than the Company) resulting from such Organic Change assumes by
written instrument (in form and substance reasonably satisfactory to the
Registered Holders of a majority of the Warrants then outstanding) the
obligation to deliver to each Registered Holder of Warrant(s) such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Registered Holder may be entitled to acquire.
2F. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features, other than as
contemplated by Section 2B hereof), then the Company's Board of Directors shall
make an appropriate adjustment in the Exercise Price and the number of Warrant
Shares obtainable upon exercise of this Warrant so as to protect the rights of
the Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price as otherwise determined pursuant to this Section 2
or decrease the number of Warrant Shares issuable upon conversion of any
Warrant.
2G. Notices. (i) Promptly after any adjustment of the Exercise Price,
the Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and
<PAGE>
certifying the calculation of such adjustment. (ii) The Company shall give
written notice to the Registered Holders at least 20 days prior to the date on
which the Company closes its books or takes a record (a) with respect to any
dividend or distribution upon its Common Stock, (b) with respect to any pro rata
subscription offer to holders of Common Stock or (c) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation. (iii) The
Company shall also give written notice to the Registered Holder at least 20 days
prior to the date on which any Organic Change, dissolution or liquidation shall
take place.
SECTION 3. Liquidating Dividends.
If the Company declares or pays a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Company shall pay to the Registered Holder of this Warrant
at the time of payment thereof the Liquidating Dividend which would have been
paid to such Registered Holder on the Warrant Shares had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Liquidating Dividend reduced by an amount equal to the aggregate Exercise Price
of this Warrant, or, if no record is taken, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined.
SECTION 4. Purchase Rights. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then the Registered Holder hereof
shall be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of Warrant Shares acquirable upon conversion of such
holder's Warrants immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
SECTION 5. No Voting Rights; Limitations of Liability.
This Warrant shall not entitle the Registered Holder hereof to any
voting rights or other rights as a stockholder of the Company. No provision
hereof, in the absence of affirmative action by the Registered Holder to
purchase Warrant Shares, and no enumeration herein of the rights or privileges
of the Registered Holder shall give rise to any liability of such Registered
Holder for the Exercise Price of Warrant Shares acquirable by exercise hereof or
as a stockholder of the Company.
SECTION 6. Transferability.
<PAGE>
Subject to the transfer conditions referred to in the legend endorsed
hereon and applicable securities laws, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Registered Holder, upon
surrender of this Warrant with a properly executed Assignment (in the form of
Exhibit II hereto) at the principal office of the Company, with the prior
written consent of the Company, such consent not to be unreasonably withheld,
provided, however, that no such consent shall be required if any such transfer
is to an Affiliate of SportsLine.
SECTION 7. Warrant Exchangeable for Different Denominations.
This Warrant is exchangeable, upon the surrender hereof by the
Registered Holder at the principal office of the Company, for new Warrants of
like tenor representing in the aggregate the purchase rights hereunder, and each
of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. At the
request of the Registered Holder (pursuant to a transfer of Warrants or
otherwise), this Warrant may be exchanged for one or more Warrants to purchase
Common Stock. The date the Company initially issues Warrants pursuant to the
Purchase Agreement shall be deemed to be the "Date of Issuance" regardless of
the number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
SECTION 8. Definitions.
The following terms have the meanings set forth below:
"Affiliate" means with respect to any Person, any other Person directly
or indirectly controlling or controlled by or is under direct or indirect
control with such specified Person.
"Board of Directors" means the board of directors of the Company.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Corporation and its Subsidiaries taken as
a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than SportsLine or a Related Party of SportsLine, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any
<PAGE>
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than SportsLine
and its Related Parties, becomes the "beneficial owner" (as such term is defined
in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating
the beneficial ownership of any particular "person," such "person" shall be
deemed to have beneficial ownership of all securities that such person has the
right to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition), directly or indirectly, of
more than 50% of the Voting Stock of the Company (measured by voting power
rather than number of shares), (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors,
(v) the Company consolidates with, or merges with or into, any Person, or any
Person consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock of the surviving or transferee Person constituting a majority
of the outstanding shares of such Voting Stock of such surviving or transferee
Person (immediately after giving effect to such issuance), or (vi) a Change of
Control of any Person holding a majority of the outstanding shares of Voting
Stock of the Company. For purposes of this definition, any transfer of an equity
interest of an entity that was formed for the purpose of acquiring Voting Stock
of the Company will be deemed to be a transfer of such portion of such Voting
Stock as corresponds to the portion of the equity of such entity that has been
so transferred.
"Common Stock" means the Company's Common Stock, $.001 par value per
share, or any securities into which such Common Stock is hereafter converted or
exchanged.
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 2C(1) and
2C(2) hereof.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Date of Issuance or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock, other than any
such securities referred to in Section 2B above.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute then in effect.
<PAGE>
"Fair Market Value" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed or as reported on the NASDAQ National Market,
or, if there has been no sales on any such exchange or reported on the NASDAQ
National Market on any day, the average of the highest bid and lowest asked
prices on all such exchanges or reported at the end of such day, or, if on any
day such security is not so listed or included in the NASDAQ National Market,
the average of the representative bid and asked prices quoted in the NASDAQ
Stock Market as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which "Fair Market Value" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ National Market, the
NASDAQ Stock Market or the over-the-counter market, the "Fair Market Value"
shall be determined in good faith by the Board of Directors of the Company and
such determination shall be delivered in writing to the Registered Holder. In
the event that the Registered Holder disputes such determination of Fair Market
Value, the Registered Holder shall so inform the Company in writing within 10
days after receipt of the Company's determination and the Company and such
Registered Holder shall negotiate in good faith to determine a mutually
acceptable Fair Market Value. If such parties are unable to reach agreement
within 30 days after the Registered Holder has given the Company written notice
of its dispute, the Fair Market Value of such security shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Company and the Registered Holder. The determination of such appraiser shall be
final and binding upon the parties, and the fees and expenses of such appraiser
shall be borne by the Company.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities other than rights, warrants or
options referred to in Section 2B above.
"Person" means an individual, a partnership (including a limited
partnership), a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Registered Holder" means the holder of this Warrant as reflected in
the records of the Company maintained pursuant to Section 13.
"Related Party" with respect to SportsLine means (A) any controlling
stockholder, Subsidiary, or spouse or immediate family member (in the case of an
individual) of SportsLine or (B) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of SportsLine and/or
such other Persons referred to in the immediately preceding clause (A).
<PAGE>
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors or managers thereof is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Warrant Shares" means shares of the Company's Common Stock issuable
upon exercise of the Warrant; provided, that if the securities issuable upon
exercise of the Warrant are issued by an entity other than the Company or there
is a change in the class of securities so issuable, then the term "Warrant
Shares" shall mean shares of the security issuable upon exercise of the Warrant
if such security is issuable in shares, or shall mean the equivalent units in
which such security is issuable if such security is not issuable in shares.
SECTION 9. Replacement.
Upon receipt of evidence reasonably satisfactory to the Company (an
affidavit of the Registered Holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing this
Warrant, and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided that if the
Registered Holder is a financial institution or other institutional investor its
own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Company shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the same rights represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
SECTION 10. Notices.
Except as otherwise expressly provided herein, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested, postage prepaid and will be deemed to have been
given when so mailed (i) to the Company, at its principal executive offices and
(ii) to a Registered Holder, at such Registered Holder's address as it appears
in the records of the Company (unless otherwise indicated by any such Registered
Holder).
SECTION 11. Amendment and Waiver.
<PAGE>
No amendment, modification or waiver will be binding or effective with
respect to any provision of this Warrant without the prior written consent of
the Registered Holder hereof.
SECTION 12. Warrant Register.
The Company shall maintain at its principal executive offices a
register for the registration of transfer of Warrants. Upon the surrender of any
certificate representing Warrants at such place, the Company will, at the
request of the record holder of such certificate, execute and deliver (at the
Company's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Warrant Shares represented by the
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of Warrant Shares as is requested by the
holder of the surrendered certificate and will be substantially identical in
form to the surrendered certificate.
SECTION 13. Fractions of Shares.
If any fractional interest in a Warrant Share would, except for the
provisions of this subparagraph, be delivered upon any exercise of the Warrant,
at the request of the Registered Holder the Company, in lieu of delivering the
fractional share therefor, shall pay an amount to the Registered Holder thereof
equal to the Fair Market Value of such fractional interest as of the date of
exercise.
SECTION 14. Descriptive Headings; Governing Law.
The descriptive headings of the several Sections and paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS WARRANT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal and to be
dated as of the date hereof.
INTERNET SPORTS NETWORK, INC.
By: /s/ Andrew DeFrancesco
--------------------------------
Name: Andrew DeFrancesco
Title: Chairman and CEO
Exhibit 4
December 21, 1999
Internet Sports Network, Inc.
225 Richmond Street W.
Toronto, Ontario
Canada M5V 1WZ
Attention: Andrew DeFrancesco
President and CEO
Gentlemen:
Reference is made to the Promotion Agreement (the "Promotion
Agreement"), dated December 21, 1999 by and between SportsLine.com, Inc.
("SPLN") and Internet Sports Network, Inc. ("ISN"). All capitalized terms herein
are as defined in the Promotion Agreement. In order to induce ISN to enter into
the Purchase Agreement the parties hereto agree to supplement the Promotion
Agreement as follows:
1) Reference is made to Section 7(a) of the Promotion Agreement,
which provides that ISN will make annual Promotional Fee Cash
Payments during the Term of the Promotion Agreement and
transfer 4,098,742 Company Shares to SPLN as consideration for
SPLN's promotion of ISN.
2) Notwithstanding anything to the contrary contained in the
Promotion Agreement, in the event that the Promotion Agreement
is terminated by SPLN pursuant to Section 19(c) of the
Promotion Agreement, (i) SPLN shall within ninety (90) days
after such termination refund a portion of the Promotional Fee
Cash Payment in respect of the year of Term in which such
termination occurs determined by multiplying such cash payment
by a fraction, the numerator of which is the actual number of
days remaining in such year of Term after the date of such
termination, and the denominator of which is 365 and (ii) ISN
shall have the right, during the three (3) months immediately
following such termination, to repurchase a portion of the
shares of Common Stock issued pursuant to Section 7(a)(ii) of
the Promotion Agreement determined by multiplying the total
number of such shares so issued by a fraction, the numerator
of which is the number of months (or a fraction of a month) in
the period commencing on the date that the notice referred to
below is given and ending on the sixth anniversary of the
Effective Date, and the denominator of which is 72, at a cash
purchase price per share equal to the greater of (x) $2.90 and
(y) the Fair Market Value of such shares on the third trading
day prior to the date ISN gives written notice to SPLN of its
election to purchase such shares which written notice shall,
in any event, be given not less than thirty (30) days prior to
the date such repurchase is to be consummated.
3) For purposes of this Letter Agreement, "Fair Market Value" of
the shares of Common Stock means the average of the closing
prices of such share's sales on all securities exchanges on
which such shares may at the time be listed or as reported on
the NASDAQ National Market, or, if there have been no sales on
any such exchange or reported on the NASDAQ National Market on
any day, the average of the highest bid and lowest asked
prices on all such exchanges or reported at the end of such
day, or, if on any day such shares are not so listed or
included in the NASDAQ National Market, the average of the
representative bid and asked prices quoted in the NASDAQ Stock
Market as of 4:00 P.M., New York time, or, if on any day such
shares are not quoted in the NASDAQ Stock Market, the average
of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of
twenty one (21) days consisting of the day as of which "Fair
Market Value" is being determined and the twenty (20)
consecutive business days prior to such day. If at any time
such shares are not listed on any securities exchange or
quoted in the NASDAQ National Market, the NASDAQ Stock Market
or the over-the-counter market, the "Fair Market Value"
shall be determined in good faith by the Board of Directors of
ISN and such determination shall be delivered in writing to
SPLN. In the event that SPLN disputes such determination of
Fair Market Value, SPLN shall so inform ISN in writing within
ten (10) days after receipt of the ISN's determination and ISN
and SPLN shall negotiate in good faith to determine a mutually
acceptable Fair Market Value. If such parties are unable to
reach agreement within thirty (30) days after SPLN has given
ISN written notice of its dispute, the Fair Market Value of
such shares shall be determined by an independent appraiser
experienced in valuing securities jointly selected by ISN and
SPLN. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such
appraiser shall be borne by ISN.
This letter agreement shall be governed by the laws of the State of
Florida without regard to the principles of conflict of laws thereof.
If the foregoing appropriately sets forth our mutual understanding with
regard to this matter, please execute this letter in the place provided below,
whereupon this letter shall constitute a binding agreement between the parties
hereto.
Very truly yours,
SportsLine.com, Inc.
By: /s/ Michael Levy
--------------------------------
Michael Levy
President
Accepted and agreed to as of the date first above written:
Internet Sports Network, Inc.
By: /s/ Andrew DeFrancesco
-------------------------------
Andrew DeFrancesco
Chairman & CEO
