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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 0-23337
SPORTSLINE.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0470894
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
6340 N.W. 5TH WAY
FORT LAUDERDALE, FLORIDA 33309
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 351-2120
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK (PAR VALUE $.01 PER SHARE)
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of shares of Common Stock held by non-affiliates
of the Registrant as of March 21, 2000, was approximately $985,728,538 based on
the $37.875 closing price for the Common Stock on The Nasdaq National Market on
such date. For purposes of this computation, all executive officers and
directors of the registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such directors and
officers are, in fact, affiliates of the registrant.
The number of shares of Common Stock of the registrant outstanding as of
February 29, 2000 was 25,935,515.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement relating to its
2000 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission not later than 120 days after the end of the fiscal year
covered by this report, are incorporated by reference into Part III of this
report.
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INDEX TO ITEMS
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PART I............................................................................................................1
Item 1. Business.........................................................................................1
Item 2. Properties......................................................................................14
Item 3. Legal Proceedings...............................................................................14
Item4. Submission of Matters to a Vote of Security Holders..............................................14
PART II..........................................................................................................15
Item5. Market for the Registrant's Common Equity and Related Stockholder Matters........................15
Item 6. Selected Financial Data.........................................................................16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..........18
Item 7A. Quantitative and Qualitative Disclosure About Market Risk......................................33
Item8. Financial Statements and Supplementary Data......................................................34
Item9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............56
PARTIII..........................................................................................................56
Item10. Directors and Executive Officers of the Registrant..............................................56
Item 11. Executive Compensation.........................................................................56
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................56
Item 13. Certain Relationships and Related Transactions.................................................56
PART IV..........................................................................................................56
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............................56
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PART I
ITEM 1. BUSINESS.
CERTAIN STATEMENTS CONTAINED IN THIS ANNUAL REPORT ON FORM 10-K,
INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES,"
"ANTICIPATES," "ESTIMATES," "EXPECTS," AND WORDS OF SIMILAR IMPORT, CONSTITUTE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. READERS ARE REFERRED TO THE "RISK FACTORS"
SECTION OF THE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" CONTAINED HEREIN, WHICH IDENTIFIES IMPORTANT RISK FACTORS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE
FORWARD LOOKING STATEMENTS.
SportsLine.com, Inc., formerly SportsLine USA, Inc. (together with its
subsidiaries, "SportsLine" or the "Company"), is a leading Internet-based sports
media company that provides branded, interactive information and programming as
well as merchandise to sports enthusiasts worldwide. SportsLine produces and
distributes original, interactive sports content, including editorials and
analyses, radio shows, contests, games, fantasy league products and fan clubs.
SportsLine also distributes a broad range of up-to-date news, scores, player and
team statistics and standings, photos, audio clips and video clips obtained from
CBS and other leading sports news organizations, as well as SportsLine's
superstar athletes. SportsLine produces the official Web sites for several
organizations including Major League Baseball, the PGA TOUR and NFL Europe
League. In addition, SportsLine is the primary sports content provider for
America Online, Excite and Netscape.
The Company has established a number of important strategic
relationships to increase awareness of the SportsLine brand, build traffic on
its Web sites and develop proprietary programming. In March 1997, SportsLine
established a strategic alliance with CBS pursuant to which SportsLine's
flagship Web site was renamed "cbs.sportsline.com" and receives extensive
network television advertising and on-air promotion, primarily during CBS
television sports broadcasts such as the NFL, the NCAA Men's Basketball
Tournament, NCAA Football, PGA Tour events, U.S. Open tennis and the Daytona
500. The CBS agreement was amended in February 1999 to extend its term through
2006. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations." The Company believes that its relationship with CBS,
in particular the branding of its flagship Web site as "cbs.sportsline.com" and
the promotion the Company receives on CBS television broadcasts, will enable it
to establish SportsLine as a broadly recognized worldwide consumer brand. The
Company also has distribution agreements and relationships with a number of
other partners including America Online, Excite, Netscape, Westwood One,
theglobe.com, Major League Baseball and the PGA TOUR. See "--- Strategic
Relationships."
In May 1999, the Company established Sports.com Limited ("Sports.com")
(formerly known as SportsLine Europe Limited) as a European-based, majority
owned subsidiary. Intel Corporation, MediaOne Ventures and Reuters hold minority
interests in Sports.com. In August 1999, the sports.com Web site was launched as
the home of sports sites for fans of European sports, including soccer, rugby
and cricket. Sports.com operates country-specific Web sites through locally
based operating subsidiaries that deliver real-time, in-depth European sports
content and programming that capitalizes on the Web's unique graphical and
interactive capabilities. Sports.com has established local subsidiaries in the
United Kingdom and France and plans to establish local subsidiaries in Germany,
Italy and Spain within the next 12 months. Sports.com has formed strategic
relationships with IMG, France Telecom Multimedia, Rete Srl and Manchester
United.
SPORTS INFORMATION, PROGRAMMING AND DISTRIBUTION
SportsLine offers a broad range of sports-related information and
programming, which it delivers through its network of Web sites and other
distribution channels.
Information and Programming
News and Editorials The Company's news organization
provides up-to-date general sports
news and information for all major
professional and college sports 24
hours a day, seven days a week,
including previews, game summaries,
audio and video clips and color
photographs, obtained from
strategic partners and a variety of
leading sports news organizations
such as The
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Associated Press, CBS, Reuters and
SportsTicker. The Company also
publishes exclusive editorials and
analyses from its in-house staff of
writers and editors and freelance
sports journalists.
Scores, Statistics and Odds The Company delivers continuously
updated, real-time scores,
schedules, standings, player and
team statistics and odds for all
major professional and college
sports from data providers
including The Associated Press,
Data Broadcasting Corporation and
SportsTicker and directly from the
NBA, MLB, NFL and WNBA.
Fantasy Leagues and Contests Fantasy league enthusiasts can
participate in SportsLine leagues
or form their own leagues with
customized rules, scoring and
reporting. The Company administers
player transactions (e.g., drafts,
trades, starting lineup selection
and disabled list and minor league
moves) and provides summaries of
scoring, standings and roster
transactions. Proprietary contests
feature cash prizes, limited
edition sports memorabilia and
other awards based on the results
of weekly, season-long or special
event related games of skill.
Regular sweepstakes and "giveaways"
feature cash prizes, sports
memorabilia, event tickets and
other merchandise.
Live Game Simulations The Company broadcasts web-based
real-time animated recreations of
major sporting events including
NBA, NFL, Major League Baseball,
World Cup Soccer and NCAA
Tournament basketball games.
Local and Personalized Content The Company packages its
information and programming to
enable users to follow local or
regional team and event coverage,
including weekly stories from
college sports publications and
team coverage from staff writers
located in strategic cities across
the nation. The Company's "Personal
SportsPage" enables members to
personalize the information and
programming they receive over the
web and "Personal SportsMail"
delivers personalized content to
members by e-mail. The Company also
began a Rewards program in 1999
which allows member to earn points
redeemable for prizes by accessing
the Web sites and accumulating page
views.
Community Content The Company hosts monitored
interactive chat sessions with
sports superstars and
personalities, and experts on
subjects such as sports memorabilia
and fantasy leagues. The Company
also hosts monitored forums devoted
to sports-related topics.
Audio The Company's radio studio produces
over 20 hours of original, live
programming each week, including
interviews with superstars and
notable sports personalities and
regular commentary from leading
sports analysts. The Company also
"cybercasts" syndicated radio shows
from Sports Byline USA, Sports
Overnight America and various
experts on sports-related topics,
and produces and distributes audio
clips of interviews, press
conferences and other audio
surrounding major sports events.
Video The Company produces original video
programming surrounding major
sports events, live video
interviews with sports celebrities
and "cybercasts" featuring live
video interviews and daily video
clips covering events such as the
Company's coverage of major events
such as the XVIII Olympic Winter
Games and the Super Bowl XXXIV. The
Company also distributes video
highlights from the PGA TOUR, NBA,
NHL, CBS Sports and other sources.
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NHL, CBS Sports and other sources
Web Sites
cbs.sportsline.com, the Company's flagship Web site, features
comprehensive, in-depth coverage of all major professional and college sports on
a domestic and international basis, including the following:
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Baseball Football
Major League Baseball National Football League
Minor League Baseball Canadian Football League
College College
Hockey Basketball
National Hockey League National Basketball Association
International Hockey League Women's National Basketball Association
American Hockey League American Basketball League
College College
Auto Racing Olympic Sports
Boxing Rugby
Cricket Skiing
Cycling Soccer
Golf Tennis
Health and Fitness Volleyball
Horse Racing Women's Sports
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cbs.sportsline.com has won numerous awards, including the Internet
Services Association's "Outstanding Innovation" award for Baseball LIVE! (1996);
a "Gold Medal" for Outstanding Olympic Coverage from The Wall Street Journal
(1996); a "Members' Choice" designation from AOL (1996-1998); NetGuide's
"Platinum Award" as one of the best sites on the Web (1996); NetGuide's
"Platinum Award" for overall site excellence (1997); "Editor's Choice" from UK
Plus (1997), PC Magazine's top 25 sites on the Web (1997); the Webby Award for
sports (1998); a "Revolution" award for Soccernet in the U.K. (1999); NetGuide's
"Best Sports Site" (1999); PC Magazine's top 100 sites on the Web (1999); US
News and World Report's "The Best of the Web: Sports" (1999); and Best Football
Site from Yahoo! Internet Life (2000).
cbs.sportsline.com's comprehensive approach is illustrated by its
coverage of Major League Baseball. In addition to up-to-date news, scores,
standings, rosters, transaction reports and exclusive editorial commentary,
cbs.sportsline.com features Baseball LIVE!, an online "stadium" that utilizes
Shockwave technology to enable users to view a graphical depiction of real-time
play-by-play action of Major League Baseball games in progress. Additional
baseball coverage includes player and team statistics that are sortable by
position, team and standing; chat rooms and baseball newsgroup links and
contests. Fantasy league enthusiasts also can purchase SportsLine's fantasy
league products, which include Fantasy Baseball and Commissioner. Fantasy
Baseball enables participants to manage their own fantasy- or rotisserie-style
baseball league in season-long and playoff competitions. Participants form
leagues of up to 20 teams and utilize cbs.sportsline.com to administer all
player transactions (for example, drafts, trades, starting lineup selection,
disabled list and minor league moves) and obtain weekly summaries of scoring,
standings and roster transactions. cbs.sportsline.com also offers Fantasy
Baseball participants the ability to communicate in specially reserved chat
rooms. Commissioner provides fantasy and rotisserie league participants a fully
configurable interface to manage their own leagues, including customizing rules,
scoring and reporting to their own preferences.
golfweb.com, acquired by the Company in January 1998, provides
golf-related content, interactive entertainment, membership services, golf
course discounts and merchandise domestically. In April 1999, the Company and
the PGA TOUR agreed to combine the golfweb.com site with pgatour.com and to
co-produce one comprehensive golf site, pgatour.com. The site offers the only
real-time scoring on the Internet from the PGA TOUR, SENIOR PGA TOUR and NIKE
TOUR events. The site also features news covering other golf organizations and
international tours. Additionally, the site focuses on recreational golf, travel
opportunities and golf instruction and features a variety of interactive tools
such as course guides, reviews and message boards. Pgatour.com also features the
PGA TOUR SHOP, the official online pro shop of the PGA TOUR offering a
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complete line of golf equipment, accessories, apparel and other products
including PGA TOUR branded merchandise.
sports.com, launched as a separate Web site in August 1999, is
dedicated to providing comprehensive coverage of European sports. The Web site
is produced and operated by the Company's European subsidiary, Sports.com which
entered into a three year promotional package with IMG, the largest independent
producer and packager of sports programming in the world. The Web site,
sports.com, is the focal point of a network of sport and country sites presented
to consumers including: football.sports.com which provides live coverage and
real time scoring of soccer; rugby.sports.com which features live match centers,
live scoring, timely editorial content, real-time statistics for all the major
divisions of rugby in England, Scotland, Ireland and Wales; and
france.sports.com which provides extensive, French-language coverage of all
sports relevant to the French sports fan. Sports.com is the official internet
media partner of Manchester United and was the exclusive Internet sports media
partner for the official site of the 1999 Rugby World Cup.
vegasinsider.com, launched as a separate Web site in March 1997,
provides sports gaming information and features electronic odds on all major
sports events from the Las Vegas casinos, including the Stardust, the Flamingo
Hilton, the MGM Grand and Bally's, plus lines from nationally recognized
oddsmakers. Handicapping information includes commentary, matchup analysis and
picks from some of the nation's leading sports handicappers. The site's news
reporting is focused on a gaming perspective and provides detailed statistical
and matchup analysis tools, including "against-the-spread" and "straight-up"
records, team and player statistics and injury and weather reports. Live
scoreboards provide breaking news and scores, updates, recaps and boxscores.
Most of the content on vegasinsider.com is available only to paying members.
majorleaguebaseball.com, launched in June 1999, is the official Web
site of Major League Baseball. The site includes live game audio broadcasts,
daily and historical video highlights, real-time statistics and updates and team
and player information. In addition, it features the sale of official licensed
merchandise and contains fantasy competitions and interactive features including
playable online games and Baseball LIVE, which provides real-time pitch-by-pitch
coverage of every game in an exciting, animated format.
Web Sites for Sports Superstars and Personalities. SportsLine has
created and maintains Web sites for several sports superstars and personalities,
including Joe Namath, Michael Jordan (jordan.sportsline.com), Tiger Woods
(tigerwoods.com), Shaquille O'Neal (shaq.com), Cal Ripken, Jr. (2131.com), Mike
Schmidt and John Daly (gripitandripit.com). The Company has packaged these Web
sites in a unique and entertaining site that includes all of SportsLine's
athlete spokespersons. The superstar athlete site includes features and insights
from athletes, the opportunity to belong to fan clubs, as well as radio
interviews and chat sessions from active and retired athletes from around the
world of sports.
Other Web Sites. SportsLine has created Web sites for sports
organizations and major sports events, including the San Francisco Forty-Niners
NFL franchise (sf49ers.com), the World of Wrestling Magazine (wrestleline.com),
the 1999 Major League Baseball All-Star Game (mlballstargame.com) and the 1999
Major League Baseball official post-season site (worldseries.com).
SportsLine is responsible for the technical development, production and
maintenance of the Web sites it creates for athletes and sports organizations,
as well as customer service, technical support and billing associated with the
sale of premium features or merchandise. SportsLine's third party Web site
agreements are for terms ranging from one to ten years and generally provide
SportsLine the exclusive right to create a Web site for a sports superstar,
personality, organization or affinity group, as well as to receive certain
content for the Web site to use the athlete or organization's name, logos and
other materials to promote the Company's business and products. In consideration
for the rights granted under its third party Web site agreements, SportsLine has
issued warrants to purchase Common Stock and, in certain instances, agreed to
make cash payments. The Company generally is entitled to receive a percentage of
the sponsorship, advertising and other revenue generated from the third party
Web sites it develops.
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Other Distribution Channels
The inclusion of cbs.sportsline.com in AOL's services and the integration of
cbs.sportsline.com into Excite Sports and Netscape Sports the Company's sports
content and programming readily accessible to the millions of Web users that
access the Internet via these platforms. The Company believes that its original
sports radio shows have broad appeal and in August 1999 entered into an
agreement to syndicate certain of its radio programming, both on the Internet
and nationally to over-the-air sports talk radio stations. As of December 31,
1999, the Company had three radio programs in syndication in association with
the Westwood One Radio Network: "The Drive" broadcast in 12 markets, "NFL Today"
broadcast in 65 markets and "NFL Sunday" broadcast in 420 markets. The Company
also intends to develop distribution and revenue opportunities in other media,
including news wire services, publications and e-mail
STRATEGIC RELATIONSHIPS
SportsLine has established strategic relationships to provide marketing
and cross promotional opportunities, to increase consumer awareness of the
SportsLine brand, to build traffic on its Web sites and to obtain exclusive
sports content for its Web sites.
CBS. In March 1997, the Company entered into a strategic alliance with
CBS pursuant to which the Company's flagship Web site was renamed
"cbs.sportsline.com". The agreement provides for cbs.sportsline.com to receive,
among other things, extensive network television advertising and on-air
promotion during the term of the agreement, primarily during CBS television
sports broadcasts such as the NFL, the NCAA Men's Basketball Tournament, NCAA
Football, PGA Tour events, U.S. Open tennis and the Daytona 500. In addition,
the Company has the right to use certain CBS logos and television-related sports
content on cbs.sportsline.com and in connection with the operation and promotion
of that Web site. CBS and the Company seek to maximize revenue through a joint
advertising sales effort. The agreement also provides the Company access to
certain CBS television-related sports content and the potential to create
distribution and revenue opportunities with more than 200 CBS affiliates
throughout the United States. The CBS agreement was amended in February 1999 to
extend its term through 2006. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations."
AOL. In July 1997, the Company entered into a strategic programming and
distribution agreement with America Online, Inc. ("AOL") pursuant to which
cbs.sportsline.com became the first "anchor tenant" on AOL's Sports Channel. In
October 1998, the Company and AOL entered into a new three-year agreement and
significantly expanded their online relationship to provide Company-produced
sports news and statistics, special features, major event coverage and
merchandise on several key AOL brands around the world. The Company became the
premier provider of special features and major event coverage to the Sports
Channel on the AOL service, as well as an anchor tenant in the Sports Web Center
on aol.com, AOL's Web site. cbs.sportsline.com is the premier national sports
partner with a presence on all Digital City local services, currently serving 50
cities, and an anchor tenant in the Sports Channel on CompuServe. In addition,
Company became the premier provider of licensed sports equipment and apparel as
well as golf products within the Sports Channel on the AOL service.
Excite. In October 1998, the Company entered into a three-year
strategic relationship with Excite, Inc. making the Company the exclusive
provider of sports content on the Excite Sports Channel.
Netscape. In January 1999, the Company entered into a strategic
relationship with Netscape Communications Corporation making the Company the
premier sports content provider for the Netcenter Sports Channel as well as the
exclusive provider for news, information and merchandise for NFL, NBA, NHL, MLB,
golf, soccer, tennis, auto racing and NCAA basketball and football. In addition,
cbs.sportsline.com is featured as a default content "channel" in the Channel
Finder of Netscape's Netcaster Software which utilizes "push" delivery to give
users the ability to subscribe to dynamic Web content and to browse these
channels and Web sites offline from their desktop.
France Telecom Multimedia. In November 1999, the Company's majority
owned subsidiary, Sports.com Limited entered into a strategic agreement with
France Telecom Multimedia, a subsidiary of France Telecom SA under which
Sports.com produces and hosts co-branded sports channels for France Telecom's
Internet portal, Voila,
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and its Internet service provider, Wanadoo, in France. The sites offer live
match centers of events, timely analysis and real-time statistics, as well as an
online store.
theglobe.com. In February 2000, the Company entered into an agreement
under which theglobe.com will exclusively develop and operate community services
for the Company. Under the terms of the agreement, theglobe.com will co-brand
and customize community services, including e-mail clubs, home page building
tools and message boards, for the Company's Web sites and fantasy sports
service.
Westwood One. In August 1999, the Company entered into a three-year
agreement with Westwood One, Inc. Under this agreement, the Company produces
sports content for Westwood One/CBS Radio Sports' coverage of live sporting
events. In addition, Westwood One was granted the right to syndicate the
Company's radio programs ("The Drive," "NFL Today" and "NFL Sunday").
WebMD. In August 1999, the Company entered into a two-year agreement
with WebMD under which WebMD became the exclusive sponsor and content provider
for the Company's Health & Wellness Web site. WebMD is providing the latest
health and medical news, information and updates and access to daily interactive
health oriented events and online support communities. Additionally, WebMD is
the official sponsor of all injury reports in the Company's coverage of
professional and collegiate athletics.
MVP.com. Effective as of January 1, 2000, the Company entered into a
10-year strategic e-commerce and marketing agreement with MVP.com, Inc., a new
sports and outdoor e-commerce company, pursuant to which MVP acquired and will
operate the Company's domestic e-commerce business, including its e-commerce
subsidiaries International Golf Outlet, Inc., Golf Club Trader, Inc. and Tennis
Direct, Inc. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Developments."
Sports Superstars and Organizations. The Company has established
strategic relationships with sports superstars and personalities, including
Michael Jordan, Tiger Woods, Joe Namath, Shaquille O'Neal, Cal Ripken, Jr., Mike
Schmidt and John Daly. Each of these individuals has agreed to serve as a
spokesperson for the Company, to permit the Company to use his or her name,
likeness and photographs on promotional materials and to be available to the
Company to provide input on business and marketing strategies. The Company also
maintains cross promotional relationships with other sports organizations and
affinity groups for which it has created Web sites, including the PGA TOUR,
Major League Baseball, World of Wrestling Magazine and Sports Careers, a career
consulting and placement service.
IMG. In July 1999, the Company's majority owned subsidiary, Sports.com
Limited, entered into a three-year promotional and consulting agreement with IMG
under which IMG provides Sports.com production services, consulting services and
promotional support through IMG-owned television, event and media properties.
Other Media Relationships. In addition to promotion on CBS television
sports broadcasts, SportsLine receives radio promotion through its strategic
media relationships with Sports Byline USA, the nation's largest syndicated
sports radio network, including on-air commercials and live endorsements by Ron
Barr, Sports Byline USA's Emmy Award winning host. Additionally, the Company has
an agreement with FT.com, the Web site of the Financial Times, to be the sports
partner of FT.com and provide domestic and international sports news and
information.
ADVERTISING AND SALES
The Company believes that the demographics of its audience are similar
to the traditional sports advertisers' target market. Based on Company sponsored
market research, users of the SportsLine's U.S. Web sites are predominantly
male, 87% are between the ages of 18 to 54, 62% have college degrees and 43%
have an annual income greater than $75,000. In Europe, Sports.com is completing
its first survey of its audience, but believes that the demographics of its
audience is predominantly male between the ages of 18 and 49. The Company
currently derives, and expects to continue to derive, a substantial portion of
its revenue from advertising on its Web sites. The Company sells "banner"
advertisements that allow interested readers to link directly to the
advertisers' own Web sites or to promotional sites created by SportsLine. The
Company also offers sponsorship opportunities that enable advertisers to
associate their corporate messages with the Company's coverage of athletes and
marquee events (such
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as the World Series, the Super Bowl, the Olympics, the NBA Playoffs and the
Stanley Cup Playoffs), special features of the Company's Web sites (including
ScoreCenters or Baseball LIVE!) and special promotions, contests and events.
SportsLine targets as advertisers on its Web sites traditional sports
advertisers, such as consumer product and service companies, technology
companies, sporting goods manufacturers and automobile companies.
Advertising revenue has been derived principally from short-term
advertising contracts on a per impression basis or for a fixed fee based on a
minimum number of impressions. SportsLine's advertising rates generally range
from $10.00 to $50.00 per thousand impressions. To enable advertisers to verify
the number of impressions received by their advertisements and monitor their
advertisements' effectiveness, the Company provides its advertisers with third
party audit reports showing data on impressions received by their
advertisements.
SportsLine's in-house sales staff develops and implements its
advertising strategies, including identifying strategic accounts and developing
presentations and promotional materials. The Company has sales personnel located
in Fort Lauderdale, New York, Chicago, San Francisco, Los Angeles, and Detroit.
The Company also capitalizes on its cross-marketing relationships with sports
superstars, personalities, organizations and affinity groups by seeking
sponsorships and advertisements from their sponsors. The Company coordinates its
advertising sales efforts for cbs.sportsline.com with CBS's television network
advertising sales personnel.
No advertiser accounted for more than 9% of the Company's revenue
during 1999 or 1998.
MEMBERSHIPS AND PREMIUM OFFERINGS
Although the majority of information and programming on the Company's
Web sites is free, SportsLine offers membership programs and other premium
services on cbs.sportsline.com and vegasinsider.com.
The following table sets forth certain information, as of December 31,
1999, concerning the Company's membership and premium service offerings:
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MEMBERSHIPS DESCRIPTION PRICE RANGE
- ------------------------- --------------------------------------------------------------------- ------------------
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SPORTSLINE REWARDS SportsLine Rewards. Membership program in which members are rewarded Free
for visiting the site, purchasing merchandise or
fantasy products and utilizing sponsors. Members can
redeem earned points for merchandise or participate
in special chats or emails.
SportsLine Rewards Plus. Same as SportsLine Rewards, except that
members receive bonus rewards and savings on the purchase of
merchandise and fantasy products. Members can also receive for $39.95 annually
tickets to special events.
GOLFWEB Players Club. Personalized golf instruction; performance tracking;
discounts on greens fees, golf travel and merchandise; online golf $39.95 annually
handicap.
Vegas Insider Electronic Odds. Fifteen minute delayed odds from premier Las Vegas
casinos.
Detailed Match-up Analysis. Game logs, "against-the-spread" and
"straight-up" records, team and player statistics, injury and weather $29.95 monthly
reports and detailed write-ups. $199.95 annually
Handicapping Experts. Picks, match-up analysis and editorial
commentary.
Member Chat Rooms. Meet and compare notes with other members who are
serious about handicapping.
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PREMIUM SERVICES DESCRIPTION PRICE RANGE
- ------------------------- --------------------------------------------------------------------- ------------------
<S> <C> <C>
Fantasy Leagues and Commissioner. Functional, easy to use fantasy and rotisserie league
Fantasy Tools management software and statistics services.
Challenge Game. Multi-player leagues featuring overall, conference, $19.95 - $99.95
league and weekly prizes.
Fantasy Software/tools. Team and league management, including
sortable stats, Fantasy Scoring Center, Stats Projector and Trends
Analysis.
Odds and Picks Electronic Odds. Instant odds from premier Las Vegas casinos. $99.95 monthly
$999.00 annually
Pick Packs. Expert picks for college and professional games from $9.95 to $49.95 per
well-known handicappers. pick pack
Job Listings Sports Careers. Exclusive job listings in multiple sports $14.95 monthly
categories. Also includes articles, audio, tips, success stories and $19.95 semiannually
company contacts. $149.95 annually
</TABLE>
For certain products, SportsLine offers potential members a 30-day free
trial period. As is typical in the online services industry, a portion of the
users who access the Company's service on a trial basis do not become members,
and each month a portion of SportsLine's members terminate their memberships.
The Company believes that its conversion and retention rates are consistent with
industry averages for online and similar services.
MERCHANDISE
SportsLine maintains a comprehensive online retail site featuring more
than 15,000 items, including event-driven merchandise (such as World Series
Lockerroom Caps), licensed team gear and apparel, unique sports superstar
memorabilia, health and fitness products and sports equipment. The site
features: (i) an intuitive search tool, resulting in the presentation of the
product image, description, price and a quick check-out feature to assist in
making purchases; (ii) dynamically generated related product offerings which
suggest similar products for sales as that requested; (iii) private
password-protected shopper profiles which expedite ordering for return shoppers;
(iv) automatic e-mail confirmation of orders; and (v) instant member discounts
for shoppers who are CBS SportsLine Rewards Plus members or Golfweb members. The
store also has an auction site where the Company can put items from its stores
up for auction. SportsLine also maintains several co-branded stores such as the
Official Major League Baseball store, the PGA TOUR store and the SportsSound
store.
During June 1998, the Company acquired igogolf.com, a leading Internet
golf retailer, which offers a full selection of name brand golf equipment and
accessories from manufacturers including Callaway, Cobra, Titleist, TaylorMade,
Ping, Wilson, Orlimar and many others. igogolf.com has established the ability
with many of these manufacturers to offer direct and/or drop shipping
capabilities which allow for fast and efficient shipment to the end-consumer.
Additionally, igogolf.com keeps an inventory of new and used golf equipment and
accessories for direct shipment to the end-consumer. In May 1999, SportsLine
acquired golfclubtrader.com which buys and sells used and new golf equipment and
in September 1999 the Company acquired tennisdirect.com, an online retailer of
tennis equipment.
In the first quarter of 2000, SportsLine entered into a 10-year
strategic e-commerce and marketing agreement with MVP.com, Inc., a new sports
and outdoor e-commerce company, pursuant to which MVP acquired and will operate
the Company's domestic e-commerce business. Effective as of January 1, 2000, MVP
has assumed responsibility, at its expense, for the design, hosting, operation
and ongoing maintenance of the Company's e-commerce operations, including those
mentioned above, and is entitled to all revenue generated from the sales of
goods and services pursuant thereto. As consideration for this right, MVP has
issued equity to the Company and will pay SportsLine promotional fees based on
the amount of revenue generated, with minimum cash payments of $120 million over
the 10-year term. In connection with this agreement, the Company sold three of
its
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subsidiaries which engage in e-commerce activity, International Golf Outlet,
Inc., Golf Club Trader, Inc. and TennisDirect.com, Inc., to MVP in exchange for
additional equity in MVP.
MARKETING
The Company's agreement with CBS provides for cbs.sportsline.com to
receive, extensive network television advertising and on-air promotion,
primarily during CBS television sports broadcasts such as the NFL, the NCAA
Men's Basketball Tournament, NCAA Football, PGA Tour events, U.S. Open tennis
and the Daytona 500. The Company also receives a variety of on-air promotional
mentions on Westwood One/CBS Radio Sports stations. The Company's European
subsidiary, Sports.com, receives television promotion through its agreement with
IMG. Sports.com's sites and product attributes are promoted contextually and
repeated in such IMG-produced programs such as "Trans World Sport" and "Futbol
Mundial."
Another effective source of advertising for SportsLine has been Web
advertising. The Company advertises on a number of leading Web sites, including
Yahoo!, Excite, Lycos, Alta Vista, Netscape and USA Today. SportsLine also
actively pursues links from other popular Web sites, and the Company's Web sites
are listed in the directories of most major search engine sites, including
Yahoo!, Excite, Alta Vista and Lycos.
SportsLine employs a variety of methods to promote the SportsLine brand
and attract traffic and new members to its Web sites. In addition to on-air
promotion on CBS television sports broadcasts and Westwood One radio stations
and advertising on other Web sites, SportsLine advertises in targeted
publications, on outdoor billboards and on sports talk radio stations,
distributes promotional materials at selected sports events and engages in an
ongoing public relations campaign. SportsLine also has conducted limited direct
mail campaigns targeting online or sports-oriented consumers. Whenever possible,
the Company utilizes cross promotional arrangements to secure advertising and
other promotional considerations.
SportsLine's agreements with sports organizations and affinity groups
typically provide for the Company to receive exposure in any print, television
and marketing vehicles utilized by the organizations or affinity groups to
promote themselves or their products or services and for the distribution of the
Company's promotional materials at events or industry shows in which they
participate.
MEMBER SERVICE AND SUPPORT
The Company believes that member service and support are important to
its ability to attract and retain members. The Company's member support staff
provides toll free telephone support, responds to customer requests concerning
technical aspects of SportsLine's Web sites or certain third party software and
conducts inbound and outbound telemarketing on an 18 hour a day, seven day a
week basis. The Company does not charge for service and support.
COMPETITION
The market for Internet services and products is intensely competitive
and rapidly changing. SportsLine competes, directly and indirectly, for
advertisers, viewers, members, content providers, merchandise sales and rights
to sports events with the following categories of companies: (i) Web sites
targeted to sports enthusiasts generally (such as ESPN.com, and CNN and Sports
Illustrated's CNN/SI and Fox Sports) or to enthusiasts of particular sports
(such as Web sites maintained by the NFL, the NBA and the NHL); (ii) publishers
and distributors of traditional off-line media (such as television, radio and
print), including those targeted to sports enthusiasts, many of which have
established or may establish Web sites; (iii) general purpose consumer online
services such as AOL and Microsoft Network, each of which provides access to
sports-related content and services; (iv) vendors of sports information,
merchandise, products and services distributed through other means, including
retail stores, mail, facsimile and private bulletin board services; and (v) Web
search and retrieval services, such as Alta Vista, Excite, Lycos and Yahoo!, and
other high-traffic Web sites, such as those operated by C|NET and Netscape. The
Company anticipates that the number of its direct and indirect competitors will
increase in the future. Management believes that SportsLine's most significant
competitors are ESPN.com, Fox Sports and CNN/SI Web sites which offer a variety
of sports content.
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<PAGE>
In Europe, Sports.com's most significant competitive challenge is from
media companies that are familiar names in their respective markets and have an
existing newsgathering, promotion and distribution infrastructure. Sports.com's
most significant competitors include Sporting Life and Football & Rugby 365. In
addition, during 1999 Sports.com terminated its relationships with Soccernet and
CricInfo to host and co-produce its web sites. As a result, Soccernet and
CricInfo now compete with Sports.com.
The Company believes that the principal competitive factors in
attracting and retaining users and members are the depth, breadth and timeliness
of content, the ability to offer compelling and entertaining content and brand
recognition. Other important factors in attracting and retaining users include
ease of use, service quality and cost. The Company believes that the principal
competitive factor in attracting and retaining content providers and
merchandisers is SportsLine's ability to offer sufficient incremental revenue
from licensing fees, bounties and online sales of product or services. The
Company believes that the principal competitive factors in attracting
advertisers include the number of users and members of SportsLine's Web sites,
the demographics of SportsLine's user and membership bases, price and the
creative implementation of advertisement placements. There can be no assurance
that the Company will be able to compete favorably with respect to these
factors.
Many of SportsLine's current and potential competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, significantly greater name recognition and substantially larger user
or membership bases than SportsLine and, therefore, have a significantly greater
ability to attract advertisers and users. In addition, many of these competitors
may be able to respond more quickly than the Company to new or emerging
technologies and changes in Internet user requirements and to devote greater
resources than the Company to the development, promotion and sale of their
services. There can be no assurance that SportsLine's current or potential
competitors will not develop products and services comparable or superior to
those developed by SportsLine or adapt more quickly than the Company to new
technologies, evolving industry trends or changing Internet user preferences.
Increased competition could result in price reductions, reduced margins or loss
of market share, any of which would materially and adversely affect the
Company's business, results of operations and financial condition. In addition,
as SportsLine expands internationally, it may face new competition. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors, or that competitive pressures faced by the
Company would not have a material adverse effect on its business, results of
operations and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
SportsLine is not currently subject to direct regulation by any
government agency, other than regulations applicable to businesses generally.
There are currently few laws or regulations directly applicable to access to, or
commerce on, the Internet. However, due to the increasing popularity and use of
the Internet, it is possible that a number of laws and regulations may be
adopted with respect to issues such as the protection of databases, user
privacy, pricing and characteristics and quality of products and services. The
adoption of laws or regulations in the future may decrease the growth of the
Internet, which could in turn decrease the demand for the Company's services and
products and increase the Company's costs of doing business or otherwise have an
adverse effect on the Company's business, operating results and financial
condition. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, libel and personal privacy is
uncertain and could expose SportsLine to substantial liability, for which the
Company might not be indemnified by content providers.
SportsLine's contests and sweepstakes may be subject to state and
federal laws governing lotteries and gambling. The Company seeks to design its
contest and sweepstakes rules to fall within exemptions from such laws and
restricts participation to individuals over 18 years of age who reside in
jurisdictions within the United States and Canada in which the contests and
sweepstakes are lawful. There can be no assurance that SportsLine's contests and
sweepstakes will be exempt from such laws or that the applicability of such laws
to the Company would not have a material adverse effect on the Company's
business, results of operations and financial condition.
Due to the global nature of the Internet, it is possible that the
governments of various states of the United States or foreign countries may
attempt to regulate SportsLine's transmissions or to prosecute SportsLine for
violations of their laws. Violations of local laws may be alleged or charged by
state or foreign governments. The Company may unintentionally violate these laws
and these laws may be modified, or new laws enacted, in the future. It is also
possible that states or foreign countries may seek to impose sales taxes on
out-of-state companies
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that engage in commerce over the Internet. In the event that states or foreign
countries succeed in imposing sales or other taxes on Internet commerce, the
growth of the use of the Internet for commerce could slow substantially.
INTELLECTUAL PROPERTY
SportsLine's performance and ability to compete are dependent to a
significant degree on its internally developed content and technology. The
Company relies on a combination of copyright and trademark laws, trade secret
protection, confidentiality and non-disclosure agreements with its employees and
with third parties and contractual provisions to establish and protect its
proprietary rights. There can be no assurance that the steps taken by SportsLine
to protect its proprietary rights will be adequate, that SportsLine will be able
to secure trademark registrations for all of its marks in the United States
and/or foreign countries, or that third parties will not infringe upon or
misappropriate the Company's copyrights, trademarks, service marks and similar
proprietary rights. In addition, effective copyright and trademark protection
may be unenforceable or limited in certain foreign countries, and the global
nature of the Internet makes it impossible to control the ultimate destination
of the Company's services. In the future, litigation may be necessary to enforce
and protect the Company's trade secrets, copyrights and other intellectual
property rights.
On December 28, 1999, an action entitled Fantasy Sports Properties,
Inc. v. SportsLine.com, Inc., Yahoo! Inc., ESPN, Inc. and Sandbox Entertainment,
Inc., was commenced against the Company and the named-codefendants in the United
States District Court for the Eastern District of Virginia. The plaintiff seeks
damages and injunctive relief for the alleged infringement by the Company and
the named co-defendants of a patent entitled "Computerized Statistical Football
Game," issued by the United States Patent and Trademark Office, which is
allegedly owned by the plaintiff. The Company in its Answer, Affirmative
Defenses and Counterclaim has taken the position that it has not infringed the
patent in suit, that the patent in suit is invalid, and the Company seeks a
Declaratory Judgment of non-infringement and invalidity. The Company intends to
vigorously defend itself in this action.
On August 16, 1999, an action entitled Shopsports.com v. SportsLine
USA, Inc., was commenced against the Company in the United States District Court
for the Central District of California. The plaintiff seeks damages and
injunctive relief in connection with the Company's use of a tertiary domain name
which the plaintiff alleges infringes on plaintiff's trademark rights. The
action is being consolidated with a declaratory judgment action, commenced by
the Company, seeking a judgment that the use of the tertiary URL
"shop.sportsline.com" did not infringe on plaintiff's common law rights. The
Company intends to vigorously defend itself in this action.
There can be no assurance that third parties will not bring copyright
or trademark infringement claims against SportsLine or claim that the Company's
use of certain technologies violates a patent. If it is determined that
SportsLine has infringed upon a third party's proprietary rights, there can be
no assurance that any necessary licenses or rights could be obtained on terms
satisfactory to the Company, if at all. The inability to obtain any required
license on satisfactory terms could have a material adverse effect on the
Company's business, results of operations and financial condition. SportsLine
may also be subject to litigation to defend against claims of infringement of
the rights of others or to determine the scope and validity of the intellectual
property rights of others. If competitors of SportsLine prepare and file
applications in the United States that claim trademarks used or registered by
the Company, SportsLine may oppose those applications and have to participate in
proceedings before the USPTO to determine priority of rights to the trademark,
which could result in substantial costs to the Company, even if the eventual
outcome is favorable to the Company. An adverse outcome could require SportsLine
to license disputed rights from third parties or to cease using such trademarks.
Any such litigation would be costly and divert management's attention, either of
which could have a material adverse effect on the Company's business, results of
operations and financial condition. Adverse determinations in such litigation
could result in the loss of certain of the Company's proprietary rights, subject
the Company to significant liabilities, require the Company to seek licenses
from third parties, or prevent the Company from selling its services, any one of
which could have a material adverse effect on SportsLine's business, results of
operations and financial condition. In addition, inasmuch as SportsLine licenses
a substantial portion of its content from third parties, its exposure to
copyright infringement actions may increase; because the Company must rely upon
such third parties for information as to the origin and ownership of such
licensed content. SportsLine generally obtains representations as to the origins
and ownership of such licensed content and generally obtains indemnification to
cover any breach of any such representations;
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<PAGE>
however, there can be no assurance that such representations will be accurate or
that such indemnification will provide adequate compensation for any breach of
such representations.
In 1998, the Company settled a lawsuit over the use of the mark
"SportsLine" and received as part of the settlement an assignment of the
plaintiff's United States trademark registration for the "SportsLine" mark. The
Company has applied to register in the United States a number of marks, several
of which include the term "SportsLine." The Company has filed applications to
register "SportsLine" marks in Australia and the United Kingdom. There can be no
assurance that the Company will be able to secure adequate protection for these
trademarks in the United States or in foreign countries. Many foreign countries
have a "first-to-file" trademark registration system; and thus the Company may
be prevented from registering its marks in certain countries if third parties
have previously filed applications to register or have registered the same or
similar marks. It is possible that competitors of the Company or others will
adopt product or service names similar to the Company's, thereby impeding the
Company's ability to build brand identity and possibly leading to customer
confusion. The inability of the Company to protect its "SportsLine" mark and
other marks adequately could have a material adverse effect on the Company's
business, results of operations and financial condition.
SportsLine grants users of cbs.sportsline.com a license to use the
Company's service under an agreement that prohibits the unauthorized
reproduction or distribution of SportsLine's licensed and proprietary content.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's service or to obtain and
use information that SportsLine or its content providers regard as proprietary.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate or that third parties will not infringe or
misappropriate SportsLine's copyrights, trademarks, service marks and similar
proprietary rights.
EMPLOYEES
SportsLine had 453 full-time employees in the United States and 93
full-time employees in Europe as of December 31, 1999. In the United States, 100
were in editorial and operations, 97 were in technical and product development,
169 were in sales and marketing and 87 were in finance and administration. In
Europe, 34 were in editorial and operations, 12 were in technical and product
development, 18 were in sales and marketing and 29 in finance and
administration. The Company's future success depends in large part upon its
ability to attract and retain highly qualified employees. Competition for such
personnel is intense, and there can be no assurance that SportsLine will be able
to retain its senior management or other key employees or that it will be able
to attract and retain additional qualified personnel in the future. The
Company's employees are not represented by any collective bargaining
organization, and the Company considers its relations with its employees to be
good.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
SportsLine makes its Web sites available through multiple servers,
running on Sun Solaris, Microsoft Windows and Microsoft NT operating systems.
SportsLine uses the Netscape family of Commercial Applications Software for its
Web servers, publishing systems, merchandise systems and secure credit card
capture and billing. Capabilities in place include bulletin boards, mail, chat
(including regular text based chat as well as Virtual Reality worlds with
integrated chat), news groups, merchandising, streaming audio and video, and
interactive Java and Shockwave applications.
SportsLine maintains all of its computer systems at its Fort
Lauderdale, Florida corporate headquarters and maintains mirror sites for its
Web sites at host facilities in Santa Clara, California, Jersey City, New Jersey
and Herndon, Virginia. The Company's operations are dependent upon its ability
to protect its systems against damage from fire, hurricanes, power loss,
telecommunications failure, break-ins, computer viruses and other events beyond
the Company's control. SportsLine maintains access to the Internet through two
third-party providers, each of which maintains a DS3 connection running at 45
megabits per second connected to two routers in the Company's facility.
Redundant fiber optic cables from the Company's building connect with each local
Internet provider's fiber network. SportsLine's Internet connections are fully
redundant, so that if a failure in the network or equipment of one service
provider occurs, traffic is automatically routed through to the other provider.
All of the Company's computer equipment is powered by an uninterruptible power
supply ("UPS"), which is backed up by a diesel
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generator designed to provide power to the UPS within seconds of a power outage.
In addition, all of the Company's production systems are copied to backup tapes
each night and stored at a third party, off-site storage facility. All of
SportsLine's computer equipment is insured at replacement cost and SportsLine
has developed a comprehensive, out-of-state disaster recovery plan to respond to
system failures. The Company has an arrangement with Comdisco Disaster Recovery
Services ("CDRS") which provides that in the event the Company's facility cannot
provide service for any reason, the Company's backup tapes would be shipped to
Comdisco's New Jersey facility where they will be loaded to replicate and
restore the Company's service. Moreover, SportsLine has reserved space in CDRS's
Business Recovery Center in Atlanta, Georgia. In the event of a system failure,
SportsLine's engineering and content production staff would have access to
hardware and software in Atlanta similar to that used at SportsLine's facility.
The Company's future plans include replacing the Atlanta facility with its
already existing operations in Tacoma, Washington. Notwithstanding the
precautions taken by the Company, any disruption in SportsLine's Internet
access, failure of SportsLine's third party providers to handle higher volumes
of users or damage or failure that causes system disruptions or other
significant interruptions in SportsLine's operations could have a material
adverse effect on the Company's business, results of operations and financial
condition.
The Company's European subsidiary, Sports.com is heavily dependent on
SportsLine for its technical infrastructure, content building and deployment.
Sports.com's Web sites are hosted by the Company's facilities in Herndon,
Virginia. During 2000, Sports.com plans to build a data center in London and
expand its technical operations in Europe.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael Levy........................ 53 Chairman of the Board, President and Chief Executive Officer
Dan Leichtenschlag.................. 38 Senior Vice President of Operations and Chief Technology Officer
Mark J. Mariani..................... 43 President, Sales and Marketing
Kenneth W. Sanders.................. 43 Senior Vice President and Chief Financial Officer
Andrew S. Sturner................... 35 President, Corporate and Business Development
</TABLE>
MICHAEL LEVY has served as the President, Chief Executive Officer and
Chairman of the Board of the Company since its inception in February 1994. From
1979 through March 1993, Mr. Levy served as President, Chief Executive Officer
and as a director of Lexicon Corporation, a high technology company specializing
in data communications and signal processing technology. From January 1988 to
June 1993, Mr. Levy also served as Chairman of the Board and Chief Executive
Officer of Sports-Tech International, Inc., a company engaged in the
development, acquisition, integration and sale of computer software, equipment
and computer-aided video systems used by professional, collegiate and high
school sports programs. Between June 1993 and February 1994, Mr. Levy was a
private investor. Mr. Levy is a director of iVillage, Inc. and NetCreations,
Inc.
DAN LEICHTENSCHLAG has served as the Company's Senior Vice President of
Operations since June 1999. Mr. Leichtenschlag joined the Company as Director of
Operations in May 1995 and was promoted to the position of Vice President of
Engineering in 1997, and given the title of Chief Technology Officer in 1998.
From June 1983 to April 1995, Mr. Leichtenschlag served in various technical and
management capacities at General Electric including Manager, Genie Systems
Development, GE's on-line service and Manager, UNIX Software Development.
MARK J. MARIANI has served as the Company's Executive Vice President,
Sales since April 1996 and was appointed President, Sales and Marketing in June
1999. From August 1991 to March 1996, Mr. Mariani served as Executive Vice
President of Sports Sales for Turner Broadcasting Sales, Inc. From June 1990 to
August 1991, Mr. Mariani served as Senior Vice President and National Sales
Manager for CNN in New York, and from May 1986 to June 1990, Mr. Mariani served
as Vice President for CNN Sales Midwest. Prior to joining Turner Broadcasting,
Mr. Mariani served as an Account Executive for WBBM, an owned and operated CBS
television station in Chicago, Illinois. Mr. Mariani is a director of Internet
Sports Network, Inc.
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KENNETH W. SANDERS has served as the Vice President and Chief Financial
Officer of the Company since September 1997 and was appointed Senior Vice
President in October 1998. From January 1996 to August 1997, Mr. Sanders served
as Senior Vice President, Chief Financial Officer of Paging Network, Inc., the
world's largest paging company. From May 1993 to December 1995, Mr. Sanders
served as Executive Vice President, Chief Financial Officer and a director of
CellStar Corporation, an integrated wholesaler and retailer of cellular phones
and related products. Between July 1979 and April 1993, Mr. Sanders was with
KPMG Peat Marwick, most recently as an Audit Partner from July 1990 to April
1993.
ANDREW S. STURNER has served as the Company's Vice President, Business
Development since June 1995 and was appointed President, Corporate and Business
Development in June 1999. From May 1994 to June 1995, Mr. Sturner served as Vice
President of Business Development for MovieFone, Inc., an interactive telephone
service company. From March 1993 to May 1994, Mr. Sturner served as President of
Interactive Services, an interactive audiotext development company which he
co-founded in 1992. From August 1990 to March 1993, Mr. Sturner was a bankruptcy
associate at the law firm of Stroock & Stroock & Lavan. Mr. Sturner is a
director of Internet Sports Network, Inc.
ITEM 2. PROPERTIES.
SportsLine's corporate headquarters are located in Fort Lauderdale,
Florida. The Company currently leases approximately 45,000 square feet in three
adjacent buildings under three leases, which expire in April 2000, June 2000 and
November 2001, respectively. The Company has an option to extend one of these
leases for a five-year term. SportsLine also leases sales offices in Chicago,
New York, San Francisco, Los Angeles and Denver, a news operation office in
Tacoma, Washington and a fantasy operations office in New York. The Company's
new subsidiary in Europe currently has three leased spaces located in London,
Leeds and Paris. The Company has entered into an agreement to lease a commercial
building in Fort Lauderdale, Florida consisting of approximately 81,000 square
feet. The lease is for a term of ten years for total rent commitments of up to
$13 million, commencing upon occupancy, with options to extend the lease for two
additional five-year terms. SportsLine anticipates moving its corporate
headquarters into this new building in April 2000.
ITEM 3. LEGAL PROCEEDINGS.
Reference is made to the patent and trademark litigation described in
"Item 1. Business - Intellectual Property."
From time to time, SportsLine may be involved in other litigation
relating to claims arising out of its operations in the normal course of
business. The Company is not currently a party to any other legal proceedings,
the adverse outcome of which, individually or in the aggregate, would have a
material adverse effect on SportsLine's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fiscal
quarter ended December 31, 1999.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
MARKET PRICES FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the Nasdaq National
Market under the symbol "SPLN" since November 13, 1997. The following table sets
forth for the periods indicated the range of high and low closing prices per
share of Common Stock, as reported by the Nasdaq National Market:
HIGH LOW
---- ---
1998
First Quarter......................... 32.38 11.75
Second Quarter........................ 38.38 22.75
Third Quarter......................... 37.50 13.00
Fourth Quarter........................ 19.13 7.69
1999
First Quarter......................... 57.81 17.00
Second Quarter........................ 54.75 30.69
Third Quarter......................... 40.75 17.00
Fourth Quarter........................ 63.25 25.25
SportsLine has never paid any cash dividends on its Common Stock and
does not anticipate paying any cash dividends in the foreseeable future.
SportsLine currently intends to retain future earnings, if any, to fund the
development and growth of its business.
As of March 21, 2000, the Company had approximately 237 shareholders of
record. The Company believes that the number of beneficial owners of the Common
Stock is in excess of 300.
SALES OF UNREGISTERED SECURITIES DURING THE YEAR ENDED DECEMBER 31, 1999
(1) In January 1999, pursuant to a March 1997 agreement with CBS, the
Company issued to CBS 558,988 shares of Common Stock and warrants to purchase
380,000 shares of Common Stock. In February 1999, the Company amended the 1997
agreement and accelerated the issuance to CBS of 1,052,937 shares of Common
Stock and warrants to purchase 760,000 shares of Common Stock, which originally
were to be issued in 2000 and 2001. The Company also issued to CBS new warrants
to purchase 1,200,000 shares of Common Stock, which vest on various dates
through January 2001, and agreed to issue to CBS on Specified issue dates for
each of the sixth through tenth contract years Common Stock having a fair market
value of $20.0 million on each issue date.
The consideration for such shares and warrants consisted of licenses to
CBS logos and content and CBS's agreement to provide the Company specified
minimum amounts of advertising and promotion.
In December 1999, the Company issued 380,000 shares to CBS upon
exercise of its warrants in cash consideration of $7,600,000.
(2) In February 1999, the Company issued 884 shares of Common Stock to
Lighthouse Capital, Inc.pursuant to a cashless exercise of a warrant in
accordance with its terms.
(3) In May 1999, as part of the acquisition of Golf Club Trader, Inc.,
the Company issued to the shareholders of Golf Club Trader a total of 195,850
shares of Common Stock.
(4) In May 1999, the Company issued to the PGA Tour, Inc. warrants to
purchase 114,943 shares of Common Stock as consideration for three-year
promotional and production agreement.
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<PAGE>
(5) The Company issued 282,960 shares of Common Stock to Kleiner
Perkins Caufield & Byers VII and 7,256 shares of Common Stock to KPCB
Information Sciences Zaibatsu Fund II pursuant to the cashless exercise of
warrants granted in 1995 in accordance with their terms.
(6) In October 1999, the Company issued to Westwood One 450,000 shares
of Common Stock as consideration for a three-year promotional and programming
agreement.
(7) In December 1999, as part of the acquisition of Daedalus World Wide
Corporation ("DWWC"), the Company issued to the shareholders of DWWC a total of
599,998 shares of Common Stock.
(8) During the year ended December 31, 1999, in connection with
acquisitions of other businesses the Company issued an aggregate of 124,320
shares of Common Stock.
(9) During the year ended December 31, 1999, upon exercise of warrants
by holders other than CBS, the Company issued a total of 658,334 shares of
Common Stock for aggregate cash of $3,985,150 including:
<TABLE>
<CAPTION>
Number of shares Consideration
Holder of Warrants received received by
-------- SportsLine
----------
<S> <C> <C>
IMG........................................................ 13,334 $ 100,000
James Lampley.............................................. 10,000 126,000
Rice Family Trust.......................................... 19,750 98,750
Thomas Loeffler............................................ 3,000 15,000
Shaquille O'Neal........................................... 32,000 160,000
John Daly.................................................. 5,000 50,000
Joe Namath................................................. 100,000 500,000
Carmen Policy.............................................. 12,000 90,000
Keyshawn Johnson........................................... 4,000 35,000
Bruce Binkow............................................... 4,000 20,000
Michael Schmidt............................................ 10,000 50,000
Sports Management Group.................................... 4,000 20,000
Gary Uberstine............................................. 8,000 40,000
Leonard Armato............................................. 15,000 75,000
Edward DeBartolo........................................... 12,000 90,000
NFL Players Association.................................... 12,000 150,000
Bill Walton................................................ 6,000 54,150
Sports Byline USA.......................................... 4,000 20,000
Estate of Burk Zanft....................................... 200,000 1,000,000
Monica Seles............................................... 5,000 25,000
Richard Horrow............................................. 10,000 50,000
Eldrick T. Woods........................................... 20,000 150,000
James Walsh................................................ 80,000 400,000
Lee Kolligian.............................................. 250 1,250
Michael Jordan............................................. 64,000 640,000
Gabrielle Reece............................................ 5,000 25,000
</TABLE>
No underwriter was involved in any of the above sales of securities. All
of the above securities were issued in reliance upon the exemption set forth in
Section 4(2) of the Securities act of 1933, as amended (the "Securities Act") pm
the basis that they were issued under circumstances not involving a public
offering.
ITEM 6. SELECTED FINANCIAL DATA.
The following data should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included in Item 8 of this
Form 10K. The selected consolidated balance sheet data set forth below
16
<PAGE>
as of December 31, 1998 and 1999, and the selected consolidated statement of
operations data for the three years ended December 31, 1999 have been derived
from the Company's audited consolidated financial statements.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,(1)
(UNAUDITED)
U.S. SPORTS.COM TOTAL
---- ---------- -----
1999 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
STATEMENT OF OPERATIONS
DATA:
(In thousands, except for share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue ............................. $ 58,284 $ 1,994 $ 60,278 $ 30,551 $ 12,014 $ 3,058 $ 100
Cost of revenue ..................... 31,536 2,548 34,078 17,231 10,431 4,233 818
-------- ------- ----------- ----------- ----------- ---------- ----------
Gross margin (deficit) .............. 26,748 (548) 26,200 13,320 1,583 (1,175) (718)
Operating expenses:
Product development ............... 1,587 -- 1,587 1,313 2,541 1,445 721
Sales and marketing ............... 34,463 1,989 36,452 20,481 14,019 7,115 1,456
General and administrative ........ 17,306 2,757 20,063 13,159 8,305 5,644 3,081
Depreciation and amortization ..... 24,809 997 25,806 17,104 11,689 993 206
Other non-recurring charge
for settlement of litigation .... -- -- -- 1,100 -- -- --
-------- ------- ----------- ----------- ----------- ---------- ----------
Total operating expenses ....... 78,165 5,743 83,908 53,158 36,554 15,197 5,464
-------- ------- ----------- ----------- ----------- ---------- ----------
Loss from operations ................ (51,417) (6,291) (57,708) (39,838) (34,971) (16,372) (6,182)
Interest expense .................... (4,392) -- (4,392) (118) (146) (161) (51)
Interest and other income, net ...... 8,783 193 8,976 4,447 940 430 125
-------- ------- ----------- ----------- ----------- ---------- ----------
Loss before extraordinary gain ...... (47,026) (6,098) (53,124) (35,509) (34,177) (16,103) (6,108)
Extraordinary gain on
extinguishment of debt ........... 36,027 -- 36,027 -- -- -- --
-------- ------- ----------- ----------- ----------- ---------- ----------
Net loss ............................ $(10,999) $(6,098) $ (17,097) $ (35,509) $ (34,177) $ (16,103) $ (6,108)
======== ======= =========== =========== =========== ========== ==========
Net loss per share--basic and
diluted ..........................
Loss per share before
extraordinary gain .............. $ (2.31) $ (1.94) $ (3.08) $ (2.31) $ (1.59)
Extraordinary gain ............... 1.57 -- -- -- --
----------- ----------- ----------- ---------- ----------
Net loss per share--basic and
diluted ....... ................. $ (0.74) $ (1.94) $ (3.08) $ (2.31) $ (1.59)
=========== =========== =========== ========== ==========
Weighted average common and
common equivalent shares
outstanding--basic and diluted ... 23,018,224 18,305,927 11,107,534 6,971,369 3,835,977
=========== =========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- -------- -------- --------
(in thousands)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Cash and marketable securities .................... $120,973 $ 85,242 $ 33,988 $ 15,250 $ 1,175
Working capital (deficit) ......................... 97,229 64,509 31,284 12,519 (1,349)
Total assets ...................................... 271,461 137,655 45,726 19,984 3,901
Long-term obligations, net of current
maturities ..................................... 19,608 207 458 685 770
Total shareholders' equity ........................ 224,656 118,963 36,985 15,426 405
</TABLE>
(1) The selected financial data gives effect to acquisitions which were
accounted for under the "pooling-of-interests" accounting method. See Note
2 of Notes to Financial Statements.
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain risk factors, including those set forth under "Risk Factors
that May Affect Future Results," below and elsewhere in this Report. The
following discussion also should be read in conjunction with the information set
forth in "Item 6. Selected Financial Data" and the Company's Consolidated
Financial Statements and Notes thereto included in "Item 8. Financial Statements
and Supplementary Data" of this Annual Report on Form 10-K.
OVERVIEW
The Company derives most of its revenue from advertising, e-commerce
and membership and premium services sales. Advertising revenue, e-commerce
revenue and fees from memberships and premium services constituted approximately
50%, 27% and 9%, respectively, of the Company's total revenue in 1999; 58%, 12%
and 16%, respectively, of the Company's total revenue in 1998; and 53%, 9% and
22%, respectively, of the Company's total revenue in 1997. The Company also
derives revenue from content licensing, primarily barter. Advertising revenue
has been derived principally from short-term advertising contracts on a per
impression basis or for a fixed fee based on a minimum number of impressions.
Advertising revenue also includes sponsorship opportunities that enable
advertisers to associate their corporate messages with the Company's coverage of
athletes and marquee events for a fee. E-commerce revenue is derived from sales
of sports memorabilia, equipment, licensed apparel and other sports related
items. Although most of the content on the Company's Web sites is free, users of
the Company's Web sites can purchase memberships and premium services for a fee.
The Company's majority owned subsidiary, Sports.com Limited which was formed in
May 1999 has contributed to the growth in revenues and accounted for
approximately 3% of total revenue in 1999. The Company has had agreements to
syndicate certain of its radio programming on traditional radio stations since
November 1997. As of December 31, 1999, the Company has three radio programs in
syndication: "The Drive" broadcast in 12 markets, "NFL Today" broadcast in 65
markets and "NFL Sunday" broadcast in 420 markets pursuant to SportsLine's
agreement with Westwood One entered into in August 1999. Through December 31,
1999, the Company's syndication revenue has not been significant.
Advertising revenue is recognized in the period in which the
advertisement is displayed, provided that no significant obligations remain and
collection of the resulting receivable is probable. Company obligations
typically include guarantees of a minimum number of "impressions," or times that
advertisements appear in page views downloaded by users. Revenue relating to
annual memberships and seasonal sports contests is recognized ratably over the
life of the membership agreement or contest period. Accordingly, amounts
received for which services have not yet been provided are recorded as deferred
revenue on the Company's balance sheets. Content licensing revenue is recognized
over the period of the license agreement as the Company delivers its content.
Merchandise revenue is recognized once the product has been shipped and payment
is reasonably assured.
On January 29, 1998, the Company acquired all of the outstanding
capital stock of Golfweb in exchange for approximately 844,490 shares of Common
Stock and the assumption of stock options and warrants to purchase up to
approximately 53,300 additional shares of Common Stock. The acquisition was
accounted for under the "pooling-of interests" accounting method. Accordingly,
the Company's consolidated financial statements include the accounts of Golfweb.
See Notes 2 and 5 of Notes to Consolidated Financial Statements.
On June 29, 1998, the Company acquired International Golf Outlet, Inc.
("IGO"), a privately-held Internet retailer of fine golf equipment and
accessories, for $2 million, consisting of $350,000 in cash and $1.65 million of
Common Stock (46,924 shares). The Company also agreed to issue to the IGO
shareholders additional Common Stock, valued at $1.5 million at the time of
acquisition (42,658 shares), if IGO meets certain annual revenue and earnings
targets over the three year period following the acquisition. These targets were
met for the first period and, accordingly, during 1999 the Company issued 14,220
additional shares of Common Stock valued at $249,000 to the former IGO
shareholders. See Notes 2 and 5 of Notes to Consolidated Financial Statements.
18
<PAGE>
In May 1999, the Company acquired Golf Club Trader, Inc. for
approximately $7 million of Common Stock (195,850 shares). The purchase was
accounted for using the pooling-of-interests method of accounting; however,
given Golf Club Trader, Inc.'s immateriality, historical results of the Company
were not restated and the results of Golf Club Trader, Inc. are included herein
beginning April 1, 1999. See Notes 2 and 5 of Notes to Consolidated Financial
Statements.
Sports.com Limited, formerly known as SportsLine Europe Limited
("Sports.com"), was formed in May 1999 as a majority owned subsidiary of the
Company. In June 1999, Sports.com acquired the sports division of Infosis Group.
The Company accounted for this transaction using the purchase method of
accounting. The accompanying financial statements also include the purchase of
Sportsweb. In connection with the initial capitalization of Sports.com and the
acquisition of Sportsweb, the Company recorded a liability of $7,443,000 on its
balance sheet to reflect its minority interest in Sports.com.
In December 1999, the Company acquired Daedalus World Wide Corporation
for consideration valued at approximately $31,780,000 consisting of $4,000,000
cash and $27,780,000 of Common Stock (599,998 shares). The transaction was
accounted for using the purchase method of accounting. See Notes 2 and 5 of
Notes to Consolidated Financial Statements.
The Company acquired other businesses during 1999, and accounted for
these transactions using the purchase method of accounting. The two businesses
were acquired in exchange for an aggregate of $2,373,000 cash and $2,555,000 of
the Company's common stock (124,322 shares). See Notes 2 and 5 of Notes to
Consolidated Financial Statements.
RECENT DEVELOPMENTS
In the first quarter of 2000, SportsLine entered into a 10-year
strategic e-commerce and marketing agreement with MVP.com, Inc., a new sports
and outdoor e-commerce company, pursuant to which MVP acquired and will operate
the Company's domestic e-commerce business. Effective as of January 1, 2000, MVP
assumed responsibility, at its expense, for the design, hosting, operation and
ongoing maintenance of the Company's e-commerce operations, including those
mentioned above, and is entitled to all revenue generated from the sales of
goods and services pursuant thereto. As consideration for this right, MVP has
issued equity to the Company and will pay SportsLine promotional fees based on
the amount of revenue generated, with minimum cash payments of $120 million over
the 10-year term. In connection with this agreement, the Company sold three of
its subsidiaries which engage in e-commerce activity (International Golf Outlet,
Inc., Golf Club Trader, Inc. and TennisDirect.com, Inc.) to MVP in exchange for
additional equity in MVP.
In January 2000, Sports.com completed a second round of funding,
raising gross proceeds of $52.5 million through the issuance of Series B
Preferred Stock. Proceeds from the funding will be used for working capital and
other general corporate purposes, including expansion into new countries,
additional marketing and advertising sales activities and capital expenditures.
RESULTS OF OPERATIONS
Revenue
Total revenue for the year ended December 31, 1999 was $60,278,000
compared to $30,551,000 for the year ended December 31, 1998 and $12,014,000 for
the year ended December 31, 1997. The increase in revenue in each period was
primarily due to increased advertising sales, as well as increased revenue from
the sale of merchandise, memberships and premium service fees, and content
licensing.
Advertising revenue increased $12,272,000 in 1999 compared to 1998 and
$11,369,000 in 1998 compared to 1997. Advertising revenue for the years ended
December 31, 1999, 1998 and 1997 accounted for approximately 50%, 58% and 53%,
respectively, of total revenue. Advertising revenue increased primarily as a
result of a higher number of impressions sold and additional sponsors
advertising on the Company's Web sites. During 1999, the Company generated
additional revenue in connection with the Company's advertising and sponsorship
agreements with WebMD, MountainZone.com and CareerPath. International
advertising revenue accounted for approximately
19
<PAGE>
3% of total advertising revenue during 1999 and the Company expects
international advertising revenue to continue to grow in future years.
Additionally, during 1999 and 1998 the Company increased the number of
impressions available for advertising by increasing its content and through its
agreements with PGATOUR.com and Major League Baseball, among others, to produce
the official Web sites of the organizations.
Membership and premium services revenue increased $597,000 in 1999
compared to 1998 and $2,331,000 in 1998 compared to 1997. In January 1999, the
Company launched "SportsLine Rewards," a program which offers bonus points to
members for viewing pages and making purchases. These points can be redeemed for
discounts on merchandise, special events and other premium items. While basic
membership revenue decreased in 1999 due to a restructuring of the Company's
membership program, premium service revenue increased due to increased
participation in the Company's fantasy sports contests as well as increased
participation in the Company's "Sports Careers" products. Membership and premium
service revenue increased in 1998 from 1997 due to increased member signups as
well as an increased number of premium products.
E-commerce revenue increased to $16,486,000 in 1999 compared to
$3,600,000 and $1,049,000 in 1998 and 1997, respectively. During the fourth
quarter of 1997, the Company launched The Sports Store (thesportstore.com),
which offers a variety of branded sports merchandise, books, videos and unique
collectible memorabilia. The principal contributing factors to increased
e-commerce revenue were increased product assortment, a new order entry platform
and better product promotion through the Company's relationships with CBS and
AOL. The purchase of two e-commerce businesses in 1999 and one in 1998 also
contributed to increased sales of merchandise from year to year. E-commerce
revenue is expected to decline significantly in future periods as a result of
the sale of the Company's domestic e-commerce operations to MVP.com; however,
advertising revenue is expected to increase as a result of the promotion fees to
be paid by MVP.com to the Company. See "--Recent Developments."
Content licensing and other revenue increased $3,972,000 during 1999
compared to 1998 and $2,254,000 during 1998 compared to 1997 due to the
Company's agreement with AOL. Content licensing and other revenue also increased
during 1999 as a result of the Company's agreement with Excite and content
revenue generated by Sports.com.
As of December 31, 1999, the Company had deferred revenue of $4,160,000
relating to cash or receivables for which services had not yet been provided.
Barter transactions, in which the Company received advertising or other
services or goods in exchange for content or advertising on its Web sites,
accounted for approximately 17%, 19% and 19% of total revenue for 1999, 1998 and
1997, respectively. Barter revenue decreased in 1999 compared to 1998 and 1997
primarily due to a greater growth rate of cash revenue versus barter revenue. In
future periods, management intends to maximize cash advertising and content
licensing revenue, although the Company will continue to enter into barter
relationships when deemed appropriate.
Cost of Revenue
Cost of revenue consists primarily of content fees to third parties and
payroll and related expenses for the Company's editorial and operations staff
who are responsible for creating content on the Company's Web sites and radio
programs. Telecommunications, Internet access and computer related expenses for
the support and delivery of the Company's services are also included in cost of
revenue. Cost of revenue also includes the cost of merchandise sold. Also
included in cost of revenue are royalty and other payments paid to certain
content providers, technology and marketing partners and celebrity athletes
based on membership levels or percentage of revenue generated subject, in
certain instances, to specified minimum amounts.
Cost of revenue was $34,078,000 in 1999 compared to $17,231,000 and
$10,431,000 for 1998 and 1997, respectively. The increase in cost of revenue for
each period was primarily the result of increased merchandise costs due to
higher merchandise sales and is also the result of increased revenue sharing
under the Company's agreements with CBS, Major League Baseball and PGATOUR.com.
In addition, telecommunications cost has increased for each period as the
Company increased its capacity to support and deliver its services to the
increased traffic on its Web sites. Other increases in cost of revenue reflect
the relatively high level of revenue splits and
20
<PAGE>
rights payments required to initiate the start up of Sports.com (which accounted
for 4% of total cost of revenue during 1999). During 1999 and 1998 the Company
increased its editorial and operations staff to support the production of
sports-related information and programming on the Company's Web sites and the
content requirements under the AOL agreement as well as the official sites of
Major League Baseball and PGATOUR.com. As a percentage of revenue, cost of
revenue increased to 57% for the year ended December 31, 1999 from 56% in
December 31, 1998 and decreased as compared to 87%, for the year ended December
31, 1997, respectively.
Operating Expenses
Product Development. Product development expense consists primarily of
consulting and employee compensation and related expenses required to support
the development of existing and new service offerings and proprietary content.
These costs are expensed as incurred.
Product development expense was $1,587,000 for the year ended December
31, 1999 compared to $1,313,000 and $2,541,000 for the years ended December 31,
1998 and 1997, respectively. The increase in product development expense in 1999
is primarily the result of increased product development personnel and
consultants and the associated costs. The decrease in product development
expense in 1998 from 1997 was primarily attributable to the reduction of
technical personnel and associated costs relating to the purchase of Golfweb.
The Company believes that significant investments in product development are
required to remain competitive. Consequently, the Company intends to continue to
invest resources in product development. As a percentage of revenue, product
development expense decreased to 3% for the year ended December 31, 1999 from 4%
and 21%, for the years ended December 31, 1998 and 1997, respectively.
Sales and Marketing. Sales and marketing expense consists of salaries
and related expenses, advertising, marketing, promotional, business development
and public relations expenses and member acquisition costs. Member acquisition
costs consist primarily of the direct costs of member solicitation, including
advertising on other Web sites and the cost of obtaining qualified prospects
from direct marketing programs and from third parties. The Company expenses
member acquisition costs as incurred.
Sales and marketing expense was $36,452,000 for the year ended December
31, 1999 compared to $20,481,000 and $14,019,000 for the years ended December
31, 1998 and 1997, respectively. The increase in sales and marketing expense in
each period was primarily the result of an increase in the number of personnel
and related costs, increased advertising on other Web sites as well as in print
and other media, prizes awarded to contestants in the Company's various contests
and costs associated with the Company's new "Rewards" program. Also in February
1999, the Company entered into an agreement with Netscape which resulted in
additional marketing expense. Sports.com accounted for 5% of sales and marketing
expense. The Company intentds to continue to aggressively promote the sports.com
brand worldwide in order to attract traffic and new users to its Web sites.
Barter transactions accounted for approximately 30%, 27% and 16% of sales and
marketing expense for the years ended December 31, 1999, 1998 and 1997,
respectively. The increase in the proportionate amount of barter expense was due
to the use of barter for content licensing during 1999 and 1998. As a percentage
of revenue, sales and marketing expense decreased to 60% for the year ended
December 31, 1999 from 67% and 117% for the years ended December 31, 1998 and
1997, respectively.
General and Administrative. General and administrative expense consists
of salary and related costs for executive, finance and accounting, technical and
customer support, human resources and administrative functions as well as
professional service fees. General and administrative expense for the year ended
December 31, 1999 was $20,063,000 compared to $13,159,000 and $8,305,000 for the
years ended December 31, 1998 and 1997, respectively. The increase in general
and administrative expense in each period was primarily attributable to salary
and related expenses for additional personnel and to a lesser extent an
increase in system support for the Company's technological operations and with
an increase in rents and related expenses. The Company increased general and
administrative expense in each year to develop and maintain the administrative
infrastructure necessary to support the growth of its business. As the result of
the expansion in Europe, Sports.com accounted for 14% of total general and
administrative expense in 1999. The Company expects to continue to incur
additional start up expenses as Sports.com continues its expansion in the
European market. As a percentage of revenue, general and administrative expense
decreased to 33% for the year ended December 31, 1999 from 43% and 69%, for the
years
21
<PAGE>
ended December 31, 1998 and 1997, respectively, as the Company achieved certain
economies of scale utilizing its core infrastructure.
Depreciation and Amortization. Depreciation and amortization expense
consists of the depreciation of property and equipment, amortization of costs
associated with consulting agreements and, beginning in March 1997, the
amortization of deferred advertising and content costs relating to the CBS
agreement. Depreciation and amortization expense for the year ended December 31,
1999 was $25,806,000 compared to $17,104,000 and $11,689,000 for the years ended
December 31, 1998 and 1997, respectively. The increase in depreciation and
amortization from 1997 to 1998 was due to the Company's agreements with CBS,
which began in March 1997, and AOL, which began in October 1998. The increase in
depreciation and amortization in 1999 from 1998 was due to the amendment to the
CBS agreement in February 1999 which increased the number of warrants issued to
CBS by 1,200,000, as well as new agreements with PGATOUR.com and Westwood One
involving the issuance of shares and warrants. Additionally, in 1999 there was a
full year of expense related to the AOL agreement as opposed to three months'
expense in 1998. Depreciation and amortization also increased in 1999 and 1998
due to increased amounts of property and equipment and goodwill amortization for
acquired companies. The Company expects depreciation and amortization expense to
increase as a result of the continuing agreements mentioned above and the
goodwill amortization of recent acquisitions.
In February 1999, the Company amended its 1997 agreement with CBS to
extend the original term of the agreement for five years, through 2006.
Commencing with calendar year 1999, CBS will provide advertising and promotion
in accordance with a fixed promotion schedule. The Company accelerated the
issuance to CBS of 1,052,937 shares of Common Stock and warrants to purchase
760,000 shares of Common Stock, which originally were to be issued in 2000 and
2001. The Company also issued to CBS new warrants to purchase 1,200,000 shares
of Common Stock, which vest on various dates through January 2001, and agreed to
issue to CBS on specified dates for each of the sixth through tenth contract
years Common Stock having a fair market value of $20.0 million on each issue
date.
Under the Company's agreement with CBS, the Company has issued shares
of common stock and warrants to purchase common stock in consideration of CBS's
advertising and promotional efforts and its license to the Company of the right
to use certain CBS logos and television-related sports content. The value of the
advertising and content has been recorded in the balance sheet as deferred
advertising and content costs and is amortized as depreciation and amortization
expense over each related contract year. See Note 5 of Notes to Consolidated
Financial Statements. Total expense under the CBS agreement was $14,096,000 for
the year ended December 31, 1999 and $12,002,000 for the year ended December 31,
1998, and will be $17,286,000 in 2000, $17,286,000 in 2001 and $22,286,000
annually from 2002 to 2006.
Under the Company's current agreement with AOL which was effective upon
expiration of the prior agreement in October 1998, the Company has issued shares
of Common Stock and warrants to purchase Common Stock and made a cash payment in
consideration of AOL's advertising and promotional efforts. The value of the
advertising has been recorded in the balance sheet as deferred advertising costs
and amortized to depreciation and amortization expense over each related
contract year. In December 1999, the Company realized a benefit of approximately
$3.4 million resulting from the reversal of the liability related to the
Company's long-term agreement with AOL. Such benefit was reflected as a
reduction to depreciation and amortization expense in 1999. See Note 5 of Notes
to Consolidated Financial Statements. Total expense under the new AOL agreement
was $4,220,000 for the year ended December 31, 1999 and will be $4,499,000 in
2000 and $4,227,000 in 2001.
Interest Expense. Interest expense was $4,392,000 for the year ended
December 31, 1999 compared to $118,000 and $146,000 for the years ended December
31, 1998 and 1997, respectively. Interest expense during 1999 consisted
primarily of interest paid on the Convertible Subordinated Notes thus causing
the increase in interest expense from 1999 to 1998. The decrease in interest
expense from 1997 to 1998 was due to the payment in full of two equipment lines
in February 1998 and one of the Company's capital leases for computer equipment
in June 1998. The Company anticipates that interest expense will decrease in the
immediate future as a result of the repurchase and retirement of approximately
$130,000,000 of the $150,000,0000 Convertible Subordinated Notes.
Interest and Other Income, Net. Interest and other income, net
primarily represents interest earned on cash and cash equivalents and marketable
securities. Interest and other income, net for the year ended December 31,
22
<PAGE>
1999 was $8,976,000 compared to $4,447,000 and $940,000 for the years ended
December 31, 1998 and 1997, respectively. The increase from 1999 to 1998 was
primarily attributable to the Company's investment of the proceeds of the
Convertible Subordinated Note offering in March 1999. The increase from 1998 to
1997 was due to the investment of the proceeds of the Company's initial public
offering and the Company's April 1998 secondary offering in cash and cash
equivalents. The Company anticipates that interest income will decrease in
future periods as a result of the use of approximately $90,100,000 of cash to
repurchase the Convertible Subordinated Notes and the use of marketable
securities for working capital and other purposes.
Extraordinary Gain. During the second half of 1999, the Company
repurchased $130,392,000 of its Convertible Subordinated Notes for approximately
$90,100,000 and as a result, the Company recognized an extraordinary gain of
$36,027,000, net of unamortized debt issuance costs.
Income Taxes. No provision for Federal and state income taxes has been
recorded as the Company incurred net operating losses for each period presented.
As of December 31, 1999, the Company had approximately $97,000,000 of net
operating loss carryforwards for Federal income tax purposes, expiring beginning
in 2009, available to offset future taxable income. Given the Company's losses
incurred to date and the difficulty in accurately forecasting the Company's
future results, management does not believe that the realization of the related
deferred income tax assets meets the criteria required by generally accepted
accounting principles and, accordingly, a full 100% valuation allowance has been
recorded to reduce the deferred income tax assets to zero. See Note 7 of Notes
to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company's primary source of liquidity
consisted of $45,968,000 in cash and cash equivalents. As of December 31, 1999,
the Company has $24,953,000 in current marketable securities and $50,052,000 in
noncurrent marketable securities, which mature at various dates from January
2001 to May 2001. In February 2000, CBS exercised warrants to purchase 500,000
shares of Common Stock resulting in net proceeds of $11,500,000.
In January 2000, Sports.com completed a second round of funding,
raising gross proceeds of $52.5 million through the issuance of Series B
Preferred Stock. Proceeds from the funding will be used for working capital and
other general corporate purposes, including expansion into new countries,
additional marketing and advertising sales activities and capital expenditures.
In March 1999, the Company completed an offering of $150,000,000
aggregate principal amount of 5% Convertible Subordinated Notes due 2006. Total
net proceeds to the Company from this offering were approximately $145,443,000.
In August 1999, the Company repurchased $60,000,000 of its Convertible
Subordinated Notes for approximately $36,400,000, and as a result, the Company
recognized an extraordinary gain of $21,800,000, net of amortized debt issuance
costs. In October 1999, the Company repurchased an additional $70,300,000 of its
Convertible Subordinated Notes for approximately $53,700,000 and as a result,
the Company recognized an extraordinary gain of approximately $14,200,000, net
of expenses and unamortized debt issuance costs. Convertible Subordinated Notes
in an aggregate principal amount of approximately $20,000,000 remain
outstanding.
The Company has obtained revolving credit facilities that provide for
the lease financing of computers and other equipment. Outstanding amounts under
the facilities bear interest at variable rates of approximately 9%. As of
December 31, 1999, the Company owed $170,000 under these facilities.
As of December 31, 1999, current deferred advertising and content costs
totaled $19,530,000, which represented costs related to the CBS and AOL
agreements to be amortized to depreciation and amortization expense during the
year ended December 31, 2000. Long term deferred advertising and content costs
related to the above agreements totaled $32,398,000 at December 31, 1999.
Accrued liabilities totaled $12,128,000 as of December 31, 1999, an increase of
$6,794,000 from December 31, 1998, primarily due to increases in accruals for
cost of revenue sharing, professional fees, accrued payroll and accrued expenses
relating to Sports.com.
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Net cash used in operating activities was $29,710,000, $25,295,000 and
$22,048,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
The principal uses of cash for all periods were to fund the Company's net losses
from operations, partially offset by increases in deferred revenue, accrued
liabilities and depreciation and amortization and other noncash charges.
Net cash used in investing activities was $34,190,000, $69,185,000 and
$3,937,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
The principal uses in 1999 were for purchases of current and noncurrent
marketable securities and to a lesser extent purchases of property and
equipment, licensing rights and acquisition of businesses. The principal uses in
1998 were for purchases of current and noncurrent marketable securities and for
purchases of property and equipment. In 1997 the principal use was for the
purchase of property and equipment.
Net cash provided by financing activities was $78,184,000, $93,682,000,
and $43,217,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. Financing activities in 1999 consisted principally of the issuance
and repurchase of Convertible Subordinated Notes. In 1998 and 1997 financing
activities consisted principally of the issuance of equity securities, including
shares of Common Stock sold in the Company's initial public offering and
secondary public offering.
The Company has entered into various licensing, royalty and consulting
agreements with content providers, vendors, athletes and sports organizations,
which agreements provide for consideration in various forms, including issuance
of warrants to purchase Common Stock and payment of royalties, bounties and
certain other guaranteed amounts on a per member and/or a minimum dollar amount
basis over terms ranging from one to ten years. Additionally, some of these
agreements provide for a specified percentage of advertising and merchandising
revenue to be paid to the athlete or organization from whose Web site the
revenue is derived. As of December 31, 1999, the minimum guaranteed payments
required to be made by the Company under such agreements were $15,990,000. The
Company's minimum guaranteed payments are subject to reduction in the case of
certain agreements based upon the appreciation of warrants issued, the value of
stock received on exercise of such warrants and the amount of profit sharing
earned under the related agreements.
Although the Company has no material commitments for capital
expenditures, it anticipates purchasing approximately $17.6 million of property
and equipment during 2000, including $12.9 million in domestic operations and
$4.7 million related to international operations. The capital expenditures will
relate to infrastructure and system needs for the Company's European expansion
as well as normal operating and financial system improvements. Additionally, the
Company intends to continue to pursue acquisitions of or investments in
businesses, services and technologies that are complementary to those of the
Company.
The Company believes that its current cash and marketable securities
will be sufficient to fund its worldwide working capital and capital expenditure
requirements for at least the next 24 to 36 months. However, on a consolidated
basis the Company expects to continue to incur significant operating losses for
at least the next 24 to 36 months. To the extent the Company requires additional
funds to support its operations or the expansion of its business, the Company
may sell additional equity, issue debt or convertible securities or obtain
credit facilities through financial institutions. The sale of additional equity
or convertible securities will result in additional dilution to the Company's
shareholders. There can be no assurance that additional financing, if required,
will be available to the Company in amounts or on terms acceptable to the
Company.
YEAR 2000 COMPLIANCE
To date the Company's systems have not experienced any material
disruption due to the onset of the Year 2000, however we cannot assure that we
will not experience disruptions in the future as a consequence of Year 2000
issues. To date the Company has completed all phases of preparedness for Year
2000 however; we cannot quantify the amount of the Company's potential exposure,
but do not believe it to be material.
SEASONALITY
The Company expects that its revenue will be higher leading up to and
during major U.S. sports seasons and lower at other times of the year,
particularly during the summer months. In addition, the effect of such seasonal
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fluctuations in revenue could be enhanced or offset by revenue associated with
major sports events, such as the Olympics, the Ryder Cup and the World Cup,
although such events do not occur every year. The Company believes that
advertising sales in traditional media, such as television, generally are lower
in the first and third calendar quarters of each year, and that advertising
expenditures fluctuate significantly with economic cycles. Depending on the
extent to which the Internet is accepted as an advertising medium, seasonality
and cyclicality in the level of Internet advertising expenditures could become
more pronounced. The foregoing factors could have a material adverse affect on
the Company's business, results of operations and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
during the year ended December 31, 1998. SFAS No. 130 establishes standards for
the reporting and display of comprehensive income (loss) and its components in a
full set of financial statements. The objective of SFAS No. 130 is to report
comprehensive income (loss), a measure of all changes in equity of an enterprise
that result from transactions and other economic events in a period, other than
transactions with owners. The Company has elected to disclose comprehensive
income (loss) in the consolidated statements of stockholders equity.
In June 1999, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities-Defferal of FASB Statement No. 133. SFAS No. 137 defers for one year
the effective date of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 will now apply to all fiscal quarters of all
fiscal years beginning after June 15, 2000. SFAS No. 133 will require the
Company to recognize all derivatives on the balance sheet as either assets or
liabilities measured at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. The Company will adpot SFAS No. 133
effective for the year ended December 31, 2001. The Company believes that the
adoption of SFAS No. 133 will not have a material impact on its consolidated
financial statements, as it has entered into no derivative contracts and has no
current plans to do so in the future.
The Company adopted SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" effective January 1, 1999. SOP
98-1 establishes criteria for determining which costs of developing or obtaining
internal-use computer software should be charged to expense and which should be
capitalized. Such adoption did not have a material effect on the Company's
financial position or results of operations.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
SportsLine's business and the value of its stock is subject to a number
of risks. Some of those risks are described below.
We have only been operating our business since August 1995
We were incorporated in February 1994 and commercially introduced our
first Web site in August 1995. We first recognized revenue from operations in
the quarter ended September 30, 1995. Accordingly, we have a limited operating
history upon which you may evaluate us. You should consider our prospects in
light of the risks, expenses and difficulties frequently encountered by early
stage companies in new and rapidly evolving markets, including the
Internet-based advertising, information services and commerce markets. As an
early stage online content provider and commerce company, we have an evolving
and unpredictable business model, we face intense competition, we must
effectively manage our growth and we must respond quickly to rapid changes in
customer demands and industry standards. To address these risks, we must provide
compelling and original content to our users, we must maintain our existing
relationships and effectively develop new relationships with advertisers,
advertising agencies and other third parties, we must develop and upgrade our
technology and respond to competitive developments, and we must attract, retain
and motivate qualified personnel. We may not succeed in addressing these
challenges and risks.
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We have an accumulated deficit and we anticipate further losses
We have incurred significant losses since we began doing business. To
date, we have achieved only limited revenue and our ability to generate
significant revenue is subject to substantial uncertainty. We may not ever
generate sufficient revenue to meet our expenses or achieve or maintain
profitability. We incurred net operating losses of $16.1 million during 1996,
$34.2 million during 1997, $35.5 million during 1998, and $53.1 million during
1999. As of December 31, 1999, we had an accumulated deficit of $109.5 million.
We expect to continue to incur losses for at least the next 24 to 36 months.
Since inception, we have incurred substantial costs to develop and
enhance our technology, to create, introduce and enhance our service offerings,
to acquire and develop content, to build traffic on our Web sites, to acquire
members, to establish marketing relationships and to build an administrative
organization. We intend to continue these efforts and we plan to increase our
spending for marketing and for the development and acquisition of content. We
have entered into various licensing, royalty and consulting agreements with
content providers, vendors, athletes and sports organizations, which agreements
provide for consideration in various forms, including issuance of warrants to
purchase shares of our common stock and payment of royalties, bounties and
certain other guaranteed amounts on a per member and/or a minimum dollar amount
basis over terms ranging from one to ten years. Additionally, some of these
agreements provide for a specified percentage of advertising and merchandising
revenue to be paid to the athlete or organization from whose Web site the
revenue is derived. As of December 31, 1999, the minimum guaranteed payments we
were required to make under such agreements were $8,797,000. Our minimum
guaranteed payments are subject to reduction in the case of certain agreements
based upon the appreciation of warrants issued, the value of stock received on
exercise of such warrants and the amount of profit sharing earned under the
related agreements. Also, we recorded non-cash expense of $14,000,000 and
$12,000,000 for the year ended December 31, 1999 and 1998, respectively, related
to our agreement with CBS and will record an additional $146,000,000 of non-cash
expense over the remaining term of our agreement with CBS. Additionally, as of
December 31, 1999, non-cash expense under our agreement with AOL will total
$8,726,000 over the remaining term of that agreement.
Our quarterly results may fluctuate and our future revenues are unpredictable
and may be seasonal
Due to our limited operating history and the unpredictability of our
industry, we cannot accurately forecast our revenue. Our revenues for the
foreseeable future will continue to come from a mix of advertising, merchandise
sales, membership and premium service fees, content licensing, Web site
development and syndication fees. We are likely to experience fluctuations in
quarterly revenue and operating results due to the level of advertising revenue
within each quarter. We base our current and future expense levels on our
investment plans and estimates of future revenues. Our expenses are to a large
extent fixed. We may not be able to adjust our spending quickly if our revenues
fall short of our expectations.
Our revenues and operating results may vary significantly from quarter
to quarter due to a number of factors, including:
o the level of usage of the Internet,
o the level of traffic on our Web sites,
o demand for Internet advertising,
o seasonal trends in both Internet usage and advertising placements,
o the addition or loss of advertisers,
o the advertising budgeting cycles of individual advertisers,
o the number of users that purchase memberships, merchandise or premium
services,
o the amount and timing of capital expenditures and other costs relating
to the expansion of our operations,
o the introduction of new sites and services by us or our competitors,
o price competition or pricing changes in the industry, and
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o general economic conditions and economic conditions specific to the
Internet, electronic commerce and online media.
Furthermore, we expect that our revenue will be higher leading up to
and during major U.S. sports seasons and lower at other times of the year,
particularly during the summer months. In addition, the effect of such seasonal
fluctuations in revenue could be enhanced or offset by revenue associated with
major sports events, such as the Olympics and World Cup events, although such
events do not occur every year. We believe that advertising sales in traditional
media, such as television, generally are lower in the first and third calendar
quarters of each year, and that advertising expenditures fluctuate significantly
with economic cycles. Depending on the extent to which the Internet is accepted
as an advertising medium, seasonality and cyclicality in the level of Internet
advertising expenditures could become more pronounced in which case our revenues
may be affected by such seasonal and cyclical patterns.
Due to all of the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is possible that our operating results may fall below the
expectations of securities analysts or investors in some future quarter which
would likely cause the trading price of our common stock to decline.
We are dependent upon our relationship with CBS to execute our business plan
In March 1997, we entered into a five-year agreement with CBS, pursuant
to which our flagship Web site was renamed "cbs.sportsline.com." We amended our
agreement with CBS in February 1999 to extend the term through 2006. Over the
term of the agreement, we have the right to use certain CBS logos and
television-related sports content and will receive extensive network television
advertising and on-air promotions. This network television advertising and
on-air promotions, as well as the association of our brand with CBS, are
important elements of our strategy to increase awareness of the SportsLine brand
and build traffic on our Web sites. Under the agreement, CBS has the right to
receive specified percentages of our net revenues. The agreement requires us to
maintain and operate our flagship Web site, cbs.sportsline.com, in accordance
with certain guidelines and restrictions and to cease using any content on
cbs.sportsline.com which CBS determines conflicts, interferes with or is
detrimental to CBS's reputation or business or which becomes subject to any
third party restriction or claim which would prohibit, limit or restrict the use
of such content on the Internet. CBS has the right to terminate the agreement
upon the acquisition by a CBS competitor of 40% or more of the voting power of
our equity securities or in certain other circumstances, including if we breach
a material term or condition or the agreement or if we become insolvent or
subject to bankruptcy or similar proceedings.
We cannot assure you that CBS will perform its obligations under the
agreement, or that the agreement will significantly increase consumer awareness
of our brand or build traffic on our Web sites. Any failure of CBS to perform
its material obligations under the agreement, or the termination of the
agreement prior to the end of its term, would have a material adverse effect on
our business, results of operations and financial condition.
We rely on other strategic relationships in order to execute our business plan
In addition to our relationship with CBS, we have entered into other
strategic relationships with sports superstars and personalities, sports
organizations, commercial online services (such as AOL), third party Web sites
(such as Excite and Netscape) and developers of browsers and other
Internet-based products. We rely on these relationships to increase awareness of
our brand among consumers, to create revenue opportunities and to obtain content
for our Web sites. We cannot assure you that a party to any of our strategic
agreements will perform its obligations as agreed or that we will be able to
specifically enforce any such agreement. Many of these strategic agreements
are short-term in nature and certain of these agreements may be terminated by
either party on short notice. Our failure to maintain or renew these existing
strategic relationships, to establish additional strategic relationships or to
fully capitalize on any such relationship could have a material adverse effect
on our business, results of operations and financial condition.
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We may not be able to compete successfully
The market for Internet services and products is relatively new,
intensely competitive and rapidly changing. Since the Internet's
commercialization in the early 1990's, the number of Web sites on the Internet
competing for consumers' attention and spending has proliferated with no
substantial barriers to entry, and we expect that competition will continue to
intensify. Competition could result in less user traffic to our Web sites, price
reductions for our advertising, reduced margins or loss of market share, any of
which would have a material adverse effect on our business, results of
operations and financial condition.
We compete for advertisers, viewers, members, content providers,
merchandise sales and rights to sports events with the following categories of
companies:
o online services or Web sites targeted to sports enthusiasts generally
(such as ESPN.com, CNN and Sports Illustrated's CNN/SI and Fox Sports)
or to enthusiasts of particular sports (such as Web sites maintained
by the NFL, the NBA and the NHL),
o publishers and distributors of traditional off-line media (such as
television, radio and print), including those targeted to sports
enthusiasts, many of which have established or may establish Web
sites,
o general purpose consumer online services such as AOL and Microsoft
Network, each of which provides access to sports-related content and
services,
o vendors of sports information, merchandise, products and services
distributed through other means, including retail stores, mail,
facsimile and private bulletin board services, and
o Web search and retrieval services and portals, such as AltaVista,
Excite, Go.com, Lycos, Netscape and Yahoo!, and other high-traffic Web
sites.
Our ability to compete depends on many factors, many of which are
outside of our control. These factors include the quality of content provided by
us and by our competitors, the ease of use of services developed either by us or
by our competitors, the timing and market acceptance of new and enhanced
services developed either by us or by our competitors, and sales and marketing
efforts by us and our competitors.
Based on our review of publicly available documents, we believe some of
our existing competitors, as well as potential new competitors, have longer
operating histories, significantly greater financial, technical and marketing
resources, greater name recognition and substantially larger user or membership
bases than we do. This may allow them to devote greater resources than we can to
the development and promotion of their services. In addition, some of these
competitors may be able to respond more quickly than us to new or emerging
technologies and changes in Internet user requirements and to devote greater
resources than us to the development, promotion and sale of their services.
There can be no assurance that our current or potential competitors will not
develop products and services comparable or superior to those developed by us or
adapt more quickly than us to new technologies, evolving industry trends or
changing Internet user preferences. In addition, as we expand internationally we
are likely to face new competition. There can be no assurance that we will be
able to compete successfully against current and future competitors, or that
competitive pressures would not have a material adverse effect on our business,
results of operations and financial condition.
We are dependent on certain content providers and are required to make
significant payments to such content providers
We rely on independent content providers for sports news, scores,
statistics and other sports information. Our future success depends, in
significant part, on our ability to maintain and renew our relationships with
these content providers and to build new relationships with other content
providers. Our agreements with content providers generally are short-term and
may be terminated by the content provider if we fail to fulfill our obligations
under the applicable agreement. Some of our content providers compete with one
another and, to some extent, with us for advertising and members. Termination of
one or more significant content provider agreements would decrease the
availability of sports news and information which we can offer our customers and
could have a material adverse effect on our business, results of operations and
financial condition.
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Most of our agreements with content providers are nonexclusive, and
many of our competitors offer, or could offer, content that is similar or the
same as that obtained by us from such content providers. In addition, the
growing reach and use of the Internet have further intensified competition in
this industry. Consumers have gained free access to certain information provided
directly on the Internet by certain content providers. To the extent that
content providers, including but not limited to our current suppliers, provide
information to users at a lower cost than us or at minimal or no cost, our
business, results of operations and financial condition could be materially
adversely affected.
Fees payable to content providers constitute a significant portion of
our cost of revenue. There can be no assurance that these content providers will
enter into or renew agreements with us on the same or similar terms as those
currently in effect. If we are required to increase the fees payable to our
content providers, such increased payments could have a material adverse effect
on our business, results of operations and financial condition.
Effectively managing our growth may be difficult
We have rapidly and significantly expanded our operations and
anticipate that significant expansion of our operations will continue to be
required in order to address potential market opportunities. This growth is
likely to place a significant strain on our management, operational and
financial resources and systems. To manage our growth, we must implement systems
and train and manage our employees. In addition, it may become necessary to
increase the capacity of our software, hardware and telecommunications systems
on short notice. We cannot assure you that our management will be able to
effectively or successfully manage our growth.
Our acquisition strategy has certain risks
Our acquisition strategy is subject to the following risks:
o we may not be able to identify additional suitable acquisition
candidates available for sale at reasonable prices,
o acquisitions may cause a disruption in our ongoing business, distract
our management and other resources and make it difficult to maintain
our standards, controls and procedures,
o we may not be able to consummate any acquisition or successfully
integrate services, products and personnel of any acquisition into our
operations,
o we may acquire companies in markets in which we have little
experience, and
o we may be required to incur debt or issue equity securities, which may
be dilutive to existing shareholders, to pay for acquisitions.
Our strategy to expand internationally has certain risks
We plan to continue to expand our business internationally and expect
that our international operations will be subject to most of the risks inherent
in our business generally. We can not assure you that revenue from international
operations will increase in the future or that operating losses will not be
incurred from such operations. In addition, there are certain risks inherent in
doing business in international markets, such as:
o changes in regulatory requirements, tariffs and other trade barriers,
o fluctuations in currency exchange rates,
o potentially adverse tax consequences,
o difficulties in managing or overseeing foreign operations, and
o differences in consumer preferences and requirements in different
markets.
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We may not be able to protect our proprietary rights and we may infringe the
proprietary rights of others
Proprietary rights are important to our success and competitive
position. In 1996, we were issued a United States trademark registration for our
former SportsLine USA logo. We have applied to register in the United States a
number of marks, several of which include the term "SportsLine." We have filed
applications to register "SportsLine" marks in Australia, the United Kingdom and
other countries. We can not assure you that we will be able to secure adequate
protection for these trademarks in the United States or in foreign countries.
Although we seek to protect our proprietary rights, our actions may be
inadequate to protect any trademarks and other proprietary rights or to prevent
others from claiming violations of their trademarks and other proprietary
rights. In addition, effective copyright and trademark protection may be
unenforceable or limited in certain countries, and the global nature of the
Internet makes it impossible to control the ultimate destination of our work. We
also license content from third parties and it is possible that we could become
subject to infringement actions based upon the content licensed from those third
parties. We generally obtain representations as to the origin and ownership of
such licensed content; however, this may not adequately protect us. Any of these
claims, with or without merit, could subject us to costly litigation and divert
the attention of our technical and management personnel.
Our business is at risk of system failures, delays and inadequacy
The performance of our Web sites is critical to our reputation and
ability to attract and retain users, advertisers and members. Services based on
sophisticated software and computer systems often encounter development delays
and the underlying software may contain undetected errors or failures when
introduced. Any system error or failure that causes interruption in availability
or an increase in response time could result in a loss of potential or existing
users, advertisers or members and, if sustained or repeated, could reduce the
attractiveness of our Web sites to users and advertisers. A sudden and
significant increase in the number of users of our Web sites also could strain
the capacity of the software, hardware or telecommunications systems we deploy,
which could lead to slower response time or system failures. In addition, if the
number of Web pages or users of our Web sites increases substantially, our
hardware and software infrastructure may not be able to adequately handle the
increased demand. Our operations also are dependent upon receipt of timely feeds
and computer downloads from content providers, and any failure or delay in the
transmission or receipt of such feeds and downloads, whether on account of our
system failure, our content providers, the public network or otherwise, could
disrupt our operations. Any failure or delay that causes interruptions in our
operations could have a material adverse effect on our business, results of
operations and financial condition.
Our success is dependent on our key personnel
Our future success depends, in part, upon the continued service of our
senior management and other key personnel. Although we are the beneficiary of a
key man life insurance policy covering Michael Levy, our President and Chief
Executive Officer, and in June 1998 we entered into an employment agreement with
Mr. Levy which continues in effect through December 31, 2003, the loss of his
services or the services of one or more of our other executive officers or key
employees could have a material adverse effect on our business, results of
operations and financial condition. Our future success also depends on our
continuing ability to attract and retain highly qualified technical, editorial
and managerial personnel. Competition for such personnel is intense, and we
have, at times, experienced difficulties in attracting the desired number of
such individuals.
Our business depends on the growth of the Internet
Our market is new and rapidly evolving. Our success is highly dependent
upon continued growth in the use of the Internet generally and, in particular,
as a medium for advertising, information services and commerce. Internet usage
may be inhibited for a number of reasons, such as:
o the Internet infrastructure may not be able to support the demands
placed on it, and its performance and reliability may decline as usage
grows,
o security and authentication concerns with respect to the transmission
over the Internet of confidential information, such as credit card
numbers, and attempts by unauthorized computer users, so-called
hackers, to penetrate online security systems,
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o privacy concerns, including those related to the ability of Web sites
to gather user information without the user's knowledge or consent,
and
o the lack of availability of cost-effective, high-speed services.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth or its performance or
reliability may decline. In addition, Web sites may from time to time experience
interruptions in service as a result of outages and other delays occurring
throughout the Internet network infrastructure. If these outages or delays
frequently occur in the future, Internet usage, as well as usage of our Web
sites, could be adversely affected.
Adoption of the Internet as an advertising medium is uncertain
Our business, results of operations and financial condition would be
materially adversely affected if the Internet advertising market develops more
slowly than we expect or if we are unsuccessful in increasing our advertising
revenues. We derive a substantial portion of our revenue from the sale of
advertisements on our Web sites. Since the Internet advertising market is new
and rapidly evolving, we cannot yet gauge its effectiveness as compared to
traditional advertising media.
The adoption of Internet advertising, particularly by those entities
that have historically relied upon traditional media for advertising, requires
the acceptance of a new way of conducting business, exchanging information and
advertising products and services. Advertisers that have traditionally relied
upon other advertising media may be reluctant to advertise on the Internet.
These businesses may find Internet advertising to be less effective than
traditional advertising media for promoting their products and services. Many
potential advertisers have little or no experience using the Internet for
advertising purposes. Consequently, they may allocate only limited portions of
their advertising budgets to Internet advertising.
Advertisers may not advertise on our Web sites or may pay less for
advertising on our Web sites if they do not believe that they can reliably
measure the effectiveness of Internet advertising or the demographics of the
user viewing their advertisements. We use both internal measurements and
measurements provided to us by third parties. If these third parties are unable
to continue to provide these services, we would have to perform them ourselves
or obtain them from another provider. This could cause us to incur additional
costs or cause interruptions in our business while we are replacing these
services. In addition, we are implementing additional systems designed to record
demographic data on our users. If we do not implement these systems
successfully, we may not be able to accurately evaluate the demographic
characteristics of our users. Moreover, "filter" software programs that limit or
prevent advertising from being delivered to an Internet user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising.
To the extent that minimum guaranteed impression levels are not met
ratably over the contract period, we defer recognition of the corresponding
pro-rata portion of the revenues related to such unfulfilled obligation until
the guaranteed impression levels are achieved. Advertising based on impressions,
or the number of times an advertisement is delivered to users, comprises
virtually all of our current revenues. To the extent that minimum impression
levels are not achieved for any reason, we may be required to provide additional
impressions after the contract term, which would reduce our advertising
inventory.
Our revenues could be adversely affected if we are unable to adapt to
other Internet advertising pricing models that are adopted as industry standard.
It is difficult to predict which, if any, pricing models for Internet
advertising will emerge as the industry standard. This makes it difficult to
project our future advertising rates and revenues.
We may not be able to adapt as Internet technologies and customer demands
continue to evolve
To be successful, we must adapt to rapidly changing Internet
technologies by continually enhancing our Web sites and introducing new services
to address our customers' changing demands. We could incur substantial costs if
we need to modify our services or infrastructure in order to adapt to changes
affecting providers of Internet services. Our business, results of operations
and financial condition could be materially adversely affected if we incurred
significant costs to adapt, or cannot adapt, to these changes.
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Concerns regarding security of transactions and transmitting confidential
information over the Internet
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. We rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication necessary to effect secure transmission of
confidential information. We cannot assure you that advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments will not result in a compromise or breach of the algorithms we use
to protect customer transaction data. If any such compromise of our security
were to occur it could have a material adverse effect on our business, results
of operations and financial condition. If someone is able to circumvent our
security measures, such person could misappropriate proprietary information or
cause interruptions in our operations. We may be required to expend significant
capital and other resources to protect against the threat of such security
breaches or to alleviate problems caused by such breaches. Concerns over the
security of Internet transactions and the privacy of users may also inhibit the
growth of the Internet generally, and the Web in particular, especially as a
means of conducting commercial transactions. To the extent that our activities
or the activities of third party contractors involve the storage and
transmission of proprietary information, such as credit card numbers, security
breaches could expose us to a risk of loss or litigation and possible liability.
We cannot assure you that our security measures will prevent security breaches
or that failure to prevent such security breaches would not have a material
adverse effect on our business, results of operations and financial condition.
Regulatory and legal uncertainties could harm our business
Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws, could decrease the demand for
our service, increase our cost of doing business or otherwise have a material
adverse effect on our business, results of operations and financial condition.
There is, and will be, an increasing number of laws and regulations pertaining
to the Internet. These laws or regulations may relate to liability for
information retrieved from or transmitted over the Internet, online content
regulation, user privacy, taxation and the quality of products and services.
Moreover, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing.
Our contests and sweepstakes may be subject to state and federal laws
governing lotteries and gambling. We seek to design our contest and sweepstakes
rules to fall within exemptions from such laws and restricts participation to
individuals over 18 years of age who reside in jurisdictions within the United
States and Canada in which the contests and sweepstakes are lawful. We cannot
assure you that our contests and sweepstakes will be exempt from such laws or
that the applicability of such laws to us would not have a material adverse
effect on our business, results of operations and financial condition.
We may be liable for the content we make available on the Internet
We may be subject to legal claims relating to the content we make
available on our Web sites, or the downloading and distribution of such content.
For example, persons may bring claims against us if material that is
inappropriate for viewing by young children can be accessed from our Web sites.
Claims could also involve such matters as defamation, invasion of privacy and
copyright infringement. Providers of Internet products and services have been
sued in the past, sometimes successfully, based on the content of material.
Although we carry general liability insurance, our insurance may not cover
potential claims of this type or may not be adequate to cover all costs incurred
in defense of potential claims or to indemnify us for all liability that may be
imposed. Any costs or imposition of liability that is not covered by insurance
or in excess of insurance coverage could have a material adverse effect on our
business, results of operations and financial condition. Implementing measures
to reduce our exposure to this liability may require us to spend substantial
resources and limit the attractiveness of our service to users.
We may not be able to acquire or maintain effective Web addresses
We hold rights to various Web domain names, including
"cbs.sportsline.com," "golfweb.com" and "vegasinsider.com," among others.
Governmental agencies typically regulate domain names. These regulations are
subject to change. We may not be able to acquire or maintain appropriate domain
names in all countries in which
32
<PAGE>
we do business. Furthermore, regulations governing domain names may not protect
our trademarks and similar proprietary rights. We may be unable to prevent third
parties from acquiring domain names that are similar to, infringe upon or
diminish the value of our trademarks and other proprietary rights.
The price of our common stock is highly volatile
The trading price of our common stock fluctuates significantly. For
example, during the 52-week period ended December 31, 1999, the reported closing
price of our common stock on the Nasdaq National Market was as high as $63.25
and as low as $17.00. The trading price of the common stock may fluctuate in
response to a number of events and factors, such as:
o quarterly variations in operating results,
o announcements of technological innovations,
o new services, products and strategic developments by us or our
competitors,
o changes in financial estimates or recommendations by securities
analysts, and
o the operating and stock price performance of other companies.
In addition, the stock market has experienced volatility that has
particularly affected the market prices of equity securities of companies within
certain industry groups such as technology companies and Internet-related
companies in particular, and that often has been unrelated to the operating
performance of such companies. These broad market fluctuations may materially
adversely affect the trading price of our common stock, regardless of our
operating performance.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's exposure to market rate risk for changes in interest
rates relates primarily to the Company's investment portfolio. The Company has
not used derivative financial instruments in its investment portfolio. The
Company invests its excess cash in debt instruments of the U.S. Government and
its agencies, and in high-quality corporate issuers and, by policy, limits the
amount of credit exposure to any one issuer. The Company protects and preserves
its invested funds by limiting default, market and reinvestment risk.
Investments in both fixed rate and floating rate interest earning
instruments carries a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors, the Company's future investment income
may fall short of expectations due to changes in interest rates or the Company
may suffer losses in principal if forced to sell securities which have declined
in market value due to changes in interest rates.
33
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Certified Public Accountants....................... 35
Consolidated Balance Sheets as of December 31, 1999 and 1998 ............ 36
Consolidated Statements of Operations
for years ended December 31, 1999, 1998 and 1997................. 37
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1999, 1998 and 1997................ 38
Consolidated Statements of Cash Flows
for the years ended December 31, 1999, 1998 and 1997................ 39
Notes to Consolidated Financial Statements............................... 40
34
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To SportsLine.com, Inc.:
We have audited the accompanying consolidated balance sheets of
SportsLine.com, Inc. (a Delaware corporation), formerly SportsLine USA, Inc.,
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SportsLine.com, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with auditing standards generally accepted in
the United States.
Arthur Andersen LLP
Fort Lauderdale, Florida,
January 24, 2000.
35
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ........................................................... $ 45,968 $ 31,684
Marketable securities ............................................................... 24,953 27,391
Deferred advertising and content costs .............................................. 19,530 5,413
Accounts receivable, net ............................................................ 11,875 5,051
Prepaid expenses and other current assets ........................................... 14,657 5,181
--------- ---------
Total current assets ............................................................ 116,983 74,720
RESTRICTED CASH EQUIVALENTS ............................................................ 489 13,038
NONCURRENT MARKETABLE SECURITIES ....................................................... 50,052 26,167
LICENSING RIGHTS ....................................................................... 4,533 --
NONCURRENT DEFERRED ADVERTISING -AOL ................................................... 3,682 13,417
NONCURRENT DEFERRED ADVERTISING AND CONTENT - CBS ...................................... 28,716 --
PROPERTY AND EQUIPMENT, net ............................................................ 10,351 5,367
GOODWILL ............................................................................... 42,823 1,931
OTHER ASSETS ........................................................................... 13,832 3,015
--------- ---------
$ 271,461 $ 137,655
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................................................... $ 3,296 $ 2,545
Accrued liabilities ................................................................. 12,128 5,334
Current portion of capital lease obligations ........................................ 170 265
Deferred revenue .................................................................... 4,160 2,067
--------- ---------
Total current liabilities ...................................................... 19,754 10,211
CONVERTIBLE SUBORDINATED NOTES ......................................................... 19,608 --
CAPITAL LEASE OBLIGATIONS, net of current portion ...................................... -- 207
ACCRUED GUARANTEE OBLIGATION ........................................................... -- 8,274
--------- ---------
Total liabilities .............................................................. 39,362 18,692
--------- ---------
MINORITY INTEREST ...................................................................... 7,443 --
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none
issued and outstanding as of December 31, 1999 and 1998, respectively ........... -- --
Common stock, $0.01 par value, 50,000,000 shares authorized,
25,358,788 and 20,300,785 issued and outstanding as of
December 31, 1999 and 1998, respectively ....................................... 254 203
Additional paid-in capital .......................................................... 333,879 211,061
Accumulated other comprehensive income .............................................. 7 --
Accumulated deficit ................................................................. (109,484) (92,301)
--------- ---------
Total shareholders' equity ...................................................... 224,656 118,963
--------- ---------
$ 271,461 $ 137,655
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
36
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUE ............................................................... $ 60,278 $ 30,551 $ 12,014
COST OF REVENUE ....................................................... 34,078 17,231 10,431
------------ ------------ ------------
GROSS MARGIN .......................................................... 26,200 13,320 1,583
------------ ------------ ------------
OPERATING EXPENSES:
Product development ................................................. 1,587 1,313 2,541
Sales and marketing ................................................. 36,452 20,481 14,019
General and administrative .......................................... 20,063 13,159 8,305
Depreciation and amortization ....................................... 25,806 17,104 11,689
Other non-recurring charge for settlement of litigation ............. -- 1,100 --
------------ ------------ ------------
Total operating expenses .................................... 83,908 53,157 36,554
------------ ------------ ------------
LOSS FROM OPERATIONS .................................................. (57,708) (39,837) (34,971)
INTEREST EXPENSE ...................................................... (4,392) (118) (146)
INTEREST AND OTHER INCOME, net ........................................ 8,976 4,446 940
------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY GAIN ......................................... (53,124) (35,509) (34,177)
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF
DEBT (Note 4) ....................................................... 36,027 -- --
------------ ------------ ------------
NET LOSS .............................................................. $ (17,097) $ (35,509) $ (34,177)
============ ============ ============
NET LOSS PER SHARE - BASIC AND
DILUTED .............................................................
Loss per share before extraordinary gain ........................... $ (2.31) $ (1.94) $ (3.08)
Extraordinary gain (Note 4) ........................................ 1.57 -- --
------------ ------------ ------------
Net loss per share - basic and diluted ............................. $ (0.74) $ (1.94) $ (3.08)
============ ============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING -
BASIC AND DILUTED ................................................... 23,018,224 18,305,927 11,107,534
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
37
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
SERIES A, B AND C
CONVERTIBLE PREFERRED ACCUMULATED
STOCK COMMON STOCK ADDITIONAL OTHER
--------------------- ---------------- PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME DEFICIT LOSS
------ ------ ------ ------ ------- ------------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 ....... 14,496,109 $ 145 3,014,288 $ 30 $ 37,866 $ -- $ (22,615)
Net proceeds from issuance of
common stock ................... -- -- 4,398,494 44 35,521 -- --
Proceeds from exercise of
common stock options ........... -- -- 42,521 -- 34 -- --
Proceeds from exercise of
common stock warrants .......... -- -- 960,000 10 7,910 -- --
Conversion of preferred stock
into common stock ..............(14,496,109) (145) 5,798,434 58 87 -- --
Non-cash issuance of common
stock and common stock warrants
pursuant to CBS agreement ........ -- -- 752,273 7 8,294 -- --
Non-cash issuance of common
stock and common stock
warrants pursuant to
consulting and advertising ..... -- -- 53,210 1 3,915 -- --
agreements
Net loss and comprehensive
loss ........................... -- -- -- -- -- -- (34,177) $(34,177)
----------- ------- ---------- -------- --------- ------ --------- =========
Balance, December 31, 1997 ....... -- -- 15,019,220 150 93,627 -- (56,792)
Net proceeds from issuance of
common stock ................... -- -- 2,288,430 23 80,818 -- --
Proceeds from exercise of
common stock options ........... -- -- 317,203 3 881 -- --
Proceeds from exercise of
common stock warrants ............ -- -- 236,189 2 1,445 -- --
Proceeds from issuance of
common stock pursuant to
employee stock purchase
plan ........................... -- -- 329,085 3 2,279 -- --
Non-cash issuance of common
stock pursuant to purchase ..... -- -- 46,924 1 1,668 -- --
of International Golf
Outlet
Non-cash issuance of common
stock and common stock warrants
pursuant to AOL agreement ........ -- -- 550,000 6 7,619 -- --
Proceeds from exercise of CBS
warrants ....................... -- -- 760,000 8 9,492 -- --
Non-cash issuance of common
stock and common stock
warrants pursuant to CBS
agreement ...................... -- -- 735,802 7 11,890 -- --
Non-cash issuance of common
stock and common stock
warrants pursuant to
consulting agreements and
purchase of service
mark ........................... -- -- 17,932 -- 1,342 -- --
Net loss and comprehensive
loss ........................... -- -- -- -- -- (35,509) $(35,509)
----------- ------- ---------- -------- -------- ------ ---------- ========
Balance, December 31, 1998 ....... -- -- 20,300,785 203 211,061 -- (92,301)
Non-cash issuance of common
stock pursuant to purchase ..... -- -- 450,000 5 8,995 -- --
of advertising
Proceeds from exercise of
common stock options ........... -- -- 644,913 6 2,984 -- --
Proceeds from exercise of
common stock warrants .......... -- -- 949,434 10 3,974 -- --
Proceeds from issuance of
common stock pursuant to
employee stock purchase plan ... -- -- 101,561 1 1,553 -- --
Non-cash issuance of warrants
pursuant to PGA Tour agreement . -- -- -- -- 2,105 -- --
Equity activity of
subsidiary, net ................ -- -- -- -- 4,936 -- --
Proceeds from exercise of CBS
warrants ....................... -- -- 380,000 4 7,596 -- --
Non-cash issuance of common stock
and common stock warrants pursuant
to CBS agreement ................. -- -- 1,611,925 16 59,672 -- --
Non-cash issuance of common
stock pursuant to
acquisition of businesses ...... -- -- 920,170 9 31,003 -- (86)
Comprehensive loss:
Net loss ......................... -- -- -- -- -- -- (17,097) $(17,097)
Cumulative translation
adjustment ..................... -- -- -- -- -- 7 -- 7
---------
Comprehensive loss................ $(17,090)
----------- ------- ---------- -------- --------- ------ --------- =========
Balance, December 31, 1999 ....... -- $ -- 25,358,788 $ 254 $ 333,879 $ 7 $(109,484)
=========== ======= ========== ======== ========= ====== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
38
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................. $ (17,097) $ (35,509) $ (34,177)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.......................................... 25,806 17,104 11,689
Provision for doubtful accounts........................................ 341 167 72
Minority interest in operations of consolidated subsidiary............. (372) -- --
Loss on disposal of assets............................................. 7 83 --
Extraordinary gain on liquidation of debt.............................. (36,027) -- --
Changes in operating assets and liabilities:
Accounts receivable................................................... (6,927) (3,057) (1,614)
Prepaid expenses and other assets..................................... (4,121) (6,929) (1,832)
Accounts payable...................................................... (376) 543 1,173
Accrued liabilities................................................... 6,963 2,076 1,632
Deferred revenue...................................................... 2,093 227 1,009
----------- ----------- -----------
Net cash used in operating activities.................................. (29,710) (25,295) (22,048)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities, net................................... (21,447) (52,052) (1,506)
Purchases of property and equipment, net.................................. (8,627) (3,781) (2,431)
Acquisition of businesses................................................. (8,165) (353) --
Purchase of licensing rights.............................................. (8,500) -- --
Purchase of service mark.................................................. -- (100) --
Net change in restricted cash............................................. 12,549 (12,899) --
----------- ------------ -----------
Net cash used in investing activities................................. (34,190) (69,185) (3,937)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock and exercise of
common stock warrants and option .................................... 16,128 94,955 43,519
Net proceeds from issuance of preferred stock of subsidiary............... 7,500 -- --
Proceeds from issuance of convertible subordinated notes, net of costs.... 145,443 -- --
Repurchase of convertible subordinated notes, net of costs................ (90,585) -- --
Proceeds from long-term borrowings........................................ -- -- 353
Repayment of long-term borrowings......................................... -- (682) (384)
Repayment of capital lease obligations.................................... (302) (591) (271)
------------ ------------ ------------
Net cash provided by financing activities............................. 78,184 93,682 43,217
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents.................................................... 14,284 (798) 17,232
CASH AND CASH EQUIVALENTS, beginning of year................................ 31,684 32,482 15,250
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year...................................... $ 45,968 $ 31,684 $ 32,482
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash issuance of common stock and common stock warrants pursuant to
CBS agreement......................................................... $ 59,688 $ 11,897 $ 8,301
=========== =========== ===========
Non-cash issuance of common stock warrants pursuant to purchase of
advertising........................................................... $ 9,000 $ -- $ --
=========== =========== ===========
Non-cash issuance of common stock warrants pursuant to PGA Tour
agreement............................................................. $ 2,105 $ -- $ --
=========== =========== ===========
Non-cash issuance of common stock and common stock warrants pursuant to
AOL agreement......................................................... $ -- $ 7,625 $ --
=========== =========== ===========
Non-cash issuance of common stock warrants pursuant to consulting
agreements and purchase of service mark............................... $ -- $ 1,342 $ 3,915
=========== =========== ===========
Non-cash issuance of common stock warrants pursuant to acquisition of
businesses............................................................ $ 30,926 $ 1,650 $ --
=========== =========== ===========
Equity activity of subsidiary........................................... $ 4,936 $ -- $ --
=========== =========== ===========
Equipment acquired under capital leases................................. $ -- $ 104 $ 670
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................................. $ 2,384 $ 109 $ 176
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
39
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(1) NATURE OF OPERATIONS:
SportsLine.com, Inc. ("SportsLine.com", formerly SportsLine USA, Inc.)
was incorporated on February 23, 1994 and began recognizing revenue from its
operations in September 1995. The Company is at the leading edge of media
companies, providing Internet sports content, community and e-commerce on a
global basis. SportsLine.com's content includes more than 100,000,000 pages of
multimedia sports information, entertainment and merchandise. In addition,
Sports.com Limited ("Sports.com"), a majority owned subsidiary of
SportsLine.com, Inc., launched the first of its sites in August 1999,
Football.Sports.com, following in September with Rugby.Sports.com and
France.Sports.com. Sports.com now covers all major sports in Europe along with
producing additional country specific local language sites for Germany, Italy
and Spain. The Company's flagship Internet sports service (www.sportsline.com )
was renamed CBS SportsLine in March 1997 as part of an exclusive promotional and
content agreement with CBS Corporation ("CBS"). SportsLine.com produces the
official league Web sites for Major League Baseball, the PGA Tour and NFL Europe
League, and serves as the primary sports content provider for America Online,
Netscape and Excite.
The Company distributes a broad range of up-to-date news, scores, player
and team statistics and standings, photos and audio and video clips obtained
from CBS and other leading sports news organizations and the Company's superstar
athletes; offers instant odds and picks; produces and distributes entertaining,
interactive and original programming such as editorials and analyses from its
in-house staff and freelance journalists; produces and offers contests, games,
and fantasy league products; and sells sports-related merchandise and
memorabilia.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of SportsLine.com and its subsidiaries (the "Company").
On January 29, 1998, the Company acquired all of the outstanding
capital stock of GolfWeb in exchange for approximately 844,490 shares of Common
Stock and the assumption of stock options and warrants to purchase up to
approximately 53,300 additional shares of Common Stock. The acquisition was
accounted for under the "pooling-of-interests" accounting method. Accordingly,
the Company's consolidated financial statements include the accounts of GolfWeb
for all years presented.
The Company acquired International Golf Outlet, Inc. in June 1998 and
accounted for this transaction using the purchase method of accounting. The
purchase resulted in goodwill of $2,048. In August 1999 additional stock was
issued for meeting revenue and other goals which increased goodwill in the
amount of $249. Such goodwill is being amortized over an estimated life of ten
years.
The Company acquired Golf Club Trader, Inc. in May 1999. The purchase
was accounted for using the pooling-of-interests method of accounting; however,
given Golf Club Trader, Inc.'s immateriality, historical results of the Company
were not restated and the results of Golf Club Trader, Inc. are included herein
beginning April 1, 1999.
The Company acquired several other businesses during 1999 in exchange for an
aggregate of $2,373 cash and $2,555 of common stock (124,322 shares), and
accounted for these transactions using the purchase method of accounting. The
purchases resulted in goodwill of $4,946, which will be amortized over an
estimated life of seven to ten years.
40
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
Sports.com Limited ("Sports.com", formerly known as SportsLine Europe
Limited) was formed in May 1999. In May 1999, Sports.com purchased Sportsweb,
the Company accounted for this transaction using the purchase method of
accounting which resulted in goodwill of $2,420. In June 1999, Sports.com
acquired the sports division of Infosis Group. The Company also accounted for
this transaction using the purchase method of accounting resulting in goodwill
of $2,526. In connection with the initial capitalization of Sports.com, a
liability of $7,443 has been reflected in the Company's consolidated balance
sheet to reflect the minority interest in Sports.com.
The Company acquired Daedalus Worldwide, Inc. in December 1999. The
transaction was accounted for using the purchase method of accounting. The
purchase resulted in goodwill of $31,880 which will be amortized over an
estimated life of seven years.
The acquisitions accounted for using the purchase method have been
allocated to the assets purchased and liabilities assumed based upon their fair
values at the dates of acquisition. The portions of the purchase prices being
allocated to goodwill are being amortized over a straight-line basis over seven
to ten years. The acquired companies are included in the Company's consolidated
financial statements from the dates of acquisition. The purchase price for the
year ended December 31, 1999 is allocated as follows:
Tangible Assets (includes cash acquired of $19) $ 1,073
Intangible Assets 41,772
Liabilities (1,127)
--------
Total Purchase Price $ 41,718
========
The following unaudited pro forma financial information presents the
consolidated operations of the Company and the acquired companies as if the
acquisitions had occurred at the beginning of the periods presented,
respectively, after giving effect to certain adjustments including increased
amortization of goodwill related to the acquisitions. The unaudited pro forma
information is provided for informational purposes only and should not be
construed to be indicative of the Company's consolidated results of operations
had the acquisitions been consummated on the dates assumed and do not project
the Company's results of operations for any future period:
1999 1998
---- ----
Revenue $ 61,891 $ 34,740
Net loss $(22,785) $(41,591)
Diluted net loss per share $ (0.96) $ (2.19)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid temporary cash investments with
original maturities of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities includes highly liquid investments with original
maturities in excess of three months but less than one year. Noncurrent
marketable securities are those investments with original maturities in excess
of one year. Such marketable securities are classified as "held to maturity"
and, accordingly, are carried at cost which approximates market value as of
December 31, 1999 and 1998.
41
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
Investments at December 31 are as follows:
December 31,
1999 1998
---- ----
U.S. Government Agencies........................ $61,644 $36,370
Corporate Bonds................................. 13,361 17,188
------- -------
Total Marketable Securities..................... 75,005 53,558
Less: Current Marketable Securities............ (24,953) (27,391)
------- -------
Noncurrent Marketable Securities................ $50,052 $26,167
======= =======
RESTRICTED CASH
Restricted cash includes cash and cash equivalents pertaining to
restricted certificates of deposit for two landlords and a supplier as discussed
in Note 8.
DEFERRED ADVERTISING AND CONTENT COSTS
Deferred advertising and content costs relates to unamortized costs under
the CBS and AOL agreements discussed in Note 5. Such costs are capitalized as
the equity instruments are issued. These costs are then charged to operations as
depreciation and amortization as the Company receives advertising and other
benefits under the agreements.
LICENSING AND CONSULTING AGREEMENTS
The cost of license and consulting agreements, which is primarily a
result of issuances of warrants to purchase common stock (see Note 6), is being
amortized using the straight-line method over the term of the related agreements
(from one to ten years) beginning in August 1995, when cbs.sportsline.com first
became commercially available. Such costs totaled approximately $18,602, $5,562
and $4,090 for the years ended December 31, 1999, 1998 and 1997, respectively.
Accumulated amortization on such amounts was approximately $4,365, $2,089 and
$1,516 at December 31, 1999, 1998 and 1997, respectively. The current portion of
such amounts is reflected in prepaid expenses and other current assets and the
long-term portion in other assets in the accompanying consolidated balance
sheets. Amortization expense under these agreements amounted to approximately
$3,134, $1,643 and $1,316 for the years ended December 31, 1999, 1998 and 1997,
respectively, and is included in depreciation and amortization expense in the
accompanying consolidated statements of operations.
42
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is carried at historical cost and is being
depreciated and amortized using the straight-line method over the shorter of the
estimated useful life of the asset or the lease period.
Maintenance and repairs are charged to expense when incurred;
betterments are capitalized. Upon the sale or retirement of assets, the cost and
accumulated depreciation are removed from the account and any gain or loss is
recognized.
ACCRUED LIABILITIES
Accrued liabilities at December 31, 1999 and 1998 are as follows:
December 31,
-------------------------
1999 1998
---- ----
Revenue sharing $2,849 $1,111
Professional fees 1,392 412
Advertising costs 957 620
Health insurance 929 341
Payroll 897 --
Other 5,104 2,850
------- ------
$12,128 $5,334
======= ======
REVENUE RECOGNITION
Revenue recognition policies for advertising, e-commerce, membership
and premium services and content licensing are set forth below.
Advertising Revenue
Advertising revenue is derived from the sale of advertising on the
Company's Web sites. Advertising revenue is recognized in the period the
advertisement is displayed, provided that no significant Company obligations
remain and collection of the resulting receivable is probable. Company
obligations typically include guarantees of a minimum number of "impressions",
or times that an advertisement is viewed by users of the Company's Web sites.
Amounts received or billed for which impressions have not yet been delivered are
reflected as deferred revenue in the accompanying consolidated balance sheets.
E-Commerce Revenue
E-commerce revenue is derived from the sales of limited edition
memorabilia, licensed apparel, golf equipment and other sports-related products.
E-commerce revenue is recognized once the product has been shipped and payment
is assured.
Membership and Premium Services Revenue
In January 1999, the Company launched "SportsLine Rewards," a program
which offers bonus points to members for viewing pages and making purchases.
These points can be redeemed for discounts on merchandise, special events and
other premium items. For additional fees, members are also eligible to
participate in sports contests to win cash prizes and merchandise. The "Rewards"
program offers only yearly memberships and thus are recognized ratably over the
life of the membership agreement.
43
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
Revenue relating to monthly memberships is recognized in the month the
service is provided. Revenue relating to yearly memberships and sports contests
is recognized ratably over the life of the membership agreement or contest
period. Accordingly, amounts received for which services have not yet been
provided are reflected as deferred revenue in the accompanying consolidated
balance sheets.
Content Licensing Revenue
Content licensing revenue is derived from the licensing of certain of
the Company's content to third parties. Content licensing revenue is recognized
over the period of the license agreement as the Company delivers content.
Barter Transactions
The Company recognizes advertising and content licensing revenue as a
result of barter transactions primarily with certain other Internet-related
companies. Such revenue is recognized based on the fair value of the
consideration received, which generally consists of advertising displayed on the
other companies' Web sites. Barter revenue and the corresponding expense is
recognized in the period the advertising is displayed.
Revenue by Type
Revenue by type for the years ended December 31, 1999, 1998 and 1997 is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Advertising.................................. $29,970 $17,698 $ 6,329
E-commerce................................... 16,486 3,600 1,048
Membership and premium services.............. 5,629 5,032 2,701
Content licensing and other.................. 8,193 4,221 1,936
------- ------- -------
$60,278 $30,551 $12,014
======= ======= =======
</TABLE>
Barter transactions, in which the Company received advertising or other
services or goods in exchange for content or advertising on its Web sites,
accounted for approximately 17%, 19% and 19% of total revenue for the years
ended December 31, 1999, 1998 and 1997, respectively.
COST OF REVENUE
Cost of revenue consists primarily of content and royalty fees, cost of
merchandise sold, payroll and related expenses for the editorial and operations
staff, telecommunications and computer-related expenses for the support and
delivery of the Company's services. Royalty payments are paid to certain content
providers and technology and marketing partners based on membership levels
subject, in certain instances, to specified minimum amounts.
SALES AND MARKETING
Sales and marketing expense consists of salaries and related expenses,
advertising, marketing, promotional, business development, public relations
expenses and member acquisition costs. Member acquisition costs consist
primarily of the direct costs of member solicitation, including advertising on
other Web sites and Internet search engines and the cost of obtaining qualified
prospects from direct marketing programs and third parties. No indirect costs
are included in member acquisition costs. In accordance with American Institute
of Certified Public Accountants ("AICPA") Statement of Position, 93-7, Reporting
on Advertising Costs, the Company may in the
44
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
future capitalize such direct-response advertising costs if historical evidence
is available to indicate that the advertising results in a future benefit. Until
that time, all such costs are expensed as incurred. All other advertising and
marketing costs are charged to expense at the time the advertising takes place.
PER SHARE AMOUNTS
In February 1997, Statement of Financial Accounting Standards ("SFAS")
No. 128, Earnings Per Share, was issued. SFAS No. 128 simplifies the methodology
of computing earnings per share and requires the presentation of basic and
diluted earnings per share. The Company's basic and diluted earnings per share
are the same, since the Company's common stock equivalents are antidilutive. The
Company's previously outstanding convertible preferred stock was converted upon
completion of the Company's initial public offering ("IPO") in November 1997.
Accordingly, such shares have been reflected as common stock for all periods
prior to the IPO. SFAS No. 128 was adopted as of December 31, 1997.
Net loss per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares consist of the incremental common shares issuable upon
conversion of all convertible preferred stock (using the if-converted method)
and shares issuable upon exercise of stock options and warrants (using the
treasury stock method). There were approximately 7,711,000, 5,187,000 and
3,475,000 options and warrants outstanding at December 31, 1999, 1998 and 1997,
respectively, that could potentially dilute earnings per share in the future.
Such options and warrants were not included in the computation of diluted loss
per share because to do so would have been antidilutive for all periods
presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, primarily consisting of cash and
cash equivalents, marketable securities, accounts receivable, restricted cash
equivalents, accounts payable and Convertible Subordinated Notes, approximate
fair value due to their short-term nature and/or market rates of interest.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of cash and cash
equivalents, marketable securities and accounts receivable. The Company's cash
management and investment policies restrict investments to low risk,
highly-liquid securities and the Company performs periodic evaluations of the
credit standing of the financial institutions with which it deals. Accounts
receivable from customers outside the United States increased due to the
acquisition of the European subsidiary but are not material. The Company
performs ongoing credit evaluations and generally requires no collateral. The
Company maintains an allowance for doubtful accounts and such losses have not
been significant. The allowance for doubtful accounts amounted to $423 and $230
at December 31, 1999 and 1998, respectively, and its activity is as follows:
45
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
January 1 balance....................... $ 230 $ 87 $ 27
Provision for doubtful accounts....... 329 166 73
Write-off of bad debts................ (136) (23) (13)
----- ---- ----
December 31 balance.................. $ 423 $230 $ 87
===== ==== ====
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, was
issued. SFAS No. 121 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of the assets. SFAS No. 121 also addresses the accounting
for long-lived assets that are expected to be disposed of.
STOCK-BASED COMPENSATION
In October 1995, SFAS No. 123, Accounting for Stock-Based Compensation,
was issued. SFAS No. 123 allows either adoption of a fair value based method of
accounting for employee stock options and similar equity instruments or
continuation of the measurement of compensation cost relating to such plans
using the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. The
Company has elected to continue to use the intrinsic value based method.
Accordingly, pro forma disclosures required to be presented by SFAS No. 123 for
companies continuing to utilize the intrinsic value based method are presented
in Note 6.
SEGMENT REPORTING
The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information for the year ended December 31, 1998. SFAS
No. 131 establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and requires
those enterprises to report selected information about operating segments in
interim financial reports issued to stockholders.
Beginning in the third quarter of 1999, the Company began operating in
two segments. The following information is disclosed, per SFAS No. 131, based on
the method management uses to organize financial information for making
operating decisions and assessing performance. The Company currently has two
principal business segments: United States and Europe.
A summary of the segment financial information is as follows:
Year ended
December 31, 1999
-------------------
Total revenue:
United States $ 58,284
Europe 1,994
-------------------
$ 60,278
===================
Depreciation and amortization:
United States $ 24,809
Europe 997
-------------------
$ 25,806
===================
46
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
Loss from operations:
United States $(51,417)
Europe (6,291)
-------------------
$(57,708)
===================
Extraordinary gain on retirement of debt:
United States $ 36,027
Europe --
-------------------
$ 36,027
===================
Net loss before extraordinary gain:
United States $(47,026)
Europe (6,098)
-------------------
$(53,124)
===================
Total assets as of December 31, 1999:
United States $259,730
Europe 11,731
------------------
$271,461
==================
Capital Expenditures:
United States $ 7,346
Europe 1,281
------------------
$ 8,627
==================
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
during the year ended December 31, 1998. SFAS No. 130 establishes standards for
the reporting and display of comprehensive income (loss) and its components in a
full set of financial statements. The objective of SFAS No. 130 is to report
comprehensive income (loss), a measure of all changes in equity of an enterprise
that result from transactions and other economic events in a period, other than
transactions with owners. The Company has elected to disclose comprehensive
income (loss) in the consolidated statements of shareholders' equity.
In June 1999, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities-Deferral of FASB Statement No. 133. SFAS No. 137 defers for one year
the effective date of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 will now apply to all fiscal quarters of all
fiscal years beginning after June 15, 2000. SFAS No. 133 will require the
Company to recognize all derivatives on the balance sheet as either assets or
liabilities measured at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. The Company will adopt SFAS No. 133
effective for the year ended December 31, 2001. The Company believes that the
adoption of SFAS No. 133 will not have a material impact on its consolidated
financial statements, as it has entered into no derivative contracts and has no
current plans to do so in the future.
The Company adopted SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" effective January 1, 1999. SOP
98-1 establishes criteria for determining which costs of developing or obtaining
internal-use computer software should be charged to expense and which should be
capitalized. Such adoption did not have a material effect on the Company's
financial position or results of operations.
47
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(3) PROPERTY AND EQUIPMENT, NET:
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
Estimated December 31,
Useful Lives ------------------------------
(Years) 1999 1998
------- ---- ----
<S> <C> <C> <C>
Computer equipment 2-3 $ 17,015 $ 8,617
Furniture, fixtures and leasehold improvements 3-7 2,380 1,765
------------ ------------
19,395 10,382
Less-accumulated depreciation and amortization (9,044) (5,015)
------------- -------------
$ 10,351 $ 5,367
============ ============
</TABLE>
Included in property and equipment is equipment acquired under capital
leases amounting to approximately $1,245 for both December 31, 1999 and 1998
less accumulated amortization amounting to $1,051 and $800, respectively.
Depreciation and amortization expense on property and equipment amounted to
approximately $4,085, $2,606 and $1,815 for the years ended December 31, 1999,
1998 and 1997, respectively.
(4) DEBT:
In March 1999, the Company completed an offering of $150 million
aggregate principal amount of 5% Convertible Subordinated Notes due 2006 (the
"Convertible Subordinated Notes"). The Convertible Subordinated Notes are
convertible, at the holder's option, into the Company's common stock at an
initial conversion rate of 15.355 shares of common stock per $1000 principal
amount of Convertible Subordinated Notes (equivalent to a conversion price of
approximately $65.125 per share), subject to adjustment in certain events.
Interest on the Convertible Subordinated Notes is payable semiannually on April
1 and October 1 of each year, commencing October 1, 1999. The Convertible
Subordinated Notes are unsecured and are subordinated to all existing and future
Senior Indebtedness (as defined in the Convertible Subordinated Notes indenture)
of the Company. The Convertible Subordinated Notes may not be redeemed by the
Company prior to April 2, 2002. Thereafter, the Convertible Subordinated Notes
are redeemable at the option of the Company, in whole or part, at the redemption
prices set forth in the Convertible Subordinated Notes indenture. As of December
31, 1999, the Company had no material indebtedness outstanding that would have
constituted Senior Indebtedness. The Indenture does not limit the amount of
additional indebtedness, including Senior Indebtedness, which the Company can
create, incur, assume, or guarantee, nor does the Indenture limit the amount of
indebtedness which any subsidiary of the Company can create, incur, assume or
guarantee.
In August 1999, the Company repurchased $60,000 of its Convertible
Subordinated Notes for approximately $36,400, and as a result, the Company
recognized an extraordinary gain of $21,800, net of amortized debt issuance
costs. In October 1999, the Company repurchased $70,300 of its Convertible
Subordinated Notes for approximately $53,700, and as a result, the Company
recognized an extraordinary gain of approximately $14,200, net of expenses and
unamortized debt issuance costs. Convertible Subordinated Notes in an aggregate
principal amount of approximately $20,000 remain outstanding as of December 31,
1999.
In July 1997, the Company entered into a $2,500 equipment line of
credit with a leasing company. The equipment line carries interest at the rate
of 7.75% plus 1/4%. Borrowings are payable monthly over 36 months. As of
December 31, 1999, $170 was outstanding.
48
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(5) SHAREHOLDERS' EQUITY:
Upon completion of the Company's IPO on November 13, 1997, the
convertible preferred stock converted into common stock at the ratio of 0.4
shares of common stock for each share of preferred stock. All then existing
classes of preferred stock ceased to be authorized, and were replaced by the
preferred stock discussed below.
On April 14, 1997, the Board of Directors authorized the filing of an
Amended and Restated Certificate of Incorporation which became effective upon
the completion of the IPO. Pursuant to the terms of the Amended and Restated
Certificate of Incorporation, the Board of Directors authorized the issuance of
up to an aggregate of 1,000,000 shares of preferred stock in one or more series
and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rates, conversion rights, voting rights, terms
of redemption (including sinking fund provisions), redemption price or
prices,liquidation preferences and the number of shares constituting any series
or designations of such series. The Company has no present plans to issue any
shares of preferred stock.
In March 1997, the Company entered into a five-year agreement with CBS
Inc. ("CBS"). In consideration of the advertising and promotional efforts of CBS
and its license to the Company of the right to use certain CBS logos and
television-related sports content, CBS will receive 3,100,000 shares of common
stock over the term of the agreement (752,273, 735,802, 558,988, 567,579 and
485,358 shares in 1997, 1998, 1999, 2000 and 2001, respectively). CBS will also
have the right to receive 60% of the Company's advertising revenue on
cbs.sportsline.com pages related to certain "signature events" (such as the NCAA
Men's Basketball Tournament, the 1998 Winter Olympics, U.S. Open Tennis, PGA
Tour events and the Daytona 500) and 50% of the Company's advertising revenue on
other cbs.sportsline.com pages containing CBS television-related sports content.
The CBS agreement also provides that the Company shall issue to CBS on the first
business day of each contract year warrants to purchase 380,000 shares of common
stock at per share exercise prices ranging from $10 in 1997 to $30 in 2001. Such
warrants are exercisable at any time during the contract year in which they are
granted. The value of the advertising and content will be recorded annually in
the consolidated balance sheets as deferred advertising and content costs and
amortized to depreciation and amortization expense over each related contract
year. Amounts amortized to expense in 1999, 1998 and 1997 totaled $14,096,
$12,002 and $7,835, respectively, consisting of amortization relating to
advertising of $11,000 for both 1999 and 1998 and $7,000 relating to 1997,
content of $518 for both 1999 and 1998 and $431 for 1997, and expense
related to warrants of $2,578, $484 and $404, respectively, and are included in
depreciation and amortization in the accompanying consolidated statements of
operations for the years ended December 31, 1999, 1998 and 1997.
In February 1999, the Company amended and extended its agreement with
CBS. In consideration of additional promotional and advertising opportunities
the Company agreed to accelerate the issuance of the remaining shares that were
formerly to be issued in 2000 and 2001 (567,579 and 485,358 shares),
respectively, issued additional warrants to purchase 1,200,000 shares of common
stock at per share exercise prices ranging from $23 in 1999 to $45 in 2001 and
issue additional shares of common stock valued at $100 million between 2002 and
2006. Additionally, the revenue sharing provisions relating to the 60% share for
signature events and the 50% share for CBS content pages were eliminated and
replaced by a new revenue sharing formula which is calculated on a broader
revenue base and at a lower rate. Total annual amounts to be amortized to
expense in accordance with the CBS agreement and amendment are as follows:
2000 $ 17,286
2001 17,286
2002 22,286
2003 22,286
2004 22,286
2005 22,286
2006 22,286
--------------
$ 146,002
==============
49
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(5) SHAREHOLDERS' EQUITY:--(CONTINUED)
In November 1997, the Company completed an underwritten initial public
offering ("IPO") of 3,500,000 shares of Common Stock. Of the 3,500,000 shares
sold in the IPO, 2,693,549 shares were sold at a price to the public of $8.00
per share and 672,043 shares and 134,408 shares were sold to Intel Corporation
and Mitsubishi Corporation, respectively, at a price of $7.44 per share. In
December 1997, the underwriters exercised their over-allotment option to
purchase an additional 525,000 shares of Common Stock. The total net proceeds to
the Company from the IPO were approximately $30,000.
On January 29, 1998, the Company acquired all of the outstanding
capital stock of GolfWeb in exchange for approximately 844,490 shares of Common
Stock and the assumption of stock options and warrants to purchase up to
approximately 53,300 additional shares of Common Stock. The acquisition was
accounted for under the "pooling-of-interests" accounting method. Accordingly,
the Company's consolidated financial statements include the accounts of GolfWeb
for all years presented.
In April 1998, the Company completed a public offering (the "Secondary
Offering") of 4 million shares of common stock at $37.625 per share. Of the four
million shares offered, 2,288,430 shares were offered by the Company and
1,711,570 shares by selling shareholders. The Company realized approximately
$81,000 in net proceeds as a result of the Secondary Offering.
On June 29, 1998, the Company acquired International Golf Outlet, Inc.
("IGO"), a privately-held Internet retailer of fine golf equipment and
accessories, for $2,000, consisting of $350 in cash and $1,650 of common stock
(46,924 shares). The Company also agreed to issue to the IGO shareholders
additional common stock, valued at $1,500 at the time of acquisition, if IGO
meets certain revenue and earnings targets over the three year period following
the acquisition. Accordingly, during 1999 the Company issued 14,220 additional
shares of Common Stock valued at $249 to IGO resulting from earnings goals being
met for the first year of operations subsequent to the acquisition.
Effective as of October 1, 1998, upon expiration of a pre-existing
agreement, the Company and America Online, Inc. ("AOL") entered into an
agreement (the "AOL Agreement"), which has an initial term of three years,
subject to extension for up to two additional three-year terms at the option of
AOL under certain circumstances. Under the AOL Agreement, the Company became the
premier provider of special features and major event coverage to the Sports
Channel on the AOL service, as well as an anchor tenant in the Sports Web Center
on aol.com, AOL's Web site. cbs.sportsline.com will also be the premier national
sports partner with a presence on all Digital City local services, currently
serving 50 cities, and an anchor tenant in the Sports Channel on CompuServe. In
addition, SportsLine WorldWide will become the premier global provider of
country-specific sports content to all of AOL's international services, and the
Company will become the premier provider of licensed sports equipment and
apparel as well as golf products within the Sports Channel on the AOL service.
The Company (i) paid AOL cash in the amount of $8,000, (ii) issued AOL 550,000
shares of common stock and (iii) granted AOL warrants to purchase an additional
900,000 shares of Common Stock at exercise prices ranging from $20 to $40 per
share, 450,000 of which are subject to vesting based on the Company's
achievement of specified revenue thresholds. Furthermore, the Company has agreed
to make a payment to AOL, provided, that AOL holds and does not sell any of such
shares for a period of two years, if AOL is not able to realize at least $15,000
from the sale of the 550,000 shares of common stock issued to it, at the end of
such two-year period (the "AOL Obligation"). During December 1999, AOL sold
shares of the Company's common stock and the Company realized a benefit of
approximately $3,400 resulting in the cancellation of the AOL obligation. Such
benefit was reflected as a reduction of depreciation and amortization expense in
1999. In addition, AOL will be eligible to share in direct revenues attributable
to AOL promotion of Company offerings on AOL brands once certain thresholds
specified in the agreement have been met. Over the three-year agreement, the
Company will receive a number of guaranteed impressions on AOL's commercial
online services and Web sites.
In May 1999, the Company acquired Golf Club Trader, Inc. for
approximately $7,000 of common stock (195,850 shares).
In December 1999, the Company acquired Daedalus World Wide Corporation
for consideration valued at approximately $31,780 consisting of $4,000 cash and
$27,780 of common stock (599,998 shares).
50
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(5) SHAREHOLDERS' EQUITY:--(CONTINUED)
The Company acquired other business during 1999 in exchange for an
aggregate of $2,373 cash and $2,555 of common stock (124,322 shares).
In October 1999, the Company issued 450,000 shares of common stock to
Westwood One as consideration for a three-year promotional and programming
agreement.
In January 1998, CBS exercised its 1997 warrants resulting in net
proceeds of $3,800 to the Company. In December 1998, CBS exercised its 1998
warrants resulting in net proceeds of $5,700 to the Company. In December 1999,
CBS exercised its 1999 warrants resulting in net proceeds of $7,600. The Company
has reserved sufficient shares of its common stock to cover issuance of common
stock under the CBS Agreement, exercises of common stock warrants and the stock
option, incentive compensation and employee stock purchase plans discussed in
Note 6.
(6) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:
Common stock warrants issued in 1999, 1998 and 1997 to non-employees
for services rendered primarily under consulting agreements were valued on the
date of grant using the Black-Scholes option pricing model. The following is a
summary of warrants granted, exercised, canceled and outstanding and the
assumptions utilized involving the grants in 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Warrants outstanding, beginning
of year 2,365,000 $17.51 2,018,000 $7.16 1,050,000 $5.23
Granted 2,455,000 29.53 1,355,000 27.08 1,933,000 8.71
Exercised (1,329,000) 9.73 (996,000) 10.99 (960,000) 8.25
Canceled (40,000) 5.00 (12,000) 8.84 (5,000) 5.00
----------- ----------- ----------
Warrants outstanding, end of year 3,451,000 29.20 2,365,000 17.51 2,018,000 7.16
========== ========== ==========
</TABLE>
The range of exercise prices of warrants outstanding at December 31,
1999 was $5.00 - $45.00. The weighted average fair value of warrants granted
during 1999, 1998 and 1997 was $9.22, $2.43 and $2.83, respectively. There were
1,094,000 warrants exercisable at December 31, 1999 at a weighted average
exercise price of $29.14 per share.
Assumptions utilized to value warrants are as follows:
<TABLE>
<CAPTION>
Risk-Free
Volatility Dividend Interest Estimated
Factor Yield Rates Lives
------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
1999 grants 75% 0% 4.5% - 6.2% 1-5
1998 grants 40%-65% 0% 4.5% - 5.9% 1-5
1997 grants 40% 0% 5.7% - 6.7% 1-9
</TABLE>
In 1995, the Company adopted a stock option plan (the "1995 Plan")
under which the Company is authorized to issue a total of 1,200,000 incentive
stock options and nonqualified stock options to purchase common stock to be
granted to employees, nonemployee members of the Board of Directors and certain
consultants or independent advisors who provide services to the Company. Options
become exercisable for 25% of the option shares upon the optionee's completion
of one year of service, as defined, with the balance vesting in successive equal
monthly installments upon the optionee's completion of each of the next 36
months of service. The maximum term of the options is 10 years.
51
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(6) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:--(CONTINUED)
On April 14, 1997, the Company adopted the 1997 Incentive Compensation
Plan (the "Incentive Plan"). Pursuant to the Incentive Plan, the total number of
shares of common stock that may be subject to the granting of awards shall be
equal to: (i) 2,000,000 shares, plus (ii) the number of shares with respect to
awards previously granted under the Incentive Plan that terminate without being
exercised, expire, are forfeited or canceled, and the number of shares of common
stock that are surrendered in payment of any awards or any tax withholding
requirements. The Incentive Plan became effective upon completion of the IPO.
The Incentive Plan provides for grants of stock options, stock appreciation
rights, restricted stock, deferred stock, other stock-related awards and
performance or annual incentive awards at not less than the fair market value of
the underlying common stock that may be settled in cash, stock or other
property. On November 19, 1999 the Company's shareholders approved amending the
Incentive Plan to increase the number of shares available for issuance to
5,500,000.
A summary of the activity relating to the Company's employee stock
option plans as of December 31, 1999, 1998 and 1997, and changes during the
years then ended is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,821,704 $ 9.60 1,457,000 $ 5.13 683,664 $1.42
Granted 2,470,100 28.78 1,980,157 12.72 904,388 7.50
Exercised (546,549) 5.62 (314,525) 2.77 (42,521) 0.80
Forfeited (484,459) 16.94 (300,928) 15.10 (88,531) 2.60
----------- ----------- -----------
Outstanding at end of year 4,260,796 20.39 2,821,704 9.60 1,457,000 5.13
========== ========== ==========
Options exercisable at end of year 775,049 11.76 462,175 5.05 331,778 1.56
========== ========== ==========
</TABLE>
The weighted average fair value of options granted during 1999, 1998
and 1997 was $21.32, $4.89 and $3.10, respectively. During 1998, certain
outstanding employee stock options were repriced to $14.0625 for officers and to
$8.00 for other employees. In September 1998, the Company repriced 230,000
options held by certain officers and directors to reduce their exercise price to
the then current market value and, in October 1998, repriced 625,382 options
held by certain other employees to the then current market value.
The following table summarizes information about employee stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- ---------------------------------
Weighted
Average
Outstanding at Remaining Weighted Exercisable at Weighted
Range of December 31, Contractual Average December 31, Average
Exercise Prices 1999 Life (In Years) Exercise Price 1999 Exercise Price
--------------- ---- --------------- -------------- ---- --------------
<S> <C> <C> <C> <C> <C>
$0.63 to $5.00 165,942 6.60 $3.56 108,777 $3.15
5.01 to 8.00 911,523 7.90 8.00 326,294 8.00
8.01 to 15.00 547,656 8.60 14.00 181,941 14.04
15.01 to 20.00 959,475 9.30 16.60 88,037 15.78
20.01 to 30.00 394,900 8.40 24.15 -- --
30.01 to 40.00 986,000 9.40 32.64 70,000 31.75
40.01 to 60.00 295,300 9.90 46.38 -- --
----------- -----------
4,260,796 8.80 20.39 775,049 11.76
=========== ===========
</TABLE>
52
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(6) WARRANTS, STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:--(CONTINUED)
Pro forma information is required by SFAS No. 123 and has been
determined as if the Company had accounted for its stock-based compensation
plans under the fair value method. The fair value of each option grant was
estimated at the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions used for grants in 1999, 1998 and
1997, respectively: risk-free interest rates of 4.6% to 5.6%, 5.7% to 6.7% and
6.0% to 6.6%, dividend yield of 0% for all years, expected volatility factor of
100%, 65% and 40% and expected life of 4.39 years for all years.
The Company's pro forma information follows for the years ended
December 31:
1999 1998 1997
---- ---- ----
Net loss - As reported $ (17,097) $ (35,509) $ (34,177)
Pro forma net loss (26,397) (37,090) (34,664)
Net loss per share -
basic and diluted - As reported $ (0.74) $ (1.94) $ (3.08)
Net loss per share
basic and diluted - Pro forma $ (1.15) $ (2.03) $ (3.12)
On April 14, 1997, the Company adopted the Employee Stock Purchase Plan
(the "Purchase Plan") under which 500,000 shares of common stock are reserved.
The Purchase Plan became effective upon completion of the IPO. The Purchase Plan
provides eligible employees, as defined therein, the right to purchase shares of
common stock. The purchase price per share will be equal to 85% of the fair
market value as of certain measurement dates. Such purchases are limited in any
calendar year to the lower of 25% of the employee's total annual compensation or
$25,000. On November 19, 1999, the Purchase Plan was amended to increase the
number of shares reserved for issuance to 1,000,000. Shares of common stock
issued under the plan were 101,561 and 329,085 in 1999 and 1998, respectively.
In January 1996, the Company adopted a retirement plan that qualifies
under Section 401(k) of the Internal Revenue Code. Under this plan,
participating employees, as defined, may defer a portion of their pretax
earnings, up to the Internal Revenue Service annual contribution limits. There
is currently no matching of employee contributions by the Company.
(7) INCOME TAXES:
No provision for Federal and state income taxes has been recorded as
the Company has incurred net operating losses through December 31, 1999. At
December 31, 1999, the Company had approximately $97,000 of net operating loss
carryforwards for Federal income tax reporting purposes available to offset
future taxable income; such carryforwards expire beginning in 2009. Under the
Tax Reform Act of 1986, the amounts of and benefits from net operating losses
carried forward may be impaired or limited in certain circumstances. Events
which may cause limitations in the amount of net operating losses that the
Company may utilize in any one year include, but are not limited to, a
cumulative ownership change of more than 50% over a three year period.
Deferred tax assets at December 31, 1999 and 1998 consist primarily of
the tax effect of net operating loss carryforwards which amounted to
approximately $97,000 and $33,000, respectively. Other deferred tax assets and
liabilities are not significant. The Company has provided a full 100% valuation
allowance on the deferred tax assets at December 31, 1999 and 1998 to reduce
such deferred income tax assets to zero as it is management's belief that
realization of such amounts do not meet the criteria required by generally
accepted accounting principles. Management will review the valuation allowance
requirement periodically and make adjustments as warranted.
53
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(8) COMMITMENTS AND CONTINGENCIES:
The Company leases its facilities and computer and communications
equipment under noncancellable leases that expire on various dates through 2009.
The office leases require the Company to pay operating costs, including property
taxes and maintenance costs and include rent adjustment clauses. The Company has
committed to a ten year lease for its new corporate headquarters beginning in
2000. Management anticipates that it will be able to sublease its existing
facilities at rates equivalent to its existing lease rates so as not to incur a
material expense. Under the terms of one office lease, the Company has provided
a letter of credit to the landlord. The letter of credit is secured by a
restricted certificate of deposit of approximately $92 as of December 31, 1999.
Under the terms of an additional office lease the Company has provided a letter
of credit to the landlord. The letter of credit is secured by a restricted
certificate of deposit of approximately $297 as of December 31, 1999.
Additionally, the Company has provided a letter of credit to one of its
suppliers. The letter of credit is secured by a restricted certificate of
deposit of approximately $100 as of December 31, 1999.
Rent expense amounted to approximately $1,716, $735 and $570 for the
years ended December 31, 1999, 1998 and 1997, respectively.
Future minimum lease payments for all leases are as follows as of
December 31, 1999:
Capital Operating
------- ---------
2000 $ 178 $ 2,060
2001 --- 1,765
2002 --- 1,675
2003 --- 1,652
2004 --- 1,586
Thereafter --- 7,251
-------- ---------
Total minimum lease payments 178 $ 15,990
=========
Less: amount representing interest (8)
--------
Lease obligations reflected as current $ 170
========
The Company has entered into various licensing, royalty and consulting
agreements with various content providers, vendors and sports celebrities. The
remaining terms of these agreements range from one to eight years. These
agreements provide for the payment of royalties, bounties and certain guaranteed
amounts, some of which are on a per member basis. Additionally, some agreements
provide for a specified percentage of advertising and merchandising revenue to
be paid to the athlete or organization from whose Web site the revenue is
derived.
Minimum guaranteed payments required under such agreements are as
follows as of December 31, 1999:
2000 $ 4,491
2001 3,918
2002 388
---------
$ 8,797
=========
From time to time, the Company may be involved in litigation relating
to claims arising out of its operations in the normal course of business. In
1998, the Company and Weatherline settled a lawsuit in which Weatherline alleged
that the Company had infringed on its trademark. In connection with the
settlement, Weatherline assigned to the Company its United States trademark
registration for the mark "Sportsline". The Company recorded a non-recurring
charge of approximately $1.1 million associated with such settlement in 1998.
54
<PAGE>
SPORTSLINE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
(8) COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
On December 28, 1999, an action entitled Fantasy Sports Properties,
Inc. v. SportsLine.com, Inc., Yahoo! Inc., ESPN, Inc. and Sandbox Entertainment,
Inc., was commenced against the Company and the named-codefendants in the United
States District Court for the Eastern District of Virginia. The plaintiff seeks
damages and injunctive relief for the alleged infringement by the Company and
the named co-defendants of a patent entitled "Computerized Statistical Football
Game," issued by the United States Patent and Trademark Office, which is
allegedly owned by the plaintiff. The Company in its Answer, Affirmative
Defenses and Counterclaim has taken the position that it has not infringed the
patent in suit, that the patent in suit is invalid, and the Company seeks a
Declaratory Judgment of non-infringement and invalidity. The Company intends to
vigorously defend itself in this action.
On August 16, 1999, an action entitled Shopsports.com v. SportsLine
USA, Inc., was commenced against the Company in the United States District Court
for the Central District of California. The plaintiff seeks damages and
injunctive relief in connection with the Company's use of a tertiary domain name
which the plaintiff alleges infringes on plaintiff's trademark rights. The
action is being consolidated with a declaratory judgment action, commenced by
the Company, seeking a judgment that the use of the tertiary URL
"shop.sportsline.com" did not infringe on plaintiff's common law rights. The
Company intends to vigorously defend itself in this action.
In the opinion of management, the Company is not currently a party to
any other legal proceedings, the adverse outcome of which, individually or in
the aggregate, would have a material adverse effect on the Company's
consolidated financial position or results of operations.
55
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required in response to this item is incorporated by
reference to the Registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
Reference is made to the Index to Financial Statements set forth in
"Item 8. Financial Statements and Supplementary Data" of this Annual Report on
Form 10-K.
2. Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission (the "Commission") are not
required under the related instructions, the required information is contained
in the financial statements and notes thereto or are not applicable, and
therefore have been omitted.
56
<PAGE>
3. Exhibits:
The following exhibits are filed as part of this Annual Report on Form
10-K:
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation (3.1) (1)
3.2 Amendment of Article IV of the Amended and Restated Certificate
of Incorporation (3.2)(2)
3.3 Amendment of Article I of the Amended and Restated Certificate
of Incorporation (filed herewith)
3.4 Form of Amended and Restated Bylaws (3.2) (1)
10.1* 1995 Stock Option Plan (10.1) (3)
10.2 Form of Indemnification Agreement between the Company and each
of its directors and executive officers (10.2) (2)
10.3* 1997 Incentive Compensation Plan, as amended (filed herewith)
10.4* Employee Stock Purchase Plan, as amended (filed herewith)
10.5 Amended and Restated Investors' Rights Agreement dated as of
September 25, 1996, among the Company, the holders of the
Company's Series A, Series B and Series C Preferred Stock, The
Estate of Burk Zanft and Michael Levy (10.5) (3)
10.6 Agreement dated March 5, 1997 between the Company and CBS Inc.
(10.6) (3)
10.7* Consulting Agreement dated September 1, 1994, between the
Company and Horrow Sports Ventures (10.10) (3)
10.8* Agreement dated June 1996 between the Company and Michael P.
Schulhof (10.11) (3)
10.9 Agreement dated August 1994 between the Company and Planned
Licensing, Inc. (10.12) (3)
10.10* Stock Option between the Company and Gerry Hogan (10.19) (4)
10.11 Agreement and Plan of Merger dated as of January 15, 1998, among
the Company, GolfWeb.Com, Inc. and GolfWeb (excluding Exhibits
thereto), and Amendment No. 1 to the Merger Agreement dated of
January 29, 1998, among the Company, GolfWeb.Com, Inc. and
GolfWeb (2.1; 2.2)(5)
10.12+ Premier Sports Information and Commerce Agreement, effective as
of October 1, 1998, by and between the Company and America
Online, Inc. (10.1) (7)
10.13 Amendment to Agreement, effective as of January 1, 1999, between
the Company and CBS Broadcasting, Inc. (99.1) (8)
10.14* Amended and Restated Employment Agreement, dated as of January
28, 2000, between the Company and Michael Levy (filed herewith)
10.15* Amended and Restated Employment Agreement, dated as of January
28, 2000, between the Company and Kenneth W. Sanders (filed
herewith)
10.16* Amended and Restated Employment Agreement, dated as of January
28, 2000, between the Company and Daniel L. Leichtenschlag
(filed herewith)
10.17* Employment Agreement, dated as of January 28, 2000, between the
Company and Andrew S. Sturner (filed herewith)
10.18* Employment Agreement, dated as of January 28, 2000, between the
Company and Mark J. Mariani (filed herewith)
10.19 First Amendment to License and Consulting Agreement between the
Company and Planned Licensing, Inc. dated as of October 16, 1999
(filed herewith)
21.1 Subsidiaries of the Company (filed herewith)
23.1 Consent of Arthur Andersen LLP (filed herewith)
27.1 Financial Data Schedule - For SEC use only (filed herewith)
57
<PAGE>
- ------------------
(1) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Registration Statement on Form
S-1 (Registration No. 333-62685).
(2) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Registration Statement on Form
S-1 (Registration No. 333-78921).
(3) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Registration Statement on Form
S-1 (Registration No. 333-25259).
(4) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Registration Statement on Form
S-8 (Registration No. 333-46029).
(5) Incorporated by reference to the exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 8-K (Event of
January 29, 1998).
(6) Incorporated by reference to the exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q for the
quarterly period ending June 30, 1998.
(7) Incorporated by reference to the exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q for the
quarterly period ending September 30, 1998.
(8) Incorporated by reference to the exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 8-K (Event of
February 10, 1999).
+ Confidential treatment granted to certain portions of this Exhibit
* Management Contract or Compensatory Plan
(b) Reports on Form 8-K
The Company filed two reports on Form 8-K during the fourth quarter ended
December 31, 1999. Information regarding the items reported on is as follows:
Date Item Reported On
---- ----------------
October 22, 1999 Item 5. Other Events. The Company announced
(i) that it had repurchased $60 million
aggregate principal amount of the
Convertible Subordinated Notes as of August
26, 1999 and (ii) that its offer to purchase
any and all outstanding Convertible
Subordinated Notes expired on October 19,
1999 and that approximately $70 million
aggregate principal amount of the
Convertible Subordinated Notes had been
tendered and accepted for payment.
December 22, 1999 Item 2. Acquisition or Disposition of
Assets. The Company announced the
acquisition of Daedalus World Wide
Corporation.
58
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SPORTSLINE.COM, INC.
By: /s/ Michael Levy
--------------------
Michael Levy
March 30, 2000 President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Michael Levy President, Chief Executive Officer and March 30, 2000
- ----------------------------------------- Director (principal executive officer)
Michael Levy
/s/ Kenneth W. Sanders Chief Financial Officer March 30, 2000
- ----------------------------------------- (principal financial and accounting officer)
Kenneth W. Sanders
Director
- -----------------------------------------
Thomas Cullen
/s/ Gerry Hogan Director March 30, 2000
- -----------------------------------------
Gerry Hogan
/s/ Richard B. Horrow Director March 30, 2000
- -----------------------------------------
Richard B. Horrow
/s/ Joseph Lacob Director March 30, 2000
- -----------------------------------------
Joseph Lacob
/s/ Sean McManus Director March 30, 2000
- -----------------------------------------
Sean McManus
59
<PAGE>
/s/ Andrew Nibley Director March 30, 2000
- -----------------------------------------
Andrew Nibley
/s/ Fredric G. Reynolds Director March 30, 2000
- -----------------------------------------
Fredric G. Reynolds
/s/ Michael P. Schulhof Director March 30, 2000
- -----------------------------------------
Michael P. Schulhof
/s/ James C. Walsh Director March 30, 2000
- -----------------------------------------
James C. Walsh
</TABLE>
60
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION
- ------- -----------
3.4 Amendment of Article I of the Amended and Restated Certificate
of Incorporation
10.3* 1997 Incentive Compensation Plan, as amended
10.4* Employee Stock Purchase Plan, as amended
10.14* Amended and Restated Employment Agreement, dated as of January
28, 2000, between the Company and Michael Levy
10.15* Amended and Restated Employment Agreement, dated as of January
28, 2000, between the Company and Kenneth W. Sanders
10.16* Amended and Restated Employment Agreement, dated as of January
28, 2000, between the Company and Daniel L. Leichtenschlag
10.17* Employment Agreement, dated as of January 28, 2000, between
the Company and Andrew S. Sturner
10.18* Employment Agreement, dated as of January 28, 2000, between
the Company and Mark J. Mariani
10.19 First Amendment to License and Consulting Agreement between
the Company and Planned Licensing, Inc. dated as of October
16, 1999.
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule - For SEC use only
61
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SPORTSLINE USA, INC.
SPORTSLINE USA, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware DOES HEREBY CERTIFY:
FIRST: That Article I of the Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended to read as follows:
The name of the corporation is SportsLine.com, Inc. (hereinafter called
the "Company").
SECOND: That said amendment was duly adopted and approved by the Board
of Directors and the stockholders of the Corporation entitled to vote thereon in
accordance with the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this Certificate be
signed by its duly authorized officer this 19th day of November, 1999.
SPORTSLINE USA, INC.,
a Delaware corporation
/s/ Michael Levy
-----------------------
Michael Levy, President
SPORTSLINE.COM, INC.
1997 INCENTIVE COMPENSATION PLAN
(AS AMENDED MARCH 2000)
<PAGE>
<TABLE>
<CAPTION>
SPORTSLINE.COM, INC.
1997 INCENTIVE COMPENSATION PLAN
<S> <C> <C>
1. Purpose..................................................................................................1
2. Definitions..............................................................................................1
3. Administration...........................................................................................4
(a) Authority of the Committee......................................................................4
(b) Manner of Exercise of Committee Authority.......................................................5
(c) Limitation of Liability.........................................................................5
4. Stock Subject to Plan....................................................................................5
(a) Limitation on Overall Number of Shares Subject to Awards........................................5
(b) Application of Limitations......................................................................6
5. Eligibility; Per-Person Award Limitations................................................................6
6. Specific Terms of Awards.................................................................................6
(a) General.........................................................................................6
(b) Options.........................................................................................6
(c) Stock Appreciation Rights.......................................................................8
(d) Restricted Stock................................................................................9
(e) Deferred Stock.................................................................................10
(f) Bonus Stock and Awards in Lieu of Obligations..................................................11
(g) Dividend Equivalents...........................................................................11
(h) Other Stock-Based Awards.......................................................................11
7. Certain Provisions Applicable to Awards.................................................................11
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.........................................11
(b) Term of Awards.................................................................................12
(c) Form and Timing of Payment Under Awards; Deferrals.............................................12
(d) Exemptions from Section 16(b) Liability........................................................12
8. Performance and Annual Incentive Awards.................................................................13
(a) Performance Conditions.........................................................................13
(b) Performance Awards Granted to Designated Covered Employees.....................................13
(c) Annual Incentive Awards Granted to Designated Covered Employees................................14
(d) Written Determinations.........................................................................15
(e) Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m).......................16
9. Change in Control.......................................................................................16
(a) Effect of "Change in Control.".................................................................16
(b) Definition of "Change in Control...............................................................17
(c) Definition of "Change in Control Price.".......................................................17
10. General Provisions......................................................................................18
(a) Compliance With Legal and Other Requirements...................................................18
(b) Limits on Transferability; Beneficiaries.......................................................18
(c) Adjustments....................................................................................18
(d) Taxes..........................................................................................19
(e) Changes to the Plan and Awards.................................................................19
(i)
<PAGE>
(f) Limitation on Rights Conferred Under Plan......................................................20
(g) Unfunded Status of Awards; Creation of Trusts..................................................20
(h) Nonexclusivity of the Plan.....................................................................21
(i) Payments in the Event of Forfeitures; Fractional Shares........................................21
(j) Governing Law..................................................................................21
(k) Plan Effective Date and Stockholder Approval; Termination of Plan..............................21
</TABLE>
(ii)
<PAGE>
SPORTSLINE.COM, INC.
1997 INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 1997 Incentive Compensation Plan (the
"Plan") is to assist SportsLine.Com, Inc. (the "Company") and its subsidiaries
in attracting, motivating, retaining and rewarding high-quality executives and
other employees, officers, Directors and independent contractors enabling such
persons to acquire or increase a proprietary interest in the Company in order to
strengthen the mutuality of interests between such persons and the Company's
stockholders, and providing such persons with annual and long term performance
incentives to expend their maximum efforts in the creation of shareholder value.
The Plan is also intended to qualify certain compensation awarded under the Plan
for tax deductibility under Section 162(m) of the Code (as hereafter defined) to
the extent deemed appropriate by the Committee (or any successor committee) of
the Board of Directors of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Meeting Date" shall mean the date of the annual
meeting of the Company's stockholders at which the Directors are elected.
(b) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(c) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
(d) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(e) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.
(f) "Board" means the Company's Board of Directors.
<PAGE>
(g) "Change in Control" means Change in Control as defined
with related terms in Section 9 of the Plan.
(h) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(j) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist solely
of at least two directors, each of whom shall be (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, unless administration
of the Plan by "non-employee directors" is not then required in order for
exemptions under Rule 16b-3 to apply to transactions under the Plan, and (ii) an
"outside director" within the meaning of Section 162(m) of the Code, unless
administration of the Plan by "outside directors" is not then required in order
to qualify for tax deductibility under Section 162(m) of the Code.
(k) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.
(l) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) of the Plan.
(m) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(n) "Director" means a member of the Board.
(o) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(p) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(q) "Effective Date" means the effective date of the Plan,
which shall be March 1, 1997.
(r) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
employees of the Company or of any Subsidiary, and independent contractors with
the Company or any Subsidiary. The foregoing notwithstanding, (i) only employees
of the Company or any Subsidiary shall be an Eligible Persons for purposes of
receiving any Incentive Stock Options and (ii) no independent contractor shall
be an Eligible Person for purposes of receiving any Awards other than Options
under Section 6(b) of the Plan. An employee on leave of absence may be
considered as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.
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(s) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(t) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.
(u) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.
(v) ""Formula Grants" means the Formula Grant Options granted
to Non-Employee Directors pursuant to Section 6(b)(iv) of the Plan.
(w) "Incentive Stock Option" or "ISO" means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(x) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
(y) "Initial Grant Date" means the date on which a
Non-Employee Director is first elected or appointed as a Director.
(z) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(aa) "Non-Employee Director" shall mean a member of the Board
who is not an employee of the Company or any subsidiary.
(bb) "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.
(cc) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
(dd) "Parent Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock in
one of the other corporations in the chain.
(ee) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
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(ff) "Performance Award" means a right, granted to a Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.
(gg) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(hh) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(ii) "Retire" or "Retirement" means termination of service as
a Director after having attained at least age 62 and having served as a Director
for at least 5 years, other than by reason of death, Disability or the
Director's wilful misconduct or negligence.
(jj) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act
(kk) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(ll) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c) hereof.
(mm) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered
by the Committee; provided, however, that except as otherwise expressly provided
in this Plan or in order to comply with Code Section 162(m) or Rule 16b-3 under
the Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board
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shall not be required to follow past practices, act in a manner consistent with
past practices, or treat any Eligible Person in a manner consistent with the
treatment of other Eligible Persons.
(b) Manner of Exercise of Committee Authority. The Committee,
and not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to officers or managers of the Company or any subsidiary, or committees thereof,
the authority, subject to such terms as the Committee or the Board shall
determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other functions
of the Committee or the Board as the Committee or the Board may determine to the
extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each
case to the extent permitted under applicable law and subject to the
requirements set forth in Section 8(d). The Committee or the Board may appoint
agents to assist it in administering the Plan
(c) Limitation of Liability. The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any executive officer,
other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.
4. Stock Subject to Plan.
(a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 5,500,000, plus (ii) the number of shares
with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of shares of
Stock that are surrendered in payment of any Awards or any tax withholding with
regard thereto. Any shares of Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury shares. Subject
to adjustment as provided in Section 10(c) hereof, in no event shall the
aggregate number of shares of Stock which may be issued pursuant to ISOs exceed
1,500,000 shares.
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(b) Application of Limitations. The limitation contained in
Section 4(a) shall apply not only to Awards that are settleable by the delivery
of shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.
5. Eligibility; Per-Person Award Limitations. Awards may be
granted under the Plan only to Eligible Persons. In each fiscal year during any
part of which the Plan is in effect, an Eligible Person may not be granted
Awards relating to more than 250,000 shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as
an Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $2,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $5,000,000.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee or the Board may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee or the Board is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Delaware law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.
(b) Options. The Committee and the Board each is
authorized to grant Options to Participants on the following terms and
conditions:
(i) Exercise Price. The exercise price per share of
Stock purchasable under an Option shall be determined by the
Committee or the Board, provided that such exercise price
shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on the date of
grant of the Option and shall not, in any event, be less than
the par value of a share of Stock on the date of grant of such
Option. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation and
an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option (to the extent
required
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by the Code at the time of grant) shall be no less
than 110% of the Fair Market Value of the Stock on the date
such Incentive Stock Option is granted.
(ii) Time and Method of Exercise. The Committee or
the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole
or in part (including based on achievement of performance
goals and/or future service requirements), the time or times
at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions,
the methods by which such exercise price may be paid or deemed
to be paid (including in the discretion of the Committee or
the Board a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or
any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis), and the methods by or forms in which Stock
will be delivered or deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of
Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Section 422 of the Code,
unless the Participant has first requested the change that
will result in such disqualification. Thus, if and to the
extent required to comply with Section 422 of the Code,
Options granted as Incentive Stock Options shall be subject to
the following special terms and conditions:
(A) the Option shall not be exercisable more
than ten years after the date such Incentive Stock Option is
granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be
(to the extent required by the Code at the time of the grant)
for no more than five years from the date of grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the shares of stock with respect to which
Incentive Stock Options granted under the Plan and all other
option plans of the Company or its Parent Corporation during
any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed
$100,000.
(iv) Formula Grants of Options to Non-Employee
Directors. Each Non-Employee Director, other than a
Non-Employee Director who is, or is an affiliate or
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designee of, a Beneficial Owner of more than 5% of the Company
Voting Securities Outstanding (as defined in Section 9(b)(i)),
shall receive on such Non-Employee Director's Initial Grant
Date an Option to purchase 12,000 shares of Stock. In
addition, each Non-Employee Director shall receive on each
Annual Meeting Date thereafter, an Option to purchase 3,000
shares of Stock. Options granted to Non-Employee Directors
pursuant to this Section shall be for a term of 10 years and
shall become exercisable at the rate of 25% per year
commencing on the first anniversary of the date on which the
Option is granted; provided, however, that the Options shall
be fully exercisable in the event that, while serving as a
Director, the Non-Employee Director dies, suffers a
Disability, or Retires. The per share exercise price of all
Options granted to Non-Employee Directors pursuant to this
paragraph (iv) shall be equal to the Fair Market Value of a
share of Stock on the date such Option is granted. Unless
otherwise extended in the sole discretion of the Committee,
the unexercised portion of any Option granted pursuant to this
paragraph (iv) shall become null and void (V) three months
after the date on which such Non-Employee Director ceases to
be a Director of the Company for any reason other than the
Non-Employee Director's wilful misconduct or negligence,
Disability, death or Retirement, (W) immediately in the event
of the Non-Employee Director's wilful misconduct or
negligence, (X) one year after the Non-Employee Director
ceases to be a Director by reason of his Disability, (Y) at
the expiration of its original term, if the Non-Employee
Director ceases to be a Director by reason of his Retirement,
and (Z) twelve months after the date of the Non-Employee
Director's death in the event that such death occurs prior to
the time the Option otherwise would become null and void
pursuant to this sentence.
(v) Repricing. Except for adjustments pursuant to
Section 10(c) (relating to the adjustment of shares of Stock),
the exercise price per share of Stock purchasable under an
Option may not be decreased after the date of the grant of the
Option nor may an outstanding Option granted under the Plan be
surrendered to the Company as consideration for the grant of a
new Option with a lower exercise price.
(c) Stock Appreciation Rights. The Committee and the
Board each is authorized to grant SAR's to Participants on the following terms
and conditions:
(i) Right to Payment. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of
one share of stock on the date of exercise (or, in the case of
a "Limited SAR" that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by
reference to the Change in Control Price, as defined under
Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee or the Board. The grant price of
an SAR shall not be less than the Fair Market Value of a share
of Stock on the date of grant except as provided under Section
7(a) hereof.
(ii) Other Terms. The Committee or the Board shall
determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be
exercised in whole or in part (including based on
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achievement of performance goals and/or future service
requirements), the time or times at which SARs shall cease to
be or become exercisable following termination of employment
or upon other conditions, the method of exercise, method of
settlement, form of consideration payable in settlement,
method by or forms in which Stock will be delivered or deemed
to be delivered to Participants, whether or not a SAR shall be
in tandem or in combination with any other Award, and any
other terms and conditions of any SAR. Limited SARs that may
only be exercised in connection with a Change in Control or
other event as specified by the Committee or the Board, may be
granted on such terms, not inconsistent with this Section
6(c), as the Committee or the Board may determine. SARs and
Limited SARs may be either freestanding or in tandem with
other Awards.
(d) Restricted Stock. The Committee and the Board each
is authorized to grant Restricted Stock to Participants on the following terms
and conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee or
the Board may impose, which restrictions may lapse separately
or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or
future service requirements), in such installments or
otherwise, as the Committee or the Board may determine at the
date of grant or thereafter. Except to the extent restricted
under the terms of the Plan and any Award agreement relating
to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including
the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee or
the Board). During the restricted period applicable to the
Restricted Stock, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the
Participant.
(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board at the time of the Award, upon
termination of a Participant's employment during the
applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the
Committee or the Board shall determine. If certificates
representing Restricted Stock are registered in the name of
the Participant, the Committee or the Board may require that
such certificates bear an
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appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, that the
Company retain physical possession of the certificates, and
that the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Committee or the
Board may require that any cash dividends paid on a share of
Restricted Stock be automatically reinvested in additional
shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined
by the Committee or the Board, Stock distributed in connection
with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has
been distributed.
(e) Deferred Stock. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award
of Deferred Stock shall occur upon expiration of the deferral
period specified for such Deferred Stock by the Committee or
the Board (or, if permitted by the Committee or the Board, as
elected by the Participant). In addition, Deferred Stock shall
be subject to such restrictions (which may include a risk of
forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on
achievement of performance goals and/or future service
requirements), separately or in combination, in installments
or otherwise, as the Committee or the Board may determine.
Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the
Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of
Deferred Stock carries no voting or dividend or other rights
associated with share ownership.
(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board, upon termination of a
Participant's employment during the applicable deferral period
thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee
or the Board may provide, by rule or regulation or in any
Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred
Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Deferred Stock.
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(iii) Dividend Equivalents. Unless otherwise
determined by the Committee or the Board at date of grant,
Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either
(A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having
a Fair Market Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock and the
amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or
permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.
(g) Dividend Equivalents. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.
(h) Other Stock-Based Awards. The Committee and the Board each
is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
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7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary, or any business entity to be acquired by
the Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee or the
Board shall require the surrender of such other Award or award in consideration
for the grant of the new Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable under other plans
of the Company or any subsidiary, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Deferred
Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an exercise
price "discounted" by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).
(c) Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee or
the Board shall determine, including, without limitation, cash, Stock, other
Awards or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 10(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent
of the Company that this Plan comply in all respects with applicable provisions
of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by a Participant who is subject
to Section 16 of the Exchange Act is subject to liability under Section 16(b)
thereof (except for transactions acknowledged in writing to be non-exempt by
such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such
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<PAGE>
transaction, such provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 or Rule
16a-1(c)(3) so that such Participant shall avoid liability under Section 16(b).
In addition, the purchase price of any Award conferring a right to purchase
Stock shall be not less than any specified percentage of the Fair Market Value
of Stock at the date of grant of the Award then required in order to comply with
Rule 16b-3.
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). If and to the extent required under Code Section 162(m), any
power or authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.
(b) Performance Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of
performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or specified subsidiaries or business units of the Company
(except with respect to the total stockholder return and
earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such
Performance Awards: (1) total
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<PAGE>
stockholder return; (2) such total stockholder return as
compared to total return (on a comparable basis) of a publicly
available index such as, but not limited to, the Standard &
Poor's 500 Stock Index or the Nasdaq Composite Index; (3) net
income; (4) pretax earnings; (5) earnings before interest
expense, taxes, depreciation and amortization; (6) pretax
operating earnings after interest expense and before bonuses,
service fees, and extraordinary or special items; (7)
operating margin; (8) earnings per share; (9) return on
equity; (10) return on capital; (11) return on investment;
(12) operating earnings; (13) working capital or inventory;
and (14) ratio of debt to stockholders' equity. One or more of
the foregoing business criteria shall also be exclusively used
in establishing performance goals for Annual Incentive Awards
granted to a Covered Employee under Section 8(c) hereof that
are intended to qualify as "performance-based compensation"
under Code Section 162(m).
(iii) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals in respect
of such Performance Awards shall be measured over a
performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later
than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during
the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may
specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to
such business criteria.
(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee
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<PAGE>
should qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Annual Incentive Award
shall be contingent upon achievement of preestablished performance goals and
other terms set forth in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance
in connection with Annual Incentive Awards. The amount of such
Annual Incentive Award pool shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by
the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Annual Incentive Award
pool as a percentage of any such business criteria, a
percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical
relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later
than the end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the case of
Awards intended to be "performance-based compensation" under
Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool
established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such
criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5
hereof.
(iii) Payout of Annual Incentive Awards. After the
end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and
the maximum amount of potential Annual Incentive Award payable
to each Participant in the Annual Incentive Award pool, or (B)
the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as a final Annual Incentive Award shall be reduced
from the amount of his or her potential Annual Incentive
Award, including a determination to make no final Award
whatsoever. The Committee shall specify the circumstances in
which an Annual Incentive Award shall be paid or forfeited in
the event of termination of employment by the Participant
prior to the end of a fiscal year or settlement of such Annual
Incentive Award.
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<PAGE>
(d) Written Determinations. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 8(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards if
and to the extent required to comply with Code Section 162(m).
(e) Status of Section 8(b) and Section 8(c) Awards Under Code
Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
9. Change in Control.
(a) Effect of "Change in Control." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b), the following provisions shall apply:
(i) Any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully
exercisable and vested as of the time of the Change in
Control, subject only to applicable restrictions set forth in
Section 10(a) hereof;
(ii) Limited SARs (and other SARs if so provided by
their terms) shall become exercisable for amounts, in cash,
determined by reference to the Change in Control Price;
(iii) The restrictions, deferral of settlement, and
forfeiture conditions applicable to any other Award granted
under the Plan shall lapse and such Awards shall be deemed
fully vested as of the time of the Change in Control, except
to the
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<PAGE>
extent of any waiver by the Participant and subject to
applicable restrictions set forth in Section 10(a) hereof; and
(iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions
under the Plan, such performance goals and other conditions
will be deemed to be met if and to the extent so provided by
the Committee in the Award agreement relating to such Award.
(b) Definition of "Change in Control. A "Change in
Control" shall be deemed to have occurred upon:
(i) An acquisition by any Person of Beneficial
Ownership of the shares of Common Stock of the Company then
outstanding (the "Company Common Stock Outstanding") or the
voting securities of the Company then outstanding entitled to
vote generally in the election of directors (the "Company
Voting Securities Outstanding") if such acquisition of
Beneficial Ownership results in the Person's Beneficially
Owning 25% or more of the Company Common Stock outstanding or
25% or more of the combined voting power of the Company Voting
Securities Outstanding; or
(ii) Approval by the shareholders of the Company
of a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case,
with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the
Company or the sale of all or substantially all of the assets
of the Company (unless such reorganization, merger,
consolidation or other corporate transaction, liquidation,
dissolution or sale (any such event being referred to as a
"Corporate Transaction") is subsequently abandoned); or
(iii) A change in the composition of the Board
such that individuals who, as of the date hereof, constitute
the Board (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities
Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the
Incumbent Board.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii)
of this Section 9(b), any acquisition or consummation of a Corporate Transaction
unanimously approved by the Incumbent Board shall not constitute a Change in
Control for purposes of the Plan.
(c) Definition of "Change in Control Price." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of
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<PAGE>
property that is the highest price per share paid (including extraordinary
dividends) in any Corporate Transaction triggering the Change in Control under
Section 9(b)(i) hereof or any liquidation of shares following a sale of
substantially all of the assets of the Company, or (ii) the highest Fair Market
Value per share at any time during the 60-day period preceding and the 60-day
period following the Change in Control.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or
other right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Company or a Subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers and exercises are permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Committee or the Board, and to any
additional terms and conditions deemed necessary or appropriate by the Committee
or the Board.
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<PAGE>
(c) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee or the Board shall, in
such manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive
Awards and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any Subsidiary
or any business unit, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, SARs, Performance Awards granted under
Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c) hereof
to Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any Subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan
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<PAGE>
without the consent of stockholders or Participants, except that any amendment
or alteration to the Plan shall be subject to the approval of the Company's
stockholders not later than the annual meeting next following such Board action
if such stockholder approval is required by any federal or state law or
regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or
the rules of any stock exchange or automated quotation system on which the Stock
may then be listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to stockholders for approval;
provided that, without the consent of an affected Participant, no such Board
action may materially and adversely affect the rights of such Participant under
any previously granted and outstanding Award; provided, further, that the
provisions of Section 6(b)(v) (relating to Option repricing) may not be amended
without stockholder approval. The Committee or the Board may waive any
conditions or rights under, or amend, alter, suspend, discontinue or terminate
any Award theretofore granted and any Award agreement relating thereto, except
as otherwise provided in the Plan; provided that, without the consent of an
affected Participant, no such Committee or the Board action may materially and
adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting. Notwithstanding anything herein to the
contrary, the provisions of Section 6(b)(iv) of this Plan which govern formula
grants of Options to Non-Employee Directors, shall not be amended more than once
every six months other than to comport with changes to the Code or the rules
promulgated thereunder or the Employee Retirement Income Security Act of 1974,
as amended, or the rules promulgated thereunder, or with rules promulgated by
the Securities and Exchange Commission, unless such limit on amendments is not
required under Rule 16b-3 or other applicable law.
(f) Limitation on Rights Conferred Under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Subsidiary; (ii) interfering in
any way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the
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<PAGE>
Committee otherwise determines with the consent of each affected Participant.
The trustee of such trusts may be authorized to dispose of trust assets and
reinvest the proceeds in alternative investments, subject to such terms and
conditions as the Committee or the Board may specify and in accordance with
applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of Delaware without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) Plan Effective Date and Stockholder Approval; Termination
of Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) and 422, Rule
16b-3 under the Exchange Act, applicable stock exchange requirements, and other
laws, regulations, and obligations of the Company applicable to the Plan. Awards
may be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.
21
SPORTSLINE USA, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide incentive for
present and future employees of the Company and any Designated Subsidiary to
acquire a proprietary interest (or increase an existing proprietary interest) in
the Company through the purchase of Common Stock. It is the Company's intention
that the Plan qualify as an "employee stock purchase plan" under Section 423 of
the Code. Accordingly, the provisions of the Plan shall be administered,
interpreted and construed in a manner consistent with the requirements of that
section of the Code.
2. Definitions.
(a) "Applicable Percentage" means the percentage specified in
Section 8, subject to adjustment by the Committee as provided in Section 8.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended, and any successor thereto.
(d) "Committee" means the committee appointed by the Board to
administer the Plan as described in Section 13 of the Plan or, if no such
Committee is appointed, the Board.
(e) "Common Stock" means the Company's common stock,
par value $0.01 per share.
(f) "Company" means SPORTSLINE USA, INC., a Delaware
corporation.
(g) "Compensation" means, with respect to each Participant for
each pay period, the full base salary, overtime and other wages paid to such
Participant by the Company or a Designated Subsidiary. Except as otherwise
determined by the Committee, "Compensation" does not include: (i) commissions or
bonuses; (ii) any amounts contributed by the Company or a Designated Subsidiary
to any pension plan; (iii) any automobile or relocation allowances (or
reimbursement for any such expenses); (iv) any amounts paid as a starting bonus
or finder's fee; (v) any amounts realized from the exercise of any stock options
or incentive awards; (vi) any amounts paid by the Company or a Designated
Subsidiary for other fringe benefits, such as health and welfare,
hospitalization and group life insurance benefits, or perquisites, or paid in
lieu of such benefits; or (vii) other similar forms of extraordinary
compensation.
(h) "Continuous Status as an Employee" means the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company or the Designated Subsidiary that
employs the Employee, provided that such leave is for a period of not
<PAGE>
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(i) "Designated Subsidiaries" means the Subsidiaries that have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(j) "Employee" means any person, including an Officer, whose
customary employment with the Company or one of its Designated Subsidiaries is
at least twenty (20) hours per week and more than five (5) months in any
calendar year.
(k) "Entry Date" means the first day of each Exercise
Period.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Exercise Date" means the last business day ending on or
before June 30, 1998, and the last business day ending on or before each
December 31 and June 30 thereafter.
(n) "Exercise Period" means, for any Offering Period, each
period commencing on the Offering Date and on the day after each Exercise Date,
and terminating on the immediately following Exercise Date.
(o) "Exercise Price" means the price per share of Common Stock
offered in a given Offering Period determined as provided in Section 8.
(p) "Fair Market Value" means, with respect to a share of
Common Stock, the Fair Market Value as determined under Section 7(b).
(q) "First Offering Date" means the commencement date of the
initial public offering contemplated by the Registration Statement on Form S-1
filed by the Company with the Securities and Exchange Commission.
(r) "Offering Date" means the first business day of each
Offering Period; provided, that in the case of an individual who becomes
eligible to become a Participant under Section 3 after the first business day of
an Offering Period, the term "Offering Date" shall mean the first business day
of the Exercise Period coinciding with or next succeeding the day on which that
individual becomes eligible to become a Participant. Options granted after the
first day of an Offering Period will be subject to the same terms as the options
granted on the first business day of such Offering Period except that they will
have a different grant date (thus, potentially, a different exercise price) and,
because they expire at the same time as the options granted on the first
business day of such Offering Period, a shorter term.
(s) "Offering Period" means (i) with respect to the first
Offering Period, the period beginning on the First Offering Date and ending on
December 31, 1998, and (ii) with respect to each Offering Period thereafter, and
subject to adjustment as provided in Section 4, the 12 month period beginning on
the business day immediately succeeding the end of the preceding Offering
Period.
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(t) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 under the Exchange Act and the rules and
regulations promulgated thereunder.
(u) "Participant" means an Employee who has elected to
participate in the Plan by filing an Enrollment Agreement with the Company as
provided in Section 5 of the Plan.
(v) "Plan" shall mean this 1997 Employee Stock Purchase
Plan.
(w) "Plan Contributions" means, with respect to each
Participant, the payroll deductions withheld from the Compensation of the
Participant and contributed to the Plan for the Participant as provided in
Section 6 of the Plan and any other amounts contributed to the Plan for the
Participant in accordance with the terms of the Plan.
(x) "Subsidiary" shall mean any corporation, domestic or
foreign, of which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock, and that otherwise
qualifies as a "subsidiary corporation" within the meaning of Section 424(f) of
the Code.
6. Eligibility.
(a) Any Employee who is employed by the Company as of the
Offering Date of a given Offering Period shall be eligible to become a
Participant as of any Entry Date within that Offering Period under the Plan,
subject to the requirements of Section 5(a) and the limitations imposed by
Section 423(b) of the Code.
(b) Notwithstanding any provision of the Plan to the contrary,
no Participant shall be granted an option under the Plan (i) if, immediately
after the grant, such Participant (or any other person whose stock would be
attributed to such Participant pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding options to purchase stock possessing 5% or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary of the Company, or (ii) which permits such Participant's
rights to purchase stock under all employee stock purchase plans of the Company
and its Subsidiaries intended to qualify under Section 423 of the Code to accrue
at a rate which exceeds $25,000 of fair market value of stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
7. Offering Periods. The Plan shall be implemented by a series of
consecutive Offering Periods. The first Offering Period shall commence on the
First Offering Date, the second Offering Period shall commence on January 1,
1999, and succeeding Offering Periods shall commence on or about the January 1
that occurs every 12 months thereafter (or at such other time or times as may be
determined by the Committee). The Committee shall have the power to change the
duration and/or the frequency of Offering Periods with respect to future
offerings without stockholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
to be affected.
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8. Election to Participate.
(a) An eligible Employee may elect to participate in the Plan
commencing on any Entry Date by completing an Enrollment Agreement on the form
provided by the Company and filing the Enrollment Agreement with the Company on
or prior to such Entry Date, unless a later time for filing the Enrollment
Agreement is set by the Committee for all eligible Employees with respect to a
given offering. The Enrollment Agreement shall set forth the percentage of the
Participant's Compensation that is to be withheld by payroll deduction pursuant
to the Plan.
(b) Except as otherwise determined by the Committee under
rules applicable to all Participants, payroll deductions for a Participant shall
commence on the first payroll following the Entry Date on which the Participant
elects to participate in accordance with Section 5(a) and shall end on the last
payroll in the Offering Period, unless sooner terminated by the Participant as
provided in Section 11.
(c) Unless a Participant elects otherwise prior to the last
Exercise Date of an Offering Period, such Participant shall be deemed (i) to
have elected to participate in the immediately succeeding Offering Period (and,
for purposes of such Offering Period such Participant's "Entry Date" shall be
deemed to be the first day of such Offering Period) and (ii) to have authorized
the same payroll deduction for such immediately succeeding Offering Period as
was in effect for such Participant immediately prior to the commencement of such
succeeding Offering Period.
9. Participant Contributions.
(a) Except as otherwise authorized by the Committee pursuant
to Section 6(d) below, all Participant contributions to the Plan shall be made
only by payroll deductions. At the time a Participant files the Enrollment
Agreement with respect to an Offering Period, the Participant may authorize
payroll deductions to be made on each payroll date during the portion of the
Offering Period that he or she is a Participant in an amount not less than 1%
and not more than 25% of the Participant's Compensation on each payroll date
during the portion of the Offering Period that he or she is a Participant (or
subsequent Offering Periods as provided in Section 5(c)). The amount of payroll
deductions shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the
Participant's Compensation.
(b) A Participant may discontinue his or her participation in
the Plan as provided in Section 11, or may decrease or increase the rate or
amount of his or her payroll deductions during such Offering Period (within the
limitations of Section 6(a) above) by completing and filing with the Company a
new Enrollment Agreement authorizing a change in the rate or amount of payroll
deductions; provided, that a Participant may not change the rate or amount of
his or her payroll deductions more than once in any Exercise Period. The change
in rate or amount shall be effective with the first full payroll period
following ten (10) business days after the Company's receipt of the new
Enrollment Agreement.
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(c) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
Participant's payroll deductions may be decreased to 0% at such time during any
Exercise Period which is scheduled to end during the current calendar year that
the aggregate of all payroll deductions accumulated with respect to such
Exercise Period and any other Exercise Period ending within the same calendar
year equal to the product of $25,000 multiplied by the Applicable Percentage for
the calendar year. Payroll deductions shall recommence at the rate provided in
the Participant's enrollment agreement at the beginning of the following
Exercise Period which is scheduled to end in the following calendar year, unless
terminated by the Participant as provided in Section 11.
(d) Notwithstanding anything to the contrary in the foregoing,
but subject to the limitations set forth in Section 3(b), the Committee may
permit Participants to make additional contributions to the Plan subject to such
terms and conditions as the Committee may in its discretion determine. All such
additional contributions shall be made in a manner consistent with the
provisions of Section 423 of the Code or any successor thereto, and shall be
held in Participants' accounts and applied to the purchase of shares of Common
Stock pursuant to options granted under this Plan in the same manner as payroll
deductions contributed to the Plan as provided above.
(e) All Plan Contributions made for a Participant shall be
deposited in the Company's general corporate account and shall be credited the
Participant's account under the Plan. No interest shall accrue or be credited
with respect to a Participant's Plan Contributions. All Plan Contributions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate or otherwise set
apart such Plan Contributions from any other corporate funds.
10. Grant of Option.
(a) On a Participant's Entry Date, subject to the limitations
set forth in Sections 3(b) and 12(a), the Participant shall be granted an option
to purchase on each subsequent Exercise Date during the Offering Period in which
such Entry Date occurs (at the Exercise Price determined as provided in Section
8 below) a number of shares of Common Stock determined by dividing such
Participant's Plan Contributions accumulated prior to such Exercise Date and
retained in the Participant's account as of such Exercise Date by the lower of
(i) the Applicable Percentage of the greater of (A) the Fair Market Value of a
share of Common Stock on the Offering Date or (B) the Fair Market Value of a
share of Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period, or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on such Exercise Date; provided,
that the maximum number of shares an Employee may purchase during any Exercise
Period shall be (i) during calendar year 1998, 6,250 shares and (ii) thereafter,
2,000 shares. The Fair Market Value of a share of Common Stock shall be
determined as provided in Section 7(b).
(b) The Fair Market Value of a share of Common Stock on a
given date shall be determined by the Committee in its discretion; provided,
that if there is a public market for the Common Stock, the Fair Market Value per
share shall be either (i) the closing price of the Common Stock on such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers
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Automated Quotation (Nasdaq) National Market System, (ii) if such price is not
reported, the average of the bid and asked prices for the Common Stock on such
date (or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by Nasdaq, (iii) in the event
the Common Stock is listed on a stock exchange, the closing price of the Common
Stock on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal, or (iv) if no such quotations are available for a
date within a reasonable time prior to the valuation date, the value of the
Common Stock as determined by the Committee using any reasonable means. For
purposes of the First Offering Date, the Fair Market Value of a share of Common
Stock shall be the Price to Public as set forth in the final prospectus filed by
the Company with the Securities and Exchange Commission pursuant to Rule 424
under the Securities Act of 1933, as amended.
11. Exercise Price. The Exercise Price per share of Common Stock
offered to each Participant in a given Offering Period shall be the lower of:
(i) the Applicable Percentage of the greater of (A) the Fair Market Value of a
share of Common Stock on the Offering Date or (B) the Fair Market Value of a
share of Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on the Exercise Date. The
Applicable Percentage with respect to each Offering Period shall be 85%, unless
and until such Applicable Percentage is increased by the Committee, in its sole
discretion, provided that any such increase in the Applicable Percentage with
respect to a given Offering Period must be established not less than fifteen
(15) days prior to the Offering Date thereof.
12. Exercise of Options. Unless the Participant withdraws from the
Plan as provided in Section 11, the Participant's option for the purchase of
shares will be exercised automatically on each Exercise Date, and the maximum
number of full shares subject to such option shall be purchased for the
Participant at the applicable Exercise Price with the accumulated Plan
Contributions then credited the Participant's account under the Plan. During a
Participant's lifetime, a Participant's option to purchase shares hereunder is
exercisable only by the Participant.
13. Delivery. As promptly as practicable after each Exercise Date,
the Company shall credit to each Participant's account the shares purchased upon
exercise of such Participant's option. As promptly as practicable after receipt
of a written request of a Participant (or the Participant's beneficiary), as
appropriate, the Company shall deliver to the Participant (or the Participant's
beneficiary) a certificate or certificates representing shares held in the
Participant's account. Any amount remaining to the credit of a Participant's
account after the purchase of shares by such Participant on an Exercise Date, or
which is insufficient to purchase a full share of Common Stock, shall be carried
over to the next Exercise Period if the Participant continues to participate in
the Plan or, if the Participant does not continue to participate, shall be
returned to the Participant.
14. Withdrawal; Termination of Employment.
(a) A Participant may withdraw from the Plan at any time by
giving written notice to the Company. All of the Plan Contributions credited to
the Participant's account and not yet invested in Common Stock will be paid to
the Participant as soon as administratively practicable. After receipt of the
Participant's notice of withdrawal, the Participant's option to purchase shares
6
<PAGE>
pursuant to the Plan automatically will be terminated, and no further payroll
deductions for the purchase of shares will be made for the Participant's
account. Payroll deductions will not resume on behalf of a Participant who has
withdrawn from the Plan (a "Former Participant") unless the Former Participant
enrolls in a subsequent Offering Period in accordance with Section 5(a).
(b) Upon termination of the Participant's Continuous Status as
an Employee prior to any Exercise Date for any reason, including retirement or
death, the Plan Contributions credited to the Participant's account and not yet
invested in Common Stock will be returned to the Participant or, in the case of
death, to the Participant's beneficiary as determined pursuant to Section 14,
and the Participant's option to purchase shares under the Plan will
automatically terminate.
(c) A Participant's withdrawal from an Offering Period will
not have any effect upon the Participant's eligibility to participate in
succeeding Offering Periods or in any similar plan which may hereafter be
adopted by the Company.
15. Stock.
(a) The maximum number of shares of Common Stock that shall be
made available for sale under the Plan shall be One Million (1,000,000) shares,
subject to adjustment as provided in Section 17. Shares of Common Stock subject
to the Plan may be newly issued shares or shares reacquired in private
transactions or open market purchases. If and to the extent that any right to
purchase reserved shares shall not be exercised by any Participant for any
reason or if such right to purchase shall terminate as provided herein, shares
that have not been so purchased hereunder shall again become available for the
purpose of the Plan unless the Plan shall have been terminated, but all shares
sold under the Plan, regardless of source, shall be counted against the
limitation set forth above.
(b) A Participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a Participant under the Plan
will be registered in the name of the Participant or in the name of the
Participant and his or her spouse, as requested by the Participant.
16. Administration.
(a) The Plan shall be administered by the Committee. The
Committee shall have the authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. The
administration, interpretation, or application of the Plan by the Committee
shall be final, conclusive and binding upon all persons.
(b) Notwithstanding the provisions of Subsection (a) of this
Section 13, in the event that Rule 16b-3 promulgated under the Exchange Act or
any successor provision thereto ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall only be
administered by such body and in such a manner as shall comply with the
applicable
7
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requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any person that is
not "disinterested" as that term is used in Rule 16b-3.
17. Designation of Beneficiary.
(a) A Participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
Participant's account under the Plan in the event of the Participant's death
subsequent to an Exercise Date on which the Participant's option hereunder is
exercised but prior to delivery to the Participant of such shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of the Participant's death prior to the exercise of the option.
(b) A Participant's beneficiary designation may be changed by
the Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
18. Transferability. Neither Plan Contributions credited to a
Participant's account nor any rights to exercise any option or receive shares of
Common Stock under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution, or as provided in Section 14). Any attempted assignment, transfer,
pledge or other distribution shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
11.
19. Participant Accounts. Individual accounts will be maintained
for each Participant in the Plan to account for the balance of his Plan
Contributions and options issued and shares purchased under the Plan. Statements
of account will be given to Participants semi-annually in due course following
each Exercise Date. The statements will set forth the amounts of payroll
deductions, the per share purchase price, the number of shares purchased and the
remaining cash balance, if any.
20. Adjustments Upon Changes in Capitalization; Corporate
Transactions.
(a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number of kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be made in the number and/or kind of shares, and the per-share
option price thereof, which may be issued in the aggregate and to any
Participant upon exercise of options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of
the Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action,
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unless otherwise provided by the Committee. In the event of a proposed sale of
all or substantially all of the Company's assets, or the merger of the Company
with or into another corporation (each, a "Sale Transaction"), each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Committee determines, in the exercise of its sole discretion and in
lieu of such assumption or substitution, to shorten the Exercise Period then in
progress by setting a new Exercise Date (the "New Exercise Date"). If the
Committee shortens the Exercise Period then in progress in lieu of assumption or
substitution in the event of a Sale Transaction, the Committee shall notify each
Participant in writing, at least ten (10) days prior to the New Exercise Date,
that the exercise date for such Participant's option has been changed to the New
Exercise Date and that such Participant's option will be exercised automatically
on the New Exercise Date, unless prior to such date the Participant has
withdrawn from the Plan as provided in Section 11. For purposes of this Section
17(b), an option granted under the Plan shall be deemed to have been assumed if,
following the Sale Transaction, the option confers the right to purchase, for
each share of option stock subject to the option immediately prior to the Sale
Transaction, the consideration (whether stock, cash or other securities or
property) received in the Sale Transaction by holders of Common Stock for each
share of Common Stock held on the effective date of the Sale Transaction (and if
such holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares of Common Stock);
provided, that if the consideration received in the Sale Transaction was not
solely common stock of the successor corporation or its parent (as defined in
Section 424(e) of the Code), the Committee may, with the consent of the
successor corporation and the Participant, provide for the consideration to be
received upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by the holders of Common Stock in the Sale Transaction.
(c) In all cases, the Committee shall have sole discretion to
exercise any of the powers and authority provided under this Section 17, and the
Committee's actions hereunder shall be final and binding on all Participants. No
fractional shares of stock shall be issued under the Plan pursuant to any
adjustment authorized under the provisions of this Section 17.
21. Amendment of the Plan. The Board or the Committee may at any
time, or from time to time, amend the Plan in any respect; provided, that (i) no
such amendment may make any change in any option theretofore granted which
adversely affects the rights of any Participant and (ii) the Plan may not be
amended in any way that will cause rights issued under the Plan to fail to meet
the requirements for employee stock purchase plans as defined in Section 423 of
the Code or any successor thereto. To the extent necessary to comply with Rule
16b-3 under the Exchange Act, Section 423 of the Code, or any other applicable
law or regulation), the Company shall obtain shareholder approval of any such
amendment.
22. Termination of the Plan.
The Plan and all rights of Employees hereunder shall terminate on the
earliest of:
(a) the Exercise Date that Participants become entitled to
purchase a number of shares greater than the number of reserved shares remaining
available for purchase under the Plan;
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(b) such date as is determined by the Board in its discretion;
or
(c) the last Exercise Date immediately preceding the tenth
(10th) anniversary of the Plan's effective date.
In the event that the Plan terminates under circumstances described in
Section 19(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.
23. Notices. All notices or other communications by a Participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
24. Effective Date. Subject to adoption of the Plan by the Board, the
Plan shall become effective on the First Exercise Date. The Board shall submit
the Plan to the shareholders of the Company for approval within twelve months
after the date the Plan is adopted by the Board. If such shareholder approval is
not obtained, the Plan and all rights of Participants under the Plan shall be
null and void and shall have no effect.
25. Conditions Upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase
shares under the Plan, and the Company's obligation to sell and deliver shares
upon the exercise of options to purchase shares shall be subject to compliance
with all applicable federal, state and foreign laws, rules and regulations and
the requirements of any stock exchange on which the shares may then be listed.
(b) The Company may make such provisions as it deems
appropriate for withholding by the Company pursuant to federal or state tax laws
of such amounts as the Company determines it is required to withhold in
connection with the purchase or sale by a Participant of any Common Stock
acquired pursuant to the Plan. The Company may require a Participant to satisfy
any relevant tax requirements before authorizing any issuance of Common Stock to
such Participant.
26. Expenses of the Plan. All cost and expenses incurred in
administering the Plan shall be paid by the Company, except that any stamp
duties or transfer taxes applicable to participation in the Plan may be charged
to the account of such Participant by the Company.
27. No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company,
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an employee's employment at any time.
28. Applicable Law. The laws of the State of Delaware shall govern all
matter relating to this Plan except to the extent (if any) superseded by the
laws of the United States.
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29. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
As amended September 1999
11
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement") dated
as of January 28, 2000, between SPORTSLINE.COM, INC., a Delaware corporation
(the "Company"), and Michael Levy (the "Executive").
PRELIMINARY STATEMENTS
A. The Company and the Executive are parties to that certain Employment
Agreement dated as of June 15, 1998, as amended by an Amendment to Employment
Agreement dated as of August 10, 1999 (the "Prior Employment Agreement");
B. The Company and the Executive desire to amend and restate the Prior
Employment Agreement as set forth herein;
C. The Compensation Committee ("Compensation Committee") of the Board
of Directors of the Company (the "Board") has approved the execution and
delivery by the Company of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth in this Agreement.
2. Term of Agreement. Subject to the terms and conditions hereof, the
term of the Executive's employment pursuant to this Agreement (the "Term") shall
commence on June 15, 1998 and shall continue in effect through December 31,
2003. The Term may be extended or renewed at any time by mutual written
agreement.
3. Position and Duties. The Executive shall serve as the Chairman of
the Board, President and Chief Executive Officer of the Company and shall have
powers and authority superior to any other officer or employee of the Company or
of any subsidiary of the Company. The Executive shall also have such other
powers and duties as may from time to time be delegated to him by the Board,
provided that such duties are consistent with his present duties and with the
Executive's position. The Executive shall report to the Board. The Executive
shall devote substantially all of his working time and efforts during normal
business hours to the business and affairs of the Company in substantially the
same manner (both as to working time and effort) as the Executive has devoted to
the Company in the past; provided, that it shall not be a violation of this
Agreement for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill speaking engagements or
(iii) manage personal investments, so long as such activities do not interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
4. Place of Performance. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations. The
<PAGE>
Company shall not, without the written consent of the Executive, relocate or
transfer its principal executive offices outside Broward County, Florida.
5. Compensation and Related Matters.
(a) Base Salary. The Executive shall receive a base salary, payable in
substantially equal bi-weekly installments, at the annual rate of at least
$385,000 during each fiscal year during the Term beginning January 1, 2000, or
such greater amount as shall be determined by the Compensation Committee
("Compensation Committee") of the Board or the entire Board, in its sole
discretion (the "Base Salary"). Notwithstanding the foregoing, on January 1,
2001 and on each January 1 thereafter (the "Salary Adjustment Date"), the
Executive's then Base Salary shall be increased by an amount equal to 10% of the
Base Salary payable to the Executive during the preceding calendar year. The
Base Salary shall also be reviewed, at least annually, for merit increases and
may, by action and in the discretion of the Compensation Committee or the Board,
be increased at any time or from time to time. Any increase in the Base Salary
or other compensation granted by the Compensation Committee or the Board shall
in no way limit or reduce any other obligation of the Company under this
Agreement and, once established at an increased specified rate, the Base Salary
shall not thereafter be reduced.
(b) Incentive Compensation. In addition to the Base Salary, during the
Term the Executive shall be entitled to receive an annual bonus (the "Annual
Bonus") for each fiscal year for which the Company achieves its budgeted EBITDA
target (the "Target"), in an amount equal to fifty percent (50%) of the
Executive's Base Salary for such fiscal year. The Target for each fiscal year
shall be approved by the Compensation Committee not later than 90 days after the
beginning of each fiscal year. For purposes of this Section, the term "EBITDA"
means the Company's earnings before income taxes, depreciation and amortization,
as determined in accordance with generally accepted accounting principles,
consistently applied with the Company's past practices, and as reflected in the
Company's audited financial statements for the relevant fiscal year. If the
Company does not achieve the Target for any fiscal year, no Annual Bonus shall
be payable for such fiscal year. The Annual Bonus payable with respect to any
fiscal year (net of any tax or other amount properly withheld therefrom) shall
be paid by the Company to the Executive within sixty (60) days after the end of
the fiscal year; provided, that (i) any amount paid shall be subject to increase
or decrease based upon the results of the Company's audited financial statements
with respect to such year, (ii) the amount of Annual Bonus payable for any
fiscal year during which the Term expires or this Agreement is terminated shall
be prorated and payable only with respect to the portion of the fiscal year
during which the Executive was employed by the Company and (iii) no Annual Bonus
shall be payable with respect to any fiscal year during which the Executive's
employment is terminated by the Company for Cause, or by the Executive for other
than Good Reason. In addition to the Annual Bonus, the Executive shall be
entitled to receive such other bonuses or incentive compensation as the
Compensation Committee may determine in its sole discretion, taking into
consideration such criteria as it shall deem relevant. The Executive shall be
entitled to participate in any bonus pool established by the Company for its
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such bonus pool.
(c) Stock Options. During the Term, the Executive shall be entitled to
receive stock option grants, no less frequently than annually. The number of
stock options and the terms and conditions of stock options granted to the
Executive shall be determined by the Compensation Committee in its discretion;
provided, that beginning in 2000, the Executive shall be granted stock options
to purchase at least 175,000 shares of the Company's common stock during each
calendar year.
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In addition, effective August 10, 1999, the Company will grant to the
Executive pursuant to the Company's 1997 Incentive Compensation Plan (the
"Plan") non-qualified stock options (the "Options") to purchase 200,000 shares
of the Company's common stock, at an exercise price equal to the closing price
per share of the common stock on August 10, 1999, as reported by Nasdaq. The
Options shall be granted pursuant to and subject to the terms and conditions of
the Plan and shall have a ten-year term. Notwithstanding anything in the Plan or
the forms of agreements evidencing the Options to the contrary, the Options
shall vest and become exercisable in full on the first business day of the
calendar quarter immediately following the calendar quarter in which the Company
first achieves positive EBITDA; and in no event shall the Options be exercised,
in whole or in part, unless and until such event occurs."
(d) Expenses. During the Term, the Company, in accordance with its
expense reimbursement policies and procedures in effect for senior management
employees from time to time, shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company, including expenses for travel and
entertainment.
(e) Other Benefits. The Company shall not make any changes in any
employee benefit plans or arrangements in effect on the date of this Agreement
in which the Executive participates, (including without limitation, to the
extent in effect, each pension and retirement plan, supplemental pension and
retirement plan, savings and profit sharing plan, life insurance policies,
officers and directors policies, stock option plan, life insurance plan, medical
and health insurance plan, disability plan, dental plan, health-and-accident
plan or, similar plans or arrangements) which would adversely affect the
Executive's rights or benefits thereunder, unless such change occurs pursuant to
an amendment applicable to all senior executives and/or employees of the Company
and does not result in a proportionately greater reduction in the rights of or
benefits to the Executive as compared with any other senior executives and/or
employees of the Company. The Executive shall be entitled to participate in or
receive benefits under any employee benefit plan or arrangement made available
by the Company in the future to its executives and key management employees,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plan or arrangement. The Company shall also provide the
Executive such coverage under any directors and officers liability policies it
maintains as is provided to its other senior management employees. Nothing paid
or provided to the Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the Base Salary
or any other obligation payable to the Executive pursuant to this Agreement.
(f) Vacation. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers, but not less than four weeks in any calendar
year (prorated in any calendar year during which the Executive is employed under
this Agreement for less than the entire such year in accordance with the number
of days in such calendar year during which he is so employed). The Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
(g) Perquisites and Fringe Benefits. The Executive shall be entitled to
continue to receive all perquisites and fringe benefits provided or available to
senior executive officers of the Company in accordance with present practice and
as may be changed from time to time with respect to all senior executive
officers of the Company.
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(h) Working Facilities. The Company shall furnish the Executive with an
office, a secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
6. Other Offices. The Executive agrees to serve without additional
compensation as a director of the Company and any of its subsidiaries and as an
officer of any of the Company's present or future subsidiaries; provided, that
the Executive shall be indemnified for serving in any and all such capacities on
a basis no less favorable than may be from time to time provided to other senior
executives of the Company, and the Company shall use its best efforts consistent
with sound business practices obtain and maintain appropriate coverage under
officers and directors policies.
7. Restrictive Covenants.
(a) Noncompetition. The Executive agrees that he will not, either
during the Term or for a period of two years following any termination of this
Agreement, other than a termination by the Executive for Good Reason (as
hereinafter defined) or a termination by the Company without Cause (as
hereinafter defined), directly or indirectly, engage in, operate, have any
investment or interest or otherwise participate in any manner (whether as an
employee, officer, director, partner, agent, security holder, creditor,
consultant or otherwise) in any sole proprietorship, partnership, corporation or
business or any other person or entity that engages, directly or indirectly, in
a Competing Business; provided, that the Executive may continue to hold Company
securities and/or acquire, solely as an investment, shares of capital stock or
other equity securities of any company which are publicly traded, so long as the
Executive does not control, acquire a controlling interest in, or become a
member of a group which exercises direct or indirect control of, more than five
percent (5%) of any class of capital stock of such corporation. For purposes of
this Agreement, the term "Competing Business" means any sole proprietorship,
partnership, corporation or business or any other person or entity that owns,
operates, manages or distributes an on-line service that provides sports news,
information and content, whether such service is accessed through the Internet,
a commercial on-line service or otherwise.
(b) Unauthorized Disclosure. During the Term and for a period of two
years following any termination of this Agreement, other than a termination by
the Executive for Good Reason (as hereinafter defined) or a termination by the
Company without Cause (as hereinafter defined), the Executive shall not, without
the written consent of the Board or a person authorized thereby, disclose to any
person, other than an employee of the Company (or its subsidiaries) or a person
to whom disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of his duties as an executive of the Company, any
confidential information obtained by him while in the employ of the Company with
respect to any of the Company's customers, suppliers, creditors, lenders,
investment bankers, methods of distribution or methods of marketing, the
disclosure of which he knows will be damaging to the Company; provided, however,
that confidential information shall not include any information known generally
to the public (other than as a result of unauthorized disclosure by the
Executive) or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that conducted by
the Company. Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to the extent
required by law.
(c) Nonsolicitation of Employees. During the Term and for a period of
two years following any termination of this Agreement, other than a termination
by the Executive for Good Reason (as hereinafter defined) or a termination by
the Company without Cause (as hereinafter
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defined), the Executive shall not directly or indirectly, for himself or for any
other person, firm, corporation, partnership, association or other entity,
attempt to employ or enter into any contractual arrangement with any employee or
former employee of the Company, unless such employee or former employee has not
been employed by the Company for a period in excess of six months.
(d) Injunction. It is recognized and hereby acknowledged by the Company
and the Executive that a breach by the Executive of any of the agreements
contained in this Section 7 may cause irreparable harm or damage to the Company
or its subsidiaries, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive and the Company agree that the Company and
any of its subsidiaries shall be entitled to an injunction issued by any court
of competent jurisdiction enjoining and restraining any and all violations of
such agreements by the Executive or his associates, affiliates, partners or
agents, and that such right to an injunction shall be cumulative and in addition
to whatever other remedies the Company may possess.
(e) Certain Provisions. The limitations of Section 7(a) shall terminate
if upon termination of this Agreement for any reason the Company does not
fulfill its obligations as required by Section 9 hereof; however, such
termination shall not affect the rights of the Executive to receive all
payments, undiminished in any way, provided by such Section 9. The provisions of
Section 7 shall apply during the time the Executive is receiving any payments
from the Company as a result of a termination resulting from Disability.
8. Termination. The Executive's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
(a) Death. The Executive's employment under this Agreement shall
terminate automatically upon his death.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from the
performance of his duties under this Agreement for six consecutive months during
any twelve-month period, and within 30 days after written notice of termination
is given (which notice may only be given after the end of such six-month
period), the Executive shall not have returned to the performance of his duties
under this Agreement, the Company may terminate the Executive's employment under
this Agreement for "Disability."
(c) Cause. The Company may terminate the Executive's employment under
this Agreement for Cause. For purposes of this Agreement, the term "Cause" shall
mean (i) the willful and continued failure by the Executive to substantially
perform his duties under this Agreement (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness or from the
termination of this Agreement by the Executive for Good Reason), after a demand
for substantial performance is delivered to the Executive by the Company
specifically identifying the manner in which the Company believes the Executive
has not substantially performed his duties, and the Executive shall have failed
to resume substantial performance of such duties within thirty (30) days of
receiving such demand, (ii) the willful engaging by the Executive in criminal
conduct (including embezzlement and criminal fraud) which is demonstrably and
materially injurious to the Company, monetarily or otherwise, or (iii) the
conviction of the Executive of a felony (other than a traffic violation) or the
conviction of the Executive of a misdemeanor which impairs the Executive's
ability substantially to perform his duties with the Company. For purposes of
this paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be
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done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding anything
herein to the contrary, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the members of the Board then in office (other than the
Executive) at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of conduct set forth in clause (i), (ii)
or (iii), above, and specifying the particulars thereon in detail.
(d) Termination by the Executive. The Executive may terminate his
employment under this Agreement (i) for Good Reason, or (ii) if his health
should become impaired to any extent that makes the continued performance of his
duties under this Agreement hazardous to his physical or mental health or his
life, provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that at the Company's request and expense the Executive shall submit to an
examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement the term "Good Reason" shall mean,
without the Executive's express prior written consent, the occurrence of any one
or more of the following: (A) the assignment to the Executive of any duties or
reporting obligations other than those contemplated by, or any limitation of the
powers of the Executive in any respect not contemplated by, Section 3 hereof, or
any other action by the Company which results in a diminution in the nature or
status of the Executive's position, authority, duties or responsibilities; (B) a
reduction by the Company in the Executive's Base Salary as the same shall be
increased from time to time; (C) the Company's requiring the Executive to be
based at a location outside of Broward County, Florida; (D) a failure by the
Company to comply with its other obligations and agreements contained herein,
including but not limited to any failure by the Company to comply with any of
the provisions of Section 5 hereof; (E) a failure of the Company to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Section 10(c) hereof; or (F) any
purported termination by the Company of the Executive's employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
subsection 8(e) hereof and otherwise in accordance with the terms of this
Agreement, and for purposes of this Agreement, no such termination shall be
effective.
The Executive's right to terminate his employment for Good Reason or
Retirement shall not be affected by his incapacity due to physical or mental
illness, nor shall the Executive's continued employment constitute consent to,
or a waiver of rights with respect to, any circumstances constituting Good
Reason hereunder. For purposes of this Section 8(d), any good faith
determination of "Good Reason" made by the Executive shall be conclusive;
provided, that with respect to the matters set forth in clauses (A) and (D),
above, the Executive shall give the Board thirty (30) days prior written notice
of his intent to terminate this Agreement as a result of any breach or alleged
breach of the applicable provision and the Company shall have the right to cure
any such breach or alleged breach within such 30-day period; provided, that no
such prior written notice or opportunity to cure shall be required following a
Change in Control.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 8(a), above) shall be communicated by written Notice of Termination
to the other party hereto given in accordance with
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Section 12. For purposes of this Agreement, a "Notice of Termination" shall mean
a written notice which indicates the specific termination provision in this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive to set
forth in any Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason shall not waive any right of the Executive hereunder or
preclude the Executive from asserting such fact or circumstance in enforcing his
rights hereunder.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties during such thirty (30) day period),
(iii) if the Executive's employment is terminated by the Company for Cause, the
date specified in the Notice of Termination after the expiration of any cure
periods, and (iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is given after the expiration
of any cure periods; provided, that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date finally
determined to be the Date of Termination, either by mutual written agreement of
the parties or by a binding and final arbitration award or an adjudication by a
court of competent jurisdiction (and in such event the Company shall continue to
perform its obligations hereunder until the date so determined).
9. Compensation Upon Termination or During Disability.
(a) Death. If the Executive's employment shall be terminated by reason
of his death, the Company shall pay to such person as the Executive shall have
designated in a notice filed with the Company, or, if no such person shall have
been designated, to his estate, (i) any unpaid amounts of his Base Salary or
Incentive Compensation accrued prior to the date of his death and (ii) a lump
sum death benefit equal to the sum of the Executive's then current Base Salary
and the Executive's Incentive Compensation for the immediately preceding
calendar year (the "Most Recent Incentive Compensation"); and upon making such
payments, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of the
Executive's death pursuant to Section 5(c)); provided, that the Executive's
spouse, beneficiaries or estate shall also be entitled to receive any amounts or
other benefits payable pursuant to any pension or employee benefit plan, life
insurance policy or other plan, program or policy then maintained or provided by
the Company in accordance with the terms thereof, or any other agreement between
the Executive and the Company. In addition, all unvested stock options held by
the Executive on the Date of Termination shall continue to vest and become
exercisable in accordance with the vesting schedule for such stock options then
in effect, and each such stock option, together with any previously vested and
unexercised stock options, shall be exercisable in accordance with their
respective terms for a period of one (1) year following the date on which it
becomes vested (or, in the case of any previously vested and unexercised
options, one (1) year following the Date of Termination) or, if earlier, until
the then scheduled expiration date(s) of such options.
(b) Disability. During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his full Base Salary and any
Incentive Compensation until the Executive's employment is terminated pursuant
to Section 8(b) hereof, or until the Executive terminates his employment
pursuant to
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Section 8(d)(ii) hereof, whichever first occurs. Following such termination, the
Executive shall be paid in equal monthly installments an amount equal to his
Base Salary at the rate in effect at the time Notice of Termination is given
until the later of one year after termination of his employment or the
expiration of the Term (as in effect on the date of termination), plus any
disability payments otherwise payable by or pursuant to plans provided by the
Company. In addition, the Executive shall be entitled to receive any amounts
payable pursuant to any pension or employee benefit plan, life insurance policy
or other plan, program or policy then maintained or provided by the Company to
the Executive in accordance with the terms thereof. In addition, all unvested
stock options held by the Executive on the Date of Termination shall continue to
vest and become exercisable in accordance with the vesting schedule for such
stock options then in effect, and each such stock option, together with any
previously vested and unexercised stock options, shall be exercisable in
accordance with their respective terms for a period of one (1) year following
the date on which it becomes vested (or, in the case of any previously vested
and unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options; provided,
that such vesting shall discontinue immediately, and any unexercised options
shall terminate and be cancelled immediately upon a breach by the Executive of
the provisions of Section 7 hereof or the Executive's acceptance of employment
with another entity.
(c) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated by the Company for Cause, or by the Executive for other than
Good Reason, the Company shall pay the Executive his full Base Salary and
accrued vacation pay through the Date of Termination at the rate in effect at
the time Notice of Termination is given (or on the Date of Termination if no
Notice of Termination is required hereunder) plus all other amounts to which the
Executive is entitled under any plan, program, policy or practice of the Company
or otherwise at the time such payments are due and such payments shall, assuming
the Company is in compliance with the provisions of this Agreement, fully
discharge the Company's obligations hereunder.
(d) Good Reason; Other than Cause or Disability. If the Company shall
terminate the Executive's employment other than for Cause or Disability (it
being understood that a purported termination for Cause or Disability which is
disputed and finally determined not to have been proper shall be a termination
by the Company in breach of this Agreement), or the Executive shall terminate
his employment for Good Reason, then the Company shall pay the Executive, not
later than the fifth day following the Date of Termination, the aggregate of the
following amounts:
(A) his full Base Salary and accrued vacation pay through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, or the Date of Termination where no Notice of
Termination is required hereunder, any accrued Incentive Compensation
and any other amounts to which the Executive is entitled under any
plan, policy, practice or program of the Company or otherwise at the
time such payments are due;
(B) the product of (x) the Most Recent Incentive Compensation,
times (y) a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination and the
denominator of which is 365; and
(C) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the Date of Termination, and as a
severance benefit to the Executive, a lump sum amount equal to the
greater of (x) two (2) times the Executive's annual Base Salary in
effect immediately prior to the occurrence of the circumstances giving
rise to such termination and (y) the amount of Base Salary that would
have been payable to
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the Executive through the end of the Term had the
Executive's employment not been terminated, assuming that the
Executive's annual Base Salary for such period was determined in
accordance with the provisions of Section 5(a).
(e) Acceleration of Vesting; Sale of Shares. Unless the Company
terminates the Executive's employment for Cause, the Executive terminates his
employment for other than Good Reason or the Executive's employment is
terminated due to his death or Disability, upon (i) termination of the
Executive's employment or (ii) upon a Change of Control, all unvested stock
options held by the Executive on the Date of Termination shall immediately vest
and become exercisable; and all such stock options, together with any previously
vested and unexercised stock options, shall be exercisable by the Executive in
accordance with their respective terms for a period of one (1) year following
the Date of Termination or the date of the Change in Control, as the case may
be, or, if earlier, until the then scheduled expiration date(s) of such options.
The Company shall provide the Executive such cooperation and assistance as may
reasonably be necessary to effect cashless exercises of such stock options, as
well as the sale of any restricted Company securities beneficially owned by the
Executive at the Date of Termination.
For purposes of this Agreement, a "Change in Control" means and shall
be deemed to have occurred if: (i) any person, entity or "group", within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than (A) the Company, its
subsidiaries or any employee benefit plan established and maintained by the
Company or its subsidiaries, or (B) the Executive or any of the Executive's
affiliates, becomes the "beneficial owner" (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities entitled to vote generally in
the election of directors; (ii) the individuals who, as of the date hereof
constitute the Company's Board of Directors (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's stockholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than the election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the shareholders of
the Company approve (A) a reorganization, merger or consolidation with respect
to which persons who were the shareholders of the Company immediately prior to
such reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (B) a liquidation or dissolution of the Company,
or (C) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned.
(f) Maintenance of Benefit. Unless the Executive is terminated for
Cause, the Company shall maintain in full force and effect, for the continued
benefit of the Executive and/or his family for two (2) years after termination
for any reason, all employee medical, health and hospitalization plans and
programs in which the Executive and/or his family was entitled to participate in
immediately prior to the Date of Termination provided that the continued
participation of the Executive and/or his family is possible under the general
terms and provisions of such plans and
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programs. In the event that the participation of the Executive and/or his family
in any such plan or program is barred, the Company shall arrange to provide the
Executive and/or his family with benefits substantially similar to those which
the Executive and/or his family would otherwise have been entitled to receive
under such plans and programs from which his or their continued participation is
barred.
(g) Full Settlement. The Company's obligation to make the payments
provided for herein and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others,
except claims in respect of the Executive's gross negligence, wilful misconduct
or violation of any applicable law. The Executive shall not be required to
mitigate the amount of any payment provided for in Section 9 hereof by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in Section 9 hereof be reduced by any compensation earned by the Executive as
the result of employment by another employer or business, by profits earned by
the Executive from any source at any time before or after the Date of
Termination, or otherwise. Unless the Executive is found by a court of competent
jurisdiction to have committed an act that constitutes gross negligence, wilful
misconduct or a violation of applicable law, the Company agrees to pay, to the
fullest extent permitted by law, all legal fees and expenses incurred by the
Executive as a result of any contest or dispute (regardless of the outcome
thereof) by the Company or others of the validity or enforceability of, or
liability under, any provision of this Agreement, or by the Executive in seeking
to obtain or enforce any right or benefit provided by this Agreement (including
the amount of any payment pursuant to Section 9 hereof or the validity of any
purported termination by the Company hereunder).
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be enforce
able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If the
Executive should die while any amounts would still be payable to him hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's personal or legal
representatives or, if there be no such persons, the Executive's estate.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its
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business and/or assets as aforesaid which executes and delivers an assumption
and agreement provided for in this Section 10(c) or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law, or
otherwise.
11. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Except as herein specifically provided, amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its subsidiaries at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
12. Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: SportsLine.com, Inc.
6350 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attn: Board of Directors
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
13. Miscellaneous.
(a) This Agreement has been approved by the Board. No provisions of
this Agreement may be modified, waived or discharged unless such modification,
waiver or discharge is agreed to in a writing signed by the Executive and such
officer as may be specifically designed by the Board.
(b) The failure by either party hereto to insist upon compliance with
any condition or provision of this Agreement shall not be deemed a waiver of
such condition or provision or any other provision hereof.
(c) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and this Agreement
supersedes any other employment agreement between the Company and the Executive
(including, without limitation, the Prior Employment Agreement).
(d) The Company may withhold from any accounts payable under this
Agreement all Federal, state or other taxes as legally shall be required.
(e) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Florida, without
reference to principles of conflicts of laws.
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(f) The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement as of the date and year first above written.
SPORTSLINE.COM, INC.
By: /s/ Kenneth W. Sanders
-----------------------------------
Title: Senior Vice President and Chief
Financial Officer
/s/ Michael Levy
-----------------------------------
Michael Levy
The foregoing Employment Agreement was approved by the Compensation
Committee of the Company's Board of Directors:
/s/ Sean McManus
-----------------
Sean McManus
/s/ Gerry Hogan
-----------------
Gerry Hogan
12
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement") dated
as of January 28, 2000, between SPORTSLINE.COM, INC., a Delaware corporation
(the "Company"), and KENNETH W. SANDERS (the "Executive").
PRELIMINARY STATEMENTS
A. The Company and the Executive are parties to that certain Employment
Agreement dated as of
August 10, 1998 (the "Prior Employment Agreement");
B. The Company and the Executive desire to amend and restate the Prior
Employment Agreement as set forth herein;
C. The Compensation Committee ("Compensation Committee") of the Board
of Directors of the Company (the "Board") has approved the execution and
delivery by the Company of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth in this Agreement.
2. Term of Agreement. Subject to the terms and conditions hereof, the
term of the Executive's employment pursuant to this Agreement (the "Term") shall
commence on August 10, 1999 and shall continue in effect through August 31,
2002. The Term may be extended or renewed at any time by mutual written
agreement of the Company and the Executive.
3. Position and Duties. The Executive shall serve as the Senior Vice
President and Chief Financial Officer of the Company, shall perform
substantially the same duties as he currently performs and shall have
substantially the same authority as he currently exercises. The Executive shall
also have such other powers and duties as may from time to time be delegated to
him by the Board, the Chairman of the Board, the Chief Executive Officer or, if
there is no Chief Executive Officer, the highest ranking executive officer of
the Company, provided that such duties are consistent with his present duties
and with the Executive's position. The Executive shall report to the Company's
Chief Executive Officer or, if there is no Chief Executive Officer, the highest
ranking executive officer of the Company. The Executive shall devote
substantially all of his working time and efforts during normal business hours
to the business and affairs of the Company in substantially the same manner
(both as to working time and effort) as the Executive has devoted to the Company
in the past; provided, that it shall not be a violation of this Agreement for
the Executive to (i) serve on corporate, civic or charitable boards or
committees, and (ii) deliver lectures or fulfill speaking engagements, so long
as such activities are approved by the Company's Chief Executive Officer and do
not interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement.
<PAGE>
4. Place of Performance. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business.
5. Compensation and Related Matters.
(a) Base Salary. The Executive shall receive a base salary, payable in
substantially equal bi-weekly installments, at the annual rate of at least
$315,000 during each fiscal year during the Term, or such greater amount as
shall be determined by the Compensation Committee or the entire Board, in its
sole discretion (the "Base Salary"). The Base Salary shall be reviewed at least
annually for merit increases and may, by action and in the discretion of the
Compensation Committee or the Board, be increased at any time or from time to
time. Any increase in the Base Salary or other compensation granted by the
Compensation Committee or the Board shall in no way limit or reduce any other
obligation of the Company under this Agreement and, unless otherwise specified
by the Compensation Committee or the Board, once established at an increased
specified rate, the Base Salary shall not thereafter be reduced.
(b) Incentive Compensation. In addition to the Base Salary, during the
Term the Executive shall be entitled to receive an annual bonus (the "Annual
Bonus") for each fiscal year for which the Company achieves its budgeted EBITDA
target (the "Target"), in an amount equal to fifty percent (50%) of the
Executive's Base Salary for such fiscal year. The Target for each fiscal year
shall be approved by the Compensation Committee not later than 90 days after the
beginning of each fiscal year. For purposes of this Section, the term "EBITDA"
means the Company's earnings before income taxes, depreciation and amortization,
as determined in accordance with generally accepted accounting principles,
consistently applied with the Company's past practices, and as reflected in the
Company's audited financial statements for the relevant fiscal year. If the
Company does not achieve the Target for any fiscal year, no Annual Bonus shall
be payable for such fiscal year. The Annual Bonus payable with respect to any
fiscal year (net of any tax or other amount properly withheld therefrom) shall
be paid by the Company to the Executive within sixty (60) days after the end of
the fiscal year; provided, that (i) any amount paid shall be subject to increase
or decrease based upon the results of the Company's audited financial statements
with respect to such year, (ii) the amount of Annual Bonus payable for any
fiscal year during which the Term expires or this Agreement is terminated shall
be prorated and payable only with respect to the portion of the fiscal year
during which the Executive was employed by the Company and (iii) no Annual Bonus
shall be payable with respect to any fiscal year during which the Executive's
employment is terminated by the Company for Cause, or by the Executive for other
than Good Reason. In addition to the Annual Bonus, the Executive shall be
entitled to receive such other bonuses or incentive compensation as the
Compensation Committee may determine in its sole discretion, taking into
consideration such criteria as it shall deem relevant.
(c) Stock Options. During the Term, the Executive shall be entitled to
receive stock option grants, no less frequently than annually. The number of
stock options and the terms and conditions of stock options granted to the
Executive shall be determined by the Compensation Committee in its discretion;
provided, that beginning in 2000, the Executive shall be granted stock options
to purchase at least 50,000 shares of the Company's common stock during each
calendar year.
(d) Expenses. During the Term, the Company, in accordance with its
expense reimbursement policies and procedures in effect for senior management
employees from time to
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time, shall reimburse the Executive for all reasonable expenses actually paid or
incurred by the Executive in the course of and pursuant to the business of the
Company.
(e) Other Benefits. The Executive shall be entitled to participate in
or receive benefits under any employee benefit plan or arrangement made
available generally by the Company to its executives, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. The Company shall also provide the Executive such coverage under
any directors and officers liability policies it maintains as is provided to its
other senior management employees. Nothing paid or provided to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary or any other obligation
payable to the Executive pursuant to this Agreement.
(f) Vacation. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers. The Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.
(g) Perquisites and Fringe Benefits. The Executive shall be entitled to
continue to receive all perquisites and fringe benefits provided or available to
senior executive officers of the Company in accordance with present practice and
as may be changed from time to time with respect to all senior executive
officers of the Company.
(h) Working Facilities. The Company shall furnish the Executive with an
office, a secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
6. Other Offices. The Executive agrees to serve without additional
compensation as an officer and/or director of any of the Company's present or
future subsidiaries; provided, that the Executive shall be indemnified for
serving in any and all such capacities on a basis no less favorable than may be
from time to time provided to other senior executives of the Company.
7. Restrictive Covenants.
(a) Noncompetition. The Executive agrees that he will not, either
during the Term and for a period of one year following any termination of this
Agreement, directly or indirectly, engage in, operate, have any investment or
interest or otherwise participate in any manner (whether as an employee,
officer, director, partner, agent, security holder, creditor, consultant or
otherwise) in any sole proprietorship, partnership, corporation or business or
any other person or entity that engages, directly or indirectly, in a Competing
Business; provided, that the Executive may continue to hold Company securities
and/or acquire, solely as an investment, shares of capital stock or other equity
securities of any company which are publicly traded, so long as the Executive
does not control, acquire a controlling interest in, or become a member of a
group which exercises direct or indirect control of, more than five percent (5%)
of any class of capital stock of such corporation. For purposes of this
Agreement, the term "Competing Business" means the ownership, operation,
management or distribution of an on-line service that provides sports news,
information and content and/or that markets, sells or otherwise distributes
sports-related products, whether such service is accessed through the Internet,
a commercial on-line service or otherwise.
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(b) Unauthorized Disclosure. During the Term and for a period of two
years following any termination of this Agreement, the Executive shall not,
without the written consent of the Board or a person authorized thereby,
disclose to any person, other than an employee of the Company (or its
subsidiaries) or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the Company, any confidential information obtained by him while
in the employ of the Company with respect to any of the Company's customers,
suppliers, creditors, lenders, investment bankers, methods of distribution or
methods of marketing; provided, however, that confidential information shall not
include any information known generally to the public (other than as a result of
unauthorized disclosure by the Executive). Notwithstanding the foregoing,
nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by law.
(c) Nonsolicitation of Employees. During the Term and for a period of
two years following any termination of this Agreement, the Executive shall not
directly or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or enter into any
contractual arrangement with any employee or former employee of the Company,
unless such employee or former employee has not been employed by the Company for
a period in excess of six months.
(d) Injunction. It is recognized and hereby acknowledged by the Company
and the Executive that a breach by the Executive of any of the agreements
contained in this Section 7 may cause irreparable harm or damage to the Company
or its subsidiaries, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive and the Company agree that the Company and
any of its subsidiaries shall be entitled to an injunction issued by any court
of competent jurisdiction enjoining and restraining any and all violations of
such agreements by the Executive or his associates, affiliates, partners or
agents, and that such right to an injunction shall be cumulative and in addition
to whatever other remedies the Company may possess.
8. Termination. The Executive's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
(a) Death. The Executive's employment under this Agreement shall
terminate automatically upon his death.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is absent from the performance of his
duties under this Agreement for a period of three months during any twelve-month
period, and within 10 days after written notice of termination is given, the
Executive does not return to the performance of his duties under this Agreement,
the Company may terminate the Executive's employment under this Agreement for
"Disability."
(c) Cause. The Company may at any time terminate the Executive's
employment under this Agreement for Cause. For purposes of this Agreement,
"Cause" means: (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or from the termination of this Agreement by the Executive for Good
Reason), after a demand for substantial performance is delivered to the
Executive by the Company specifically identifying the manner in which the
Company believes the Executive has not substantially performed his duties, and
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the Executive shall have failed to resume substantial performance of such duties
within thirty (30) days of receiving such demand, (ii) the willful engaging by
the Executive in criminal conduct (including embezzlement and criminal fraud)
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, or (iii) the conviction of the Executive of a felony (other than a
traffic violation) or the conviction of the Executive of a misdemeanor which
impairs the Executive's ability substantially to perform his duties with the
Company. For purposes of this paragraph, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding anything
herein to the contrary, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the members of the Board then in office (other than the
Executive) at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of conduct set forth in clause (i), (ii)
or (iii), above, and specifying the particulars thereon in detail.
(d) Termination by the Executive. The Executive may terminate his
employment under this Agreement (i) for Good Reason, or (ii) if his health
should become impaired to any extent that makes the continued performance of his
duties under this Agreement hazardous to his physical or mental health or his
life, provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that at the Company's request and expense the Executive shall submit to an
examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement, "Good Reason" means, without the
Executive's prior written consent, the occurrence of any one or more of the
following: (A) any action by the Company which results in a material diminution
in the nature or status of the Executive's position, authority, duties or
responsibilities; (B) a failure by the Company to pay any amounts of Base
Salary, Annual Bonus or other amounts payable hereunder, or to comply with its
other obligations and agreements contained herein; (C) a failure of the Company
to obtain an agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Section 10(c) hereof; (D) Executive
no longer reports directly to the person(s) specified in Section 3 hereof, or
(E) any purported termination by the Company of the Executive's employment that
is not effected pursuant to a Notice of Termination satisfying the requirements
of subsection 8(e) hereof and otherwise in accordance with the terms of this
Agreement, and for purposes of this Agreement, no such termination shall be
effective.
The Executive's right to terminate his employment for Good Reason shall
not be affected by his incapacity due to physical or mental illness, nor shall
the Executive's continued employment constitute consent to, or a waiver of his
rights with respect to, any circumstances constituting Good Reason. With respect
to the matters set forth in clauses (A), (B), (C) and (D), above, the Executive
shall give the Board thirty (30) days prior written notice of his intent to
terminate this Agreement, and the Company shall have the right to cure any such
breach or alleged breach within such 30-day period.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 8(a), above) shall be
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communicated by written Notice of Termination to the other party hereto given in
accordance with Section 12. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated. The failure by the
Executive to set forth in any Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties during such thirty (30) day period),
(iii) if the Executive's employment is terminated by the Company for Cause, the
date specified in the Notice of Termination after the expiration of any cure
periods, and (iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is given after the expiration
of any cure periods; provided, that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date finally
determined to be the Date of Termination, either by mutual written agreement of
the parties or by a binding and final arbitration award or an adjudication by a
court of competent jurisdiction (and in such event the Company shall continue to
perform its obligations hereunder until the date so determined).
9. Compensation Upon Termination or During Disability.
(a) Death. If the Executive's employment is terminated by reason of his
death, the Company shall pay to such person as the Executive shall have
designated in a notice filed with the Company, or, if no such person has been
designated, to his estate, any unpaid amounts of his Base Salary or Annual Bonus
accrued prior to the date of his death; and upon making such payments, the
Company shall have no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date of the Executive's
death pursuant to Section 5(c)); provided, that the Executive's spouse,
beneficiaries or estate shall also be entitled to receive any amounts or other
benefits payable pursuant to any pension or employee benefit plan, life
insurance policy or other plan, program or policy then maintained or provided by
the Company in accordance with the terms thereof. In addition, all unvested
stock options held by the Executive on the Date of Termination shall continue to
vest and become exercisable in accordance with the vesting schedule for such
stock options then in effect, and each such stock option, together with any
previously vested and unexercised stock options, shall be exercisable in
accordance with their respective terms for a period of one (1) year following
the date on which it becomes vested (or, in the case of any previously vested
and unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options.
(b) Disability. During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his Base Salary and any Annual
Bonus until the Executive's employment is terminated pursuant to Section 8(b)
hereof, or until the Executive terminates his employment pursuant to Section
8(d)(ii) hereof, whichever first occurs. If the Executive's employment is
terminated by reason of his Disability, the Company shall pay to the Executive
any unpaid amounts of his Base Salary or Annual
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Bonus accrued prior to the date of such termination; and upon making such
payments, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
such termination pursuant to Section 5(c)); provided, that the Executive shall
also be entitled to receive any amounts or other benefits payable pursuant to
any pension or employee benefit plan, life insurance policy or other plan,
program or policy then maintained or provided by the Company in accordance with
the terms thereof. In addition, all unvested stock options held by the Executive
on the Date of Termination shall continue to vest and become exercisable in
accordance with the vesting schedule for such stock options then in effect, and
each such stock option, together with any previously vested and unexercised
stock options, shall be exercisable in accordance with their respective terms
for a period of one (1) year following the date on which it becomes vested (or,
in the case of any previously vested and unexercised options, one (1) year
following the Date of Termination) or, if earlier, until the then scheduled
expiration date(s) of such options; provided, that such vesting shall
discontinue immediately, and any unexercised options shall terminate and be
cancelled immediately upon a breach by the Executive of the provisions of
Section 7 hereof or the Executive's acceptance of employment with another
entity.
(c) Cause; Other than for Good Reason. If the Executive's employment is
terminated by the Company for Cause, or by the Executive for other than Good
Reason, the Company shall pay the Executive his Base Salary and accrued vacation
pay through the Date of Termination at the rate in effect at the time Notice of
Termination is given (or on the Date of Termination if no Notice of Termination
is required hereunder) plus all other amounts to which the Executive is entitled
under any plan, program, policy or practice of the Company or otherwise at the
time such payments are due and such payments shall, assuming the Company is in
compliance with the provisions of this Agreement, fully discharge the Company's
obligations hereunder.
(d) Good Reason; Other than Cause or Disability. If the Company
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Good Reason, then:
(i) within thirty (30) days after the Date of Termination, the
Company shall pay the Executive an amount equal to his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given (or the Date of Termination where no
Notice of Termination is required hereunder), together with any accrued
Incentive Compensation and other amounts to which the Executive is then
entitled under any plan, policy, practice or program of the Company at
the time such payments are due; and
(ii) in lieu of any further salary, incentive compensation or
other payments for periods subsequent to the Date of Termination, and
as a severance benefit to the Executive, the Company will continue to
pay the Executive an amount equal the installments of Base Salary at
the rate in effect at the time Notice of Termination is given (or the
Date of Termination where no Notice of Termination is required
hereunder) that would have been paid to the Executive had his
employment not been terminated for a period of one (1) year following
the Date of Termination; provided, that the Executive shall use
reasonable efforts to seek other employment following such termination,
and the amount of any payment provided for in this clause (ii) will be
reduced by any compensation the Executive earns as the result of
employment by another employer or business during the period the
Company is obligated to make payments hereunder.
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(e) Acceleration of Vesting; Sale of Shares. Unless the Company
terminates the Executive's employment for Cause, the Executive terminates his
employment for other than Good Reason or the Executive's employment is
terminated due to his death or Disability, upon (i) termination of the
Executive's employment or (ii) upon a Change of Control, all unvested stock
options held by the Executive on the Date of Termination shall immediately vest
and become exercisable; and all such stock options, together with any previously
vested and unexercised stock options, shall be exercisable by the Executive in
accordance with their respective terms for a period of one (1) year following
the Date of Termination or the date of the Change in Control, as the case may
be, or, if earlier, until the then scheduled expiration date(s) of such options.
The Company shall provide the Executive such cooperation and assistance as may
reasonably be necessary to effect cashless exercises of such stock options, as
well as the sale of any restricted Company securities beneficially owned by the
Executive at the Date of Termination.
For purposes of this Agreement, a "Change in Control" means and shall
be deemed to have occurred if: (i) any person, entity or "group", within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than (A) the Company, its
subsidiaries or any employee benefit plan established and maintained by the
Company or its subsidiaries, or (B) the Executive or any of the Executive's
affiliates, becomes the "beneficial owner" (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities entitled to vote generally in
the election of directors; (ii) the individuals who, as of the date hereof
constitute the Company's Board of Directors (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's stockholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than the election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the shareholders of
the Company approve (A) a reorganization, merger or consolidation with respect
to which persons who were the shareholders of the Company immediately prior to
such reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (B) a liquidation or dissolution of the Company,
or (C) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be enforce
able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If the
Executive dies while any amounts would still be payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid
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in accordance with the terms of this Agreement to the Executive's personal or
legal representatives or, if there be no such persons, the Executive's estate.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, the term "Company" means the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers an assumption and agreement provided for
in this Section 10(c) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, or otherwise.
11. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Except as herein specifically provided, amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its subsidiaries at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
12. Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: SportsLine.com, Inc.
6350 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
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13. Miscellaneous.
(a) This Agreement has been approved by the Compensation Committee. No
provisions of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in a writing signed by the
Executive and such officer as may be specifically designed by the Compensation
Committee or the Board.
(b) The failure by either party hereto to insist upon compliance with
any condition or provision of this Agreement shall not be deemed a waiver of
such condition or provision or any other provision hereof.
(c) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and this Agreement
supersedes any other agreement or understanding between the Company and the
Executive relating to the Executive's employment and any compensation or
benefits in respect thereof (including, without limitation, the Prior Employment
Agreement).
(d) The Company may withhold from any accounts payable under this
Agreement all Federal, state or other taxes as legally shall be required.
(e) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Florida, without
reference to principles of conflicts of laws.
(f) The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement as of the date and year first above written.
SPORTSLINE.COM, INC.
By: /s/ Michael Levy
----------------------------------------
Title: President and Chief Executive Officer
/s/ Kenneth W. Sanders
-------------------------------------------
Kenneth W. Sanders
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement") dated
as of January 28, 2000, between SPORTSLINE.COM, INC., a Delaware corporation
(the "Company"), and DANIEL L. LEICHTENSCHLAG (the "Executive").
PRELIMINARY STATEMENTS
A. The Company and the Executive are parties to that certain Employment
Agreement dated as of
August 10, 1999 (the "Prior Employment Agreement");
B. The Company and the Executive desire to amend and restate the Prior
Employment Agreement as set forth herein;
C. The Compensation Committee ("Compensation Committee") of the Board
of Directors of the Company (the "Board") has approved the execution and
delivery by the Company of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth in this Agreement.
2. Term of Agreement. Subject to the terms and conditions hereof, the
term of the Executive's employment pursuant to this Agreement (the "Term") shall
commence on August 10, 1999 and shall continue in effect through August 31,
2002. The Term may be extended or renewed at any time by mutual written
agreement of the Company and the Executive.
3. Position and Duties. The Executive shall serve as Senior Vice
President, Operations of the Company, shall perform substantially the same
duties as he currently performs and shall have substantially the same authority
as he currently exercises. The Executive shall also have such other powers and
duties as may from time to time be delegated to him by the Board, the Chairman
of the Board, the Chief Executive Officer or, if there is no Chief Executive
Officer, the highest ranking executive officer of the Company, provided that
such duties are consistent with his present duties and with the Executive's
position. The Executive shall report to the Company's Chief Executive Officer
or, if there is no Chief Executive Officer, the highest ranking executive
officer of the Company. The Executive shall devote substantially all of his
working time and efforts during normal business hours to the business and
affairs of the Company in substantially the same manner (both as to working time
and effort) as the Executive has devoted to the Company in the past; provided,
that it shall not be a violation of this Agreement for the Executive to (i)
serve on corporate, civic or charitable boards or committees, and (ii) deliver
lectures or fulfill speaking engagements, so long as such activities are
approved by the Company's Chief Executive Officer and do not interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
<PAGE>
4. Place of Performance. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business.
5. Compensation and Related Matters.
(a) Base Salary. The Executive shall receive a base salary, payable in
substantially equal bi-weekly installments, at the annual rate of at least
$210,000 during each fiscal year during the Term, or such greater amount as
shall be determined by the Compensation Committee or the entire Board, in its
sole discretion (the "Base Salary"). The Base Salary shall be reviewed at least
annually for merit increases and may, by action and in the discretion of the
Compensation Committee or the Board, be increased at any time or from time to
time. Any increase in the Base Salary or other compensation granted by the
Compensation Committee or the Board shall in no way limit or reduce any other
obligation of the Company under this Agreement and, unless otherwise specified
by the Compensation Committee or the Board, once established at an increased
specified rate, the Base Salary shall not thereafter be reduced.
(b) Incentive Compensation. In addition to the Base Salary, during the
Term the Executive shall be entitled to receive an annual bonus (the "Annual
Bonus") for each fiscal year for which the Company achieves its budgeted EBITDA
target (the "Target"), in an amount equal to fifty percent (50%) of the
Executive's Base Salary for such fiscal year. The Target for each fiscal year
shall be approved by the Compensation Committee not later than 90 days after the
beginning of each fiscal year. For purposes of this Section, the term "EBITDA"
means the Company's earnings before income taxes, depreciation and amortization,
as determined in accordance with generally accepted accounting principles,
consistently applied with the Company's past practices, and as reflected in the
Company's audited financial statements for the relevant fiscal year. If the
Company does not achieve the Target for any fiscal year, no Annual Bonus shall
be payable for such fiscal year. The Annual Bonus payable with respect to any
fiscal year (net of any tax or other amount properly withheld therefrom) shall
be paid by the Company to the Executive within sixty (60) days after the end of
the fiscal year; provided, that (i) any amount paid shall be subject to increase
or decrease based upon the results of the Company's audited financial statements
with respect to such year, (ii) the amount of Annual Bonus payable for any
fiscal year during which the Term expires or this Agreement is terminated shall
be prorated and payable only with respect to the portion of the fiscal year
during which the Executive was employed by the Company and (iii) no Annual Bonus
shall be payable with respect to any fiscal year during which the Executive's
employment is terminated by the Company for Cause, or by the Executive for other
than Good Reason. In addition to the Annual Bonus, the Executive shall be
entitled to receive such other bonuses or incentive compensation as the
Compensation Committee may determine in its sole discretion, taking into
consideration such criteria as it shall deem relevant.
(c) Stock Options. During the Term, the Executive shall be entitled to
receive stock option grants, no less frequently than annually. The number of
stock options and the terms and conditions of stock options granted to the
Executive shall be determined by the Compensation Committee in its discretion;
provided, that beginning in 2000, the Executive shall be granted stock options
to purchase at least 25,000 shares of the Company's common stock during each
calendar year.
(d) Expenses. During the Term, the Company, in accordance with its
expense reimbursement policies and procedures in effect for senior management
employees from time to
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time, shall reimburse the Executive for all reasonable expenses actually paid or
incurred by the Executive in the course of and pursuant to the business of the
Company.
(e) Other Benefits. The Executive shall be entitled to participate in
or receive benefits under any employee benefit plan or arrangement made
available generally by the Company to its executives, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. The Company shall also provide the Executive such coverage under
any directors and officers liability policies it maintains as is provided to its
other senior management employees. Nothing paid or provided to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary or any other obligation
payable to the Executive pursuant to this Agreement.
(f) Vacation. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers. The Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.
(g) Perquisites and Fringe Benefits. The Executive shall be entitled to
continue to receive all perquisites and fringe benefits provided or available to
senior executive officers of the Company in accordance with present practice and
as may be changed from time to time with respect to all senior executive
officers of the Company.
(h) Working Facilities. The Company shall furnish the Executive with an
office, a secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
6. Other Offices. The Executive agrees to serve without additional
compensation as an officer and/or director of any of the Company's present or
future subsidiaries; provided, that the Executive shall be indemnified for
serving in any and all such capacities on a basis no less favorable than may be
from time to time provided to other senior executives of the Company.
7. Restrictive Covenants.
(a) Noncompetition. The Executive agrees that he will not, either
during the Term and for a period of one year following any termination of this
Agreement, directly or indirectly, engage in, operate, have any investment or
interest or otherwise participate in any manner (whether as an employee,
officer, director, partner, agent, security holder, creditor, consultant or
otherwise) in any sole proprietorship, partnership, corporation or business or
any other person or entity that engages, directly or indirectly, in a Competing
Business; provided, that the Executive may continue to hold Company securities
and/or acquire, solely as an investment, shares of capital stock or other equity
securities of any company which are publicly traded, so long as the Executive
does not control, acquire a controlling interest in, or become a member of a
group which exercises direct or indirect control of, more than five percent (5%)
of any class of capital stock of such corporation. For purposes of this
Agreement, the term "Competing Business" means the ownership, operation,
management or distribution of an on-line service that provides sports news,
information and content and/or that markets, sells or otherwise distributes
sports-related products, whether such service is accessed through the Internet,
a commercial on-line service or otherwise.
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(b) Unauthorized Disclosure. During the Term and for a period of two
years following any termination of this Agreement, the Executive shall not,
without the written consent of the Board or a person authorized thereby,
disclose to any person, other than an employee of the Company (or its
subsidiaries) or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the Company, any confidential information obtained by him while
in the employ of the Company with respect to any of the Company's customers,
suppliers, creditors, lenders, investment bankers, methods of distribution or
methods of marketing; provided, however, that confidential information shall not
include any information known generally to the public (other than as a result of
unauthorized disclosure by the Executive). Notwithstanding the foregoing,
nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by law.
(c) Nonsolicitation of Employees. During the Term and for a period of
two years following any termination of this Agreement, the Executive shall not
directly or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or enter into any
contractual arrangement with any employee or former employee of the Company,
unless such employee or former employee has not been employed by the Company for
a period in excess of six months.
(d) Injunction. It is recognized and hereby acknowledged by the Company
and the Executive that a breach by the Executive of any of the agreements
contained in this Section 7 may cause irreparable harm or damage to the Company
or its subsidiaries, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive and the Company agree that the Company and
any of its subsidiaries shall be entitled to an injunction issued by any court
of competent jurisdiction enjoining and restraining any and all violations of
such agreements by the Executive or his associates, affiliates, partners or
agents, and that such right to an injunction shall be cumulative and in addition
to whatever other remedies the Company may possess.
8. Termination. The Executive's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
(a) Death. The Executive's employment under this Agreement shall
terminate automatically upon his
death.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is absent from the performance of his
duties under this Agreement for a period of three months during any twelve-month
period, and within 10 days after written notice of termination is given, the
Executive does not return to the performance of his duties under this Agreement,
the Company may terminate the Executive's employment under this Agreement for
"Disability."
(c) Cause. The Company may at any time terminate the Executive's
employment under this Agreement for Cause. For purposes of this Agreement,
"Cause" means: (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or from the termination of this Agreement by the Executive for Good
Reason), after a demand for substantial performance is delivered to the
Executive by the Company specifically identifying the manner in which the
Company believes the Executive has not substantially performed his duties, and
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the Executive shall have failed to resume substantial performance of such duties
within thirty (30) days of receiving such demand, (ii) the willful engaging by
the Executive in criminal conduct (including embezzlement and criminal fraud)
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, or (iii) the conviction of the Executive of a felony (other than a
traffic violation) or the conviction of the Executive of a misdemeanor which
impairs the Executive's ability substantially to perform his duties with the
Company. For purposes of this paragraph, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding anything
herein to the contrary, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the members of the Board then in office (other than the
Executive) at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of conduct set forth in clause (i), (ii)
or (iii), above, and specifying the particulars thereon in detail.
(d) Termination by the Executive. The Executive may terminate his
employment under this Agreement (i) for Good Reason, or (ii) if his health
should become impaired to any extent that makes the continued performance of his
duties under this Agreement hazardous to his physical or mental health or his
life, provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that at the Company's request and expense the Executive shall submit to an
examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement, "Good Reason" means, without the
Executive's prior written consent, the occurrence of any one or more of the
following: (A) any action by the Company which results in a material diminution
in the nature or status of the Executive's position, authority, duties or
responsibilities; (B) a failure by the Company to pay any amounts of Base
Salary, Annual Bonus or other amounts payable hereunder, or to comply with its
other obligations and agreements contained herein; (C) a failure of the Company
to obtain an agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Section 10(c) hereof; (D) Executive
no longer reports directly to the person(s) specified in Section 3 hereof, or
(E) any purported termination by the Company of the Executive's employment that
is not effected pursuant to a Notice of Termination satisfying the requirements
of subsection 8(e) hereof and otherwise in accordance with the terms of this
Agreement, and for purposes of this Agreement, no such termination shall be
effective.
The Executive's right to terminate his employment for Good Reason shall
not be affected by his incapacity due to physical or mental illness, nor shall
the Executive's continued employment constitute consent to, or a waiver of his
rights with respect to, any circumstances constituting Good Reason. With respect
to the matters set forth in clauses (A), (B), (C) and (D), above, the Executive
shall give the Board thirty (30) days prior written notice of his intent to
terminate this Agreement, and the Company shall have the right to cure any such
breach or alleged breach within such 30-day period.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 8(a), above) shall be
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communicated by written Notice of Termination to the other party hereto given in
accordance with Section 12. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated. The failure by the
Executive to set forth in any Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties during such thirty (30) day period),
(iii) if the Executive's employment is terminated by the Company for Cause, the
date specified in the Notice of Termination after the expiration of any cure
periods, and (iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is given after the expiration
of any cure periods; provided, that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date finally
determined to be the Date of Termination, either by mutual written agreement of
the parties or by a binding and final arbitration award or an adjudication by a
court of competent jurisdiction (and in such event the Company shall continue to
perform its obligations hereunder until the date so determined).
9. Compensation Upon Termination or During Disability.
(a) Death. If the Executive's employment is terminated by reason of his
death, the Company shall pay to such person as the Executive shall have
designated in a notice filed with the Company, or, if no such person has been
designated, to his estate, any unpaid amounts of his Base Salary or Annual Bonus
accrued prior to the date of his death; and upon making such payments, the
Company shall have no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date of the Executive's
death pursuant to Section 5(c)); provided, that the Executive's spouse,
beneficiaries or estate shall also be entitled to receive any amounts or other
benefits payable pursuant to any pension or employee benefit plan, life
insurance policy or other plan, program or policy then maintained or provided by
the Company in accordance with the terms thereof. In addition, all unvested
stock options held by the Executive on the Date of Termination shall continue to
vest and become exercisable in accordance with the vesting schedule for such
stock options then in effect, and each such stock option, together with any
previously vested and unexercised stock options, shall be exercisable in
accordance with their respective terms for a period of one (1) year following
the date on which it becomes vested (or, in the case of any previously vested
and unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options.
(b) Disability. During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his Base Salary and any Annual
Bonus until the Executive's employment is terminated pursuant to Section 8(b)
hereof, or until the Executive terminates his employment pursuant to Section
8(d)(ii) hereof, whichever first occurs. If the Executive's employment is
terminated by reason of his Disability, the Company shall pay to the Executive
any unpaid amounts of his Base Salary or Annual
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Bonus accrued prior to the date of such termination; and upon making such
payments, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
such termination pursuant to Section 5(c)); provided, that the Executive shall
also be entitled to receive any amounts or other benefits payable pursuant to
any pension or employee benefit plan, life insurance policy or other plan,
program or policy then maintained or provided by the Company in accordance with
the terms thereof. In addition, all unvested stock options held by the Executive
on the Date of Termination shall continue to vest and become exercisable in
accordance with the vesting schedule for such stock options then in effect, and
each such stock option, together with any previously vested and unexercised
stock options, shall be exercisable in accordance with their respective terms
for a period of one (1) year following the date on which it becomes vested (or,
in the case of any previously vested and unexercised options, one (1) year
following the Date of Termination) or, if earlier, until the then scheduled
expiration date(s) of such options; provided, that such vesting shall
discontinue immediately, and any unexercised options shall terminate and be
cancelled immediately upon a breach by the Executive of the provisions of
Section 7 hereof or the Executive's acceptance of employment with another
entity.
(c) Cause; Other than for Good Reason. If the Executive's employment is
terminated by the Company for Cause, or by the Executive for other than Good
Reason, the Company shall pay the Executive his Base Salary and accrued vacation
pay through the Date of Termination at the rate in effect at the time Notice of
Termination is given (or on the Date of Termination if no Notice of Termination
is required hereunder) plus all other amounts to which the Executive is entitled
under any plan, program, policy or practice of the Company or otherwise at the
time such payments are due and such payments shall, assuming the Company is in
compliance with the provisions of this Agreement, fully discharge the Company's
obligations hereunder.
(d) Good Reason; Other than Cause or Disability. If the Company
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Good Reason, then:
(i) within thirty (30) days after the Date of Termination, the
Company shall pay the Executive an amount equal to his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given (or the Date of Termination where no
Notice of Termination is required hereunder), together with any accrued
Incentive Compensation and other amounts to which the Executive is then
entitled under any plan, policy, practice or program of the Company at
the time such payments are due; and
(ii) in lieu of any further salary, incentive compensation or
other payments for periods subsequent to the Date of Termination, and
as a severance benefit to the Executive, the Company will continue to
pay the Executive an amount equal the installments of Base Salary at
the rate in effect at the time Notice of Termination is given (or the
Date of Termination where no Notice of Termination is required
hereunder) that would have been paid to the Executive had his
employment not been terminated for a period of one (1) year following
the Date of Termination; provided, that the Executive shall use
reasonable efforts to seek other employment following such termination,
and the amount of any payment provided for in this clause (ii) will be
reduced by any compensation the Executive earns as the result of
employment by another employer or business during the period the
Company is obligated to make payments hereunder.
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(e) Acceleration of Vesting; Sale of Shares. Unless the Company
terminates the Executive's employment for Cause, the Executive terminates his
employment for other than Good Reason or the Executive's employment is
terminated due to his death or Disability, upon (i) termination of the
Executive's employment or (ii) upon a Change of Control, all unvested stock
options held by the Executive on the Date of Termination shall immediately vest
and become exercisable; and all such stock options, together with any previously
vested and unexercised stock options, shall be exercisable by the Executive in
accordance with their respective terms for a period of one (1) year following
the Date of Termination or the date of the Change in Control, as the case may
be, or, if earlier, until the then scheduled expiration date(s) of such options.
The Company shall provide the Executive such cooperation and assistance as may
reasonably be necessary to effect cashless exercises of such stock options, as
well as the sale of any restricted Company securities beneficially owned by the
Executive at the Date of Termination.
For purposes of this Agreement, a "Change in Control" means and shall
be deemed to have occurred if: (i) any person, entity or "group", within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than (A) the Company, its
subsidiaries or any employee benefit plan established and maintained by the
Company or its subsidiaries, or (B) the Executive or any of the Executive's
affiliates, becomes the "beneficial owner" (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities entitled to vote generally in
the election of directors; (ii) the individuals who, as of the date hereof
constitute the Company's Board of Directors (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's stockholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than the election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the shareholders of
the Company approve (A) a reorganization, merger or consolidation with respect
to which persons who were the shareholders of the Company immediately prior to
such reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (B) a liquidation or dissolution of the Company,
or (C) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be enforce
able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If the
Executive dies while any amounts would still be payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid
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in accordance with the terms of this Agreement to the Executive's personal or
legal representatives or, if there be no such persons, the Executive's estate.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, the term "Company" means the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers an assumption and agreement provided for
in this Section 10(c) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, or otherwise.
11. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Except as herein specifically provided, amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its subsidiaries at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
12. Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: SportsLine.com, Inc.
6350 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
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13. Miscellaneous.
(a) This Agreement has been approved by the Compensation Committee. No
provisions of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in a writing signed by the
Executive and such officer as may be specifically designed by the Compensation
Committee or the Board.
(b) The failure by either party hereto to insist upon compliance with
any condition or provision of this Agreement shall not be deemed a waiver of
such condition or provision or any other provision hereof.
(c) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and this Agreement
supersedes any other agreement or understanding between the Company and the
Executive relating to the Executive's employment and any compensation or
benefits in respect thereof (including, without limitation, the Prior Employment
Agreement).
(d) The Company may withhold from any accounts payable under this
Agreement all Federal, state or other taxes as legally shall be required.
(e) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Florida, without
reference to principles of conflicts of laws.
(f) The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement as of the date and year first above written.
SPORTSLINE.COM, INC.
By: /s/ Michael Levy
----------------------------------------
Title: President and Chief Executive Officer
/s/ Daniel L. Leichtenschlag
-------------------------------------------
Daniel L. Leichtenschlag
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") dated as of January 28,
2000, between SPORTSLINE.COM, INC., a Delaware corporation (the "Company"), and
ANDREW S. STURNER (the "Executive").
PRELIMINARY STATEMENTS
A. The Executive is currently President, Corporate and Business
Development of the Company.
B. The Compensation Committee ("Compensation Committee") of the Board
of Directors of the Company (the "Board") recognizes that the Executive's
contribution to the growth and success of the Company has been substantial and
desires to assure the Company of the Executive's continued employment in an
executive capacity and to compensate him therefor.
C. The Compensation Committee has determined that this Agreement will
reinforce and encourage the Executive's continued attention and dedication to
the Company.
D. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth in this Agreement.
2. Term of Agreement. Subject to the terms and conditions hereof, the
term of the Executive's employment pursuant to this Agreement (the "Term") shall
commence on the date hereof and shall continue in effect through January 28,
2003. The Term may be extended or renewed at any time by mutual written
agreement of the Company and the Executive.
3. Position and Duties. The Executive shall serve as the President,
Corporate and Business Development of the Company, shall perform substantially
the same duties as he currently performs and shall have substantially the same
authority as he currently exercises. The Executive shall also have such other
powers and duties as may from time to time be delegated to him by the Board, the
Chairman of the Board, the Chief Executive Officer or, if there is no Chief
Executive Officer, the highest ranking executive officer of the Company,
provided that such duties are consistent with his present duties and with the
Executive's position. The Executive shall report to the Company's Chief
Executive Officer or, if there is no Chief Executive Officer, the highest
ranking executive officer of the Company. The Executive shall devote
substantially all of his working time and efforts during normal business hours
to the business and affairs of the Company in substantially the same manner
(both as to working time and effort) as the Executive has devoted to the Company
in the past; provided, that it shall not be a violation of this Agreement for
the Executive to (i) serve on corporate, civic or charitable boards or
committees, and (ii) deliver lectures or fulfill speaking engagements, so long
as such activities are approved by the Company's Chief
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Executive Officer and do not interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
4. Place of Performance. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business.
5. Compensation and Related Matters.
(a) Base Salary. The Executive shall receive a base salary, payable in
substantially equal bi-weekly installments, at the annual rate of at least
$270,000 during each fiscal year during the Term, or such greater amount as
shall be determined by the Compensation Committee or the entire Board, in its
sole discretion (the "Base Salary"). The Base Salary shall be reviewed at least
annually for merit increases and may, by action and in the discretion of the
Compensation Committee or the Board, be increased at any time or from time to
time. Any increase in the Base Salary or other compensation granted by the
Compensation Committee or the Board shall in no way limit or reduce any other
obligation of the Company under this Agreement and, unless otherwise specified
by the Compensation Committee or the Board, once established at an increased
specified rate, the Base Salary shall not thereafter be reduced.
(b) Incentive Compensation. In addition to the Base Salary, during the
Term the Executive shall be entitled to receive an annual bonus (the "Annual
Bonus") for each fiscal year for which the Company achieves its budgeted EBITDA
target (the "Target"), in an amount equal to fifty percent (50%) of the
Executive's Base Salary for such fiscal year. The Target for each fiscal year
shall be approved by the Compensation Committee not later than 90 days after the
beginning of each fiscal year. For purposes of this Section, the term "EBITDA"
means the Company's earnings before income taxes, depreciation and amortization,
as determined in accordance with generally accepted accounting principles,
consistently applied with the Company's past practices, and as reflected in the
Company's audited financial statements for the relevant fiscal year. If the
Company does not achieve the Target for any fiscal year, no Annual Bonus shall
be payable for such fiscal year. The Annual Bonus payable with respect to any
fiscal year (net of any tax or other amount properly withheld therefrom) shall
be paid by the Company to the Executive within sixty (60) days after the end of
the fiscal year; provided, that (i) any amount paid shall be subject to increase
or decrease based upon the results of the Company's audited financial statements
with respect to such year, (ii) the amount of Annual Bonus payable for any
fiscal year during which the Term expires or this Agreement is terminated shall
be prorated and payable only with respect to the portion of the fiscal year
during which the Executive was employed by the Company and (iii) no Annual Bonus
shall be payable with respect to any fiscal year during which the Executive's
employment is terminated by the Company for Cause, or by the Executive for other
than Good Reason. In addition to the Annual Bonus, the Executive shall be
entitled to receive such other bonuses or incentive compensation as the
Compensation Committee may determine in its sole discretion, taking into
consideration such criteria as it shall deem relevant.
(c) Stock Options. During the Term, the Executive shall be entitled to
receive stock option grants, no less frequently than annually. The number of
stock options and the terms and conditions of stock options granted to the
Executive shall be determined by the Compensation Committee in its discretion;
provided, that beginning in 2000, the Executive shall be granted stock options
to purchase at least 50,000 shares of the Company's common stock during each
calendar year.
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(d) Expenses. During the Term, the Company, in accordance with its
expense reimbursement policies and procedures in effect for senior management
employees from time to time, shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company.
(e) Other Benefits. The Executive shall be entitled to participate in
or receive benefits under any employee benefit plan or arrangement made
available generally by the Company to its executives, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. The Company shall also provide the Executive such coverage under
any directors and officers liability policies it maintains as is provided to its
other senior management employees. Nothing paid or provided to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary or any other obligation
payable to the Executive pursuant to this Agreement.
(f) Vacation. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers. The Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.
(g) Perquisites and Fringe Benefits. The Executive shall be entitled to
continue to receive all perquisites and fringe benefits provided or available to
senior executive officers of the Company in accordance with present practice and
as may be changed from time to time with respect to all senior executive
officers of the Company.
(h) Working Facilities. The Company shall furnish the Executive with an
office, a secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
6. Other Offices. The Executive agrees to serve without additional
compensation as an officer and/or director of any of the Company's present or
future subsidiaries; provided, that the Executive shall be indemnified for
serving in any and all such capacities on a basis no less favorable than may be
from time to time provided to other senior executives of the Company.
7. Restrictive Covenants.
(a) Noncompetition. The Executive agrees that he will not, either
during the Term and for a period of one year following any termination of this
Agreement, directly or indirectly, engage in, operate, have any investment or
interest or otherwise participate in any manner (whether as an employee,
officer, director, partner, agent, security holder, creditor, consultant or
otherwise) in any sole proprietorship, partnership, corporation or business or
any other person or entity that engages, directly or indirectly, in a Competing
Business; provided, that the Executive may continue to hold Company securities
and/or acquire, solely as an investment, shares of capital stock or other equity
securities of any company which are publicly traded, so long as the Executive
does not control, acquire a controlling interest in, or become a member of a
group which exercises direct or indirect control of, more than five percent (5%)
of any class of capital stock of such corporation. For purposes of this
Agreement, the term "Competing Business" means the ownership, operation,
management or distribution of an on-line service that provides sports news,
information and content and/or that markets, sells or otherwise distributes
sports-related products, whether such service is accessed through the Internet,
a commercial on-line service or otherwise.
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(b) Unauthorized Disclosure. During the Term and for a period of two
years following any termination of this Agreement, the Executive shall not,
without the written consent of the Board or a person authorized thereby,
disclose to any person, other than an employee of the Company (or its
subsidiaries) or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the Company, any confidential information obtained by him while
in the employ of the Company with respect to any of the Company's customers,
suppliers, creditors, lenders, investment bankers, methods of distribution or
methods of marketing; provided, however, that confidential information shall not
include any information known generally to the public (other than as a result of
unauthorized disclosure by the Executive). Notwithstanding the foregoing,
nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by law.
(c) Nonsolicitation of Employees. During the Term and for a period of
two years following any termination of this Agreement, the Executive shall not
directly or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or enter into any
contractual arrangement with any employee or former employee of the Company,
unless such employee or former employee has not been employed by the Company for
a period in excess of six months.
(d) Injunction. It is recognized and hereby acknowledged by the Company
and the Executive that a breach by the Executive of any of the agreements
contained in this Section 7 may cause irreparable harm or damage to the Company
or its subsidiaries, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive and the Company agree that the Company and
any of its subsidiaries shall be entitled to an injunction issued by any court
of competent jurisdiction enjoining and restraining any and all violations of
such agreements by the Executive or his associates, affiliates, partners or
agents, and that such right to an injunction shall be cumulative and in addition
to whatever other remedies the Company may possess.
8. Termination. The Executive's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
(a) Death. The Executive's employment under this Agreement shall
terminate automatically upon his death.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is absent from the performance of his
duties under this Agreement for a period of three months during any twelve-month
period, and within 10 days after written notice of termination is given, the
Executive does not return to the performance of his duties under this Agreement,
the Company may terminate the Executive's employment under this Agreement for
"Disability."
(c) Cause. The Company may at any time terminate the Executive's
employment under this Agreement for Cause. For purposes of this Agreement,
"Cause" means: (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or from the termination of this Agreement by the Executive for Good
Reason), after a demand for substantial performance is delivered to the
Executive by the Company specifically identifying the manner in which the
Company believes the Executive has not substantially performed his duties, and
the Executive shall have failed to resume substantial performance of such duties
within thirty (30)
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days of receiving such demand, (ii) the willful engaging by the Executive in
criminal conduct (including embezzlement and criminal fraud) which is
demonstrably and materially injurious to the Company, monetarily or otherwise,
or (iii) the conviction of the Executive of a felony (other than a traffic
violation) or the conviction of the Executive of a misdemeanor which impairs the
Executive's ability substantially to perform his duties with the Company. For
purposes of this paragraph, no act, or failure to act, on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Company. Notwithstanding anything herein to the contrary,
the Executive shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution,
duly adopted by the affirmative vote of not less than a majority of the members
of the Board then in office (other than the Executive) at a meeting of the Board
called and held for such purpose (after reasonable notice to the Executive and
an opportunity for him, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in clause (i), (ii) or (iii), above, and specifying
the particulars thereon in detail.
(d) Termination by the Executive. The Executive may terminate his
employment under this Agreement (i) for Good Reason, or (ii) if his health
should become impaired to any extent that makes the continued performance of his
duties under this Agreement hazardous to his physical or mental health or his
life, provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that at the Company's request and expense the Executive shall submit to an
examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement, "Good Reason" means, without the
Executive's prior written consent, the occurrence of any one or more of the
following: (A) any action by the Company which results in a material diminution
in the nature or status of the Executive's position, authority, duties or
responsibilities; (B) a failure by the Company to pay any amounts of Base
Salary, Annual Bonus or other amounts payable hereunder, or to comply with its
other obligations and agreements contained herein; (C) a failure of the Company
to obtain an agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Section 10(c) hereof; (D) Executive
no longer reports directly to the person(s) specified in Section 3 hereof, or
(E) any purported termination by the Company of the Executive's employment that
is not effected pursuant to a Notice of Termination satisfying the requirements
of subsection 8(e) hereof and otherwise in accordance with the terms of this
Agreement, and for purposes of this Agreement, no such termination shall be
effective.
The Executive's right to terminate his employment for Good Reason shall
not be affected by his incapacity due to physical or mental illness, nor shall
the Executive's continued employment constitute consent to, or a waiver of his
rights with respect to, any circumstances constituting Good Reason. With respect
to the matters set forth in clauses (A), (B), (C) and (D), above, the Executive
shall give the Board thirty (30) days prior written notice of his intent to
terminate this Agreement, and the Company shall have the right to cure any such
breach or alleged breach within such 30-day period.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 8(a), above) shall be communicated by written Notice of Termination
to the other party hereto given in accordance with Section 12. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice
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which indicates the specific termination provision in this Agreement relied upon
and sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. The failure by the Executive to set forth in any Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties during such thirty (30) day period),
(iii) if the Executive's employment is terminated by the Company for Cause, the
date specified in the Notice of Termination after the expiration of any cure
periods, and (iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is given after the expiration
of any cure periods; provided, that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date finally
determined to be the Date of Termination, either by mutual written agreement of
the parties or by a binding and final arbitration award or an adjudication by a
court of competent jurisdiction (and in such event the Company shall continue to
perform its obligations hereunder until the date so determined).
9. Compensation Upon Termination or During Disability.
(a) Death. If the Executive's employment is terminated by reason of his
death, the Company shall pay to such person as the Executive shall have
designated in a notice filed with the Company, or, if no such person has been
designated, to his estate, any unpaid amounts of his Base Salary or Annual Bonus
accrued prior to the date of his death; and upon making such payments, the
Company shall have no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date of the Executive's
death pursuant to Section 5(c)); provided, that the Executive's spouse,
beneficiaries or estate shall also be entitled to receive any amounts or other
benefits payable pursuant to any pension or employee benefit plan, life
insurance policy or other plan, program or policy then maintained or provided by
the Company in accordance with the terms thereof. In addition, all unvested
stock options held by the Executive on the Date of Termination shall continue to
vest and become exercisable in accordance with the vesting schedule for such
stock options then in effect, and each such stock option, together with any
previously vested and unexercised stock options, shall be exercisable in
accordance with their respective terms for a period of one (1) year following
the date on which it becomes vested (or, in the case of any previously vested
and unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options.
(b) Disability. During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his Base Salary and any Annual
Bonus until the Executive's employment is terminated pursuant to Section 8(b)
hereof, or until the Executive terminates his employment pursuant to Section
8(d)(ii) hereof, whichever first occurs. If the Executive's employment is
terminated by reason of his Disability, the Company shall pay to the Executive
any unpaid amounts of his Base Salary or Annual Bonus accrued prior to the date
of such termination; and upon making such payments, the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of such termination pursuant to
Section 5(c)); provided, that the
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Executive shall also be entitled to receive any amounts or other benefits
payable pursuant to any pension or employee benefit plan, life insurance policy
or other plan, program or policy then maintained or provided by the Company in
accordance with the terms thereof. In addition, all unvested stock options held
by the Executive on the Date of Termination shall continue to vest and become
exercisable in accordance with the vesting schedule for such stock options then
in effect, and each such stock option, together with any previously vested and
unexercised stock options, shall be exercisable in accordance with their
respective terms for a period of one (1) year following the date on which it
becomes vested (or, in the case of any previously vested and unexercised
options, one (1) year following the Date of Termination) or, if earlier, until
the then scheduled expiration date(s) of such options; provided, that such
vesting shall discontinue immediately, and any unexercised options shall
terminate and be cancelled immediately upon a breach by the Executive of the
provisions of Section 7 hereof or the Executive's acceptance of employment with
another entity.
(c) Cause; Other than for Good Reason. If the Executive's employment is
terminated by the Company for Cause, or by the Executive for other than Good
Reason, the Company shall pay the Executive his Base Salary and accrued vacation
pay through the Date of Termination at the rate in effect at the time Notice of
Termination is given (or on the Date of Termination if no Notice of Termination
is required hereunder) plus all other amounts to which the Executive is entitled
under any plan, program, policy or practice of the Company or otherwise at the
time such payments are due and such payments shall, assuming the Company is in
compliance with the provisions of this Agreement, fully discharge the Company's
obligations hereunder.
(d) Good Reason; Other than Cause or Disability. If the Company
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Good Reason, then:
(i) within thirty (30) days after the Date of Termination, the
Company shall pay the Executive an amount equal to his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given (or the Date of Termination where no
Notice of Termination is required hereunder), together with any accrued
Incentive Compensation and other amounts to which the Executive is then
entitled under any plan, policy, practice or program of the Company at
the time such payments are due; and
(ii) in lieu of any further salary, incentive compensation or
other payments for periods subsequent to the Date of Termination, and
as a severance benefit to the Executive, the Company will continue to
pay the Executive an amount equal the installments of Base Salary at
the rate in effect at the time Notice of Termination is given (or the
Date of Termination where no Notice of Termination is required
hereunder) that would have been paid to the Executive had his
employment not been terminated for a period of one (1) year following
the Date of Termination; provided, that the Executive shall use
reasonable efforts to seek other employment following such termination,
and the amount of any payment provided for in this clause (ii) will be
reduced by any compensation the Executive earns as the result of
employment by another employer or business during the period the
Company is obligated to make payments hereunder.
(e) Acceleration of Vesting; Sale of Shares. Unless the Company
terminates the Executive's employment for Cause, the Executive terminates his
employment for other than Good Reason or the Executive's employment is
terminated due to his death or Disability, upon (i) termination of the
Executive's employment or (ii) upon a Change of Control, all unvested stock
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options held by the Executive on the Date of Termination shall immediately vest
and become exercisable; and all such stock options, together with any previously
vested and unexercised stock options, shall be exercisable by the Executive in
accordance with their respective terms for a period of one (1) year following
the Date of Termination or the date of the Change in Control, as the case may
be, or, if earlier, until the then scheduled expiration date(s) of such options.
The Company shall provide the Executive such cooperation and assistance as may
reasonably be necessary to effect cashless exercises of such stock options, as
well as the sale of any restricted Company securities beneficially owned by the
Executive at the Date of Termination.
For purposes of this Agreement, a "Change in Control" means and shall
be deemed to have occurred if: (i) any person, entity or "group", within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than (A) the Company, its
subsidiaries or any employee benefit plan established and maintained by the
Company or its subsidiaries, or (B) the Executive or any of the Executive's
affiliates, becomes the "beneficial owner" (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities entitled to vote generally in
the election of directors; (ii) the individuals who, as of the date hereof
constitute the Company's Board of Directors (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's stockholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than the election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the shareholders of
the Company approve (A) a reorganization, merger or consolidation with respect
to which persons who were the shareholders of the Company immediately prior to
such reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (B) a liquidation or dissolution of the Company,
or (C) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be enforce
able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If the
Executive dies while any amounts would still be payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's personal or legal representatives
or, if there be no such persons, the Executive's estate.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
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(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, the term "Company" means SportsLine USA,
Inc. and any successor to its business and/or assets as aforesaid which executes
and delivers an assumption and agreement provided for in this Section 10(c) or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law, or otherwise.
11. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Except as herein specifically provided, amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its subsidiaries at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
12. Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: SportsLine.com, Inc.
6350 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
13. Miscellaneous.
(a) This Agreement has been approved by the Compensation Committee. No
provisions of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in a writing signed by the
Executive and such officer as may be specifically designed by the Compensation
Committee or the Board.
(b) The failure by either party hereto to insist upon compliance with
any condition or provision of this Agreement shall not be deemed a waiver of
such condition or provision or any other provision hereof.
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(c) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and this Agreement
supersedes any other agreement or understanding between the Company and the
Executive relating to the Executive's employment and any compensation or
benefits in respect thereof.
(d) The Company may withhold from any accounts payable under this
Agreement all Federal, state or other taxes as legally shall be required.
(e) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Florida, without
reference to principles of conflicts of laws.
(f) The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date and year first above written.
SPORTSLINE.COM, INC.
By: /s/ Michael Levy
----------------------------------------
Title: President and Chief Executive Officer
/s/ Andrew S. Sturner
-------------------------------------------
Andrew S. Sturner
10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") dated as of January 28,
2000, between SPORTSLINE.COM, INC., a Delaware corporation (the "Company"), and
MARK J. MARIANI (the "Executive").
PRELIMINARY STATEMENTS
A. The Executive is currently President, Sales and Marketing of the
Company.
B. The Compensation Committee ("Compensation Committee") of the Board
of Directors of the Company (the "Board") recognizes that the Executive's
contribution to the growth and success of the Company has been substantial and
desires to assure the Company of the Executive's continued employment in an
executive capacity and to compensate him therefor.
C. The Compensation Committee has determined that this Agreement will
reinforce and encourage the Executive's continued attention and dedication to
the Company.
D. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth in this Agreement.
2. Term of Agreement. Subject to the terms and conditions hereof, the
term of the Executive's employment pursuant to this Agreement (the "Term") shall
commence on the date hereof and shall continue in effect through January 28,
2003. The Term may be extended or renewed at any time by mutual written
agreement of the Company and the Executive.
3. Position and Duties. The Executive shall serve as the President,
Sales and Marketing of the Company, shall perform substantially the same duties
as he currently performs and shall have substantially the same authority as he
currently exercises. The Executive shall also have such other powers and duties
as may from time to time be delegated to him by the Board, the Chairman of the
Board, the Chief Executive Officer or, if there is no Chief Executive Officer,
the highest ranking executive officer of the Company, provided that such duties
are consistent with his present duties and with the Executive's position. The
Executive shall report to the Company's Chief Executive Officer or, if there is
no Chief Executive Officer, the highest ranking executive officer of the
Company. The Executive shall devote substantially all of his working time and
efforts during normal business hours to the business and affairs of the Company
in substantially the same manner (both as to working time and effort) as the
Executive has devoted to the Company in the past; provided, that it shall not be
a violation of this Agreement for the Executive to (i) serve on corporate, civic
or charitable boards or committees, and (ii) deliver lectures or fulfill
speaking engagements, so long as such activities are approved by the Company's
Chief Executive Officer and do not interfere
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with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
4. Place of Performance. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business.
5. Compensation and Related Matters.
(a) Base Salary. The Executive shall receive a base salary, payable in
substantially equal bi-weekly installments, at the annual rate of at least
$270,000 during each fiscal year during the Term, or such greater amount as
shall be determined by the Compensation Committee or the entire Board, in its
sole discretion (the "Base Salary"). The Base Salary shall be reviewed at least
annually for merit increases and may, by action and in the discretion of the
Compensation Committee or the Board, be increased at any time or from time to
time. Any increase in the Base Salary or other compensation granted by the
Compensation Committee or the Board shall in no way limit or reduce any other
obligation of the Company under this Agreement and, unless otherwise specified
by the Compensation Committee or the Board, once established at an increased
specified rate, the Base Salary shall not thereafter be reduced.
(b) Incentive Compensation. In addition to the Base Salary, during the
Term the Executive shall be entitled to receive an annual bonus (the "Annual
Bonus") for each fiscal year for which the Company achieves its budgeted Revenue
target (the "Target"), in an amount equal to fifty percent (50%) of the
Executive's Base Salary for such fiscal year. The Target for each fiscal year
shall be approved by the Compensation Committee not later than 90 days after the
beginning of each fiscal year. For purposes of this Section, the term "Revenues"
means the Company's total revenues, as determined in accordance with generally
accepted accounting principles, consistently applied with the Company's past
practices, and as reflected in the Company's audited financial statements for
the relevant fiscal year. If the Company does not achieve the Target for any
fiscal year, no Annual Bonus shall be payable for such fiscal year. The Annual
Bonus payable with respect to any fiscal year (net of any tax or other amount
properly withheld therefrom) shall be paid by the Company to the Executive
within sixty (60) days after the end of the fiscal year; provided, that (i) any
amount paid shall be subject to increase or decrease based upon the results of
the Company's audited financial statements with respect to such year, (ii) the
amount of Annual Bonus payable for any fiscal year during which the Term expires
or this Agreement is terminated shall be prorated and payable only with respect
to the portion of the fiscal year during which the Executive was employed by the
Company and (iii) no Annual Bonus shall be payable with respect to any fiscal
year during which the Executive's employment is terminated by the Company for
Cause, or by the Executive for other than Good Reason. In addition to the Annual
Bonus, the Executive shall be entitled to receive such other bonuses or
incentive compensation as the Compensation Committee may determine in its sole
discretion, taking into consideration such criteria as it shall deem relevant.
(c) Stock Options. During the Term, the Executive shall be entitled to
receive stock option grants, no less frequently than annually. The number of
stock options and the terms and conditions of stock options granted to the
Executive shall be determined by the Compensation Committee in its discretion;
provided, that beginning in 2000, the Executive shall be granted stock options
to purchase at least 50,000 shares of the Company's common stock during each
calendar year.
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(d) Expenses. During the Term, the Company, in accordance with its
expense reimbursement policies and procedures in effect for senior management
employees from time to time, shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company.
(e) Other Benefits. The Executive shall be entitled to participate in
or receive benefits under any employee benefit plan or arrangement made
available generally by the Company to its executives, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. The Company shall also provide the Executive such coverage under
any directors and officers liability policies it maintains as is provided to its
other senior management employees. Nothing paid or provided to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary or any other obligation
payable to the Executive pursuant to this Agreement.
(f) Vacation. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers. The Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.
(g) Perquisites and Fringe Benefits. The Executive shall be entitled to
continue to receive all perquisites and fringe benefits provided or available to
senior executive officers of the Company in accordance with present practice and
as may be changed from time to time with respect to all senior executive
officers of the Company.
(h) Working Facilities. The Company shall furnish the Executive with an
office, a secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
6. Other Offices. The Executive agrees to serve without additional
compensation as an officer and/or director of any of the Company's present or
future subsidiaries; provided, that the Executive shall be indemnified for
serving in any and all such capacities on a basis no less favorable than may be
from time to time provided to other senior executives of the Company.
7. Restrictive Covenants.
(a) Noncompetition. The Executive agrees that he will not, either
during the Term and for a period of one year following any termination of this
Agreement, directly or indirectly, engage in, operate, have any investment or
interest or otherwise participate in any manner (whether as an employee,
officer, director, partner, agent, security holder, creditor, consultant or
otherwise) in any sole proprietorship, partnership, corporation or business or
any other person or entity that engages, directly or indirectly, in a Competing
Business; provided, that the Executive may continue to hold Company securities
and/or acquire, solely as an investment, shares of capital stock or other equity
securities of any company which are publicly traded, so long as the Executive
does not control, acquire a controlling interest in, or become a member of a
group which exercises direct or indirect control of, more than five percent (5%)
of any class of capital stock of such corporation. For purposes of this
Agreement, the term "Competing Business" means the ownership, operation,
management or distribution of an on-line service that provides sports news,
information and content
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and/or that markets, sells or otherwise distributes sports-related products,
whether such service is accessed through the Internet, a commercial on-line
service or otherwise.
(b) Unauthorized Disclosure. During the Term and for a period of two
years following any termination of this Agreement, the Executive shall not,
without the written consent of the Board or a person authorized thereby,
disclose to any person, other than an employee of the Company (or its
subsidiaries) or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the Company, any confidential information obtained by him while
in the employ of the Company with respect to any of the Company's customers,
suppliers, creditors, lenders, investment bankers, methods of distribution or
methods of marketing; provided, however, that confidential information shall not
include any information known generally to the public (other than as a result of
unauthorized disclosure by the Executive). Notwithstanding the foregoing,
nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by law.
(c) Nonsolicitation of Employees. During the Term and for a period of
two years following any termination of this Agreement, the Executive shall not
directly or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or enter into any
contractual arrangement with any employee or former employee of the Company,
unless such employee or former employee has not been employed by the Company for
a period in excess of six months.
(d) Injunction. It is recognized and hereby acknowledged by the Company
and the Executive that a breach by the Executive of any of the agreements
contained in this Section 7 may cause irreparable harm or damage to the Company
or its subsidiaries, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive and the Company agree that the Company and
any of its subsidiaries shall be entitled to an injunction issued by any court
of competent jurisdiction enjoining and restraining any and all violations of
such agreements by the Executive or his associates, affiliates, partners or
agents, and that such right to an injunction shall be cumulative and in addition
to whatever other remedies the Company may possess.
8. Termination. The Executive's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
(a) Death. The Executive's employment under this Agreement shall
terminate automatically upon his death.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive is absent from the performance of his
duties under this Agreement for a period of three months during any twelve-month
period, and within 10 days after written notice of termination is given, the
Executive does not return to the performance of his duties under this Agreement,
the Company may terminate the Executive's employment under this Agreement for
"Disability."
(c) Cause. The Company may at any time terminate the Executive's
employment under this Agreement for Cause. For purposes of this Agreement,
"Cause" means: (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or
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<PAGE>
from the termination of this Agreement by the Executive for Good Reason), after
a demand for substantial performance is delivered to the Executive by the
Company specifically identifying the manner in which the Company believes the
Executive has not substantially performed his duties, and the Executive shall
have failed to resume substantial performance of such duties within thirty (30)
days of receiving such demand, (ii) the willful engaging by the Executive in
criminal conduct (including embezzlement and criminal fraud) which is
demonstrably and materially injurious to the Company, monetarily or otherwise,
or (iii) the conviction of the Executive of a felony (other than a traffic
violation) or the conviction of the Executive of a misdemeanor which impairs the
Executive's ability substantially to perform his duties with the Company. For
purposes of this paragraph, no act, or failure to act, on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Company. Notwithstanding anything herein to the contrary,
the Executive shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution,
duly adopted by the affirmative vote of not less than a majority of the members
of the Board then in office (other than the Executive) at a meeting of the Board
called and held for such purpose (after reasonable notice to the Executive and
an opportunity for him, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in clause (i), (ii) or (iii), above, and specifying
the particulars thereon in detail.
(d) Termination by the Executive. The Executive may terminate his
employment under this Agreement (i) for Good Reason, or (ii) if his health
should become impaired to any extent that makes the continued performance of his
duties under this Agreement hazardous to his physical or mental health or his
life, provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that at the Company's request and expense the Executive shall submit to an
examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement, "Good Reason" means, without the
Executive's prior written consent, the occurrence of any one or more of the
following: (A) any action by the Company which results in a material diminution
in the nature or status of the Executive's position, authority, duties or
responsibilities; (B) a failure by the Company to pay any amounts of Base
Salary, Annual Bonus or other amounts payable hereunder, or to comply with its
other obligations and agreements contained herein; (C) a failure of the Company
to obtain an agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Section 10(c) hereof; (D) Executive
no longer reports directly to the person(s) specified in Section 3 hereof, or
(E) any purported termination by the Company of the Executive's employment that
is not effected pursuant to a Notice of Termination satisfying the requirements
of subsection 8(e) hereof and otherwise in accordance with the terms of this
Agreement, and for purposes of this Agreement, no such termination shall be
effective.
The Executive's right to terminate his employment for Good Reason shall
not be affected by his incapacity due to physical or mental illness, nor shall
the Executive's continued employment constitute consent to, or a waiver of his
rights with respect to, any circumstances constituting Good Reason. With respect
to the matters set forth in clauses (A), (B), (C) and (D), above, the Executive
shall give the Board thirty (30) days prior written notice of his intent to
terminate this Agreement, and the Company shall have the right to cure any such
breach or alleged breach within such 30-day period.
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(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 8(a), above) shall be communicated by written Notice of Termination
to the other party hereto given in accordance with Section 12. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
indicates the specific termination provision in this Agreement relied upon and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. The failure by the Executive to set forth in any Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties during such thirty (30) day period),
(iii) if the Executive's employment is terminated by the Company for Cause, the
date specified in the Notice of Termination after the expiration of any cure
periods, and (iv) if the Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is given after the expiration
of any cure periods; provided, that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date finally
determined to be the Date of Termination, either by mutual written agreement of
the parties or by a binding and final arbitration award or an adjudication by a
court of competent jurisdiction (and in such event the Company shall continue to
perform its obligations hereunder until the date so determined).
9. Compensation Upon Termination or During Disability.
(a) Death. If the Executive's employment is terminated by reason of his
death, the Company shall pay to such person as the Executive shall have
designated in a notice filed with the Company, or, if no such person has been
designated, to his estate, any unpaid amounts of his Base Salary or Annual Bonus
accrued prior to the date of his death; and upon making such payments, the
Company shall have no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date of the Executive's
death pursuant to Section 5(c)); provided, that the Executive's spouse,
beneficiaries or estate shall also be entitled to receive any amounts or other
benefits payable pursuant to any pension or employee benefit plan, life
insurance policy or other plan, program or policy then maintained or provided by
the Company in accordance with the terms thereof. In addition, all unvested
stock options held by the Executive on the Date of Termination shall continue to
vest and become exercisable in accordance with the vesting schedule for such
stock options then in effect, and each such stock option, together with any
previously vested and unexercised stock options, shall be exercisable in
accordance with their respective terms for a period of one (1) year following
the date on which it becomes vested (or, in the case of any previously vested
and unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options.
(b) Disability. During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his Base Salary and any Annual
Bonus until the Executive's employment is terminated pursuant to Section 8(b)
hereof, or until the Executive terminates his employment pursuant to Section
8(d)(ii)
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hereof, whichever first occurs. If the Executive's employment is terminated by
reason of his Disability, the Company shall pay to the Executive any unpaid
amounts of his Base Salary or Annual Bonus accrued prior to the date of such
termination; and upon making such payments, the Company shall have no further
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of such termination pursuant to Section
5(c)); provided, that the Executive shall also be entitled to receive any
amounts or other benefits payable pursuant to any pension or employee benefit
plan, life insurance policy or other plan, program or policy then maintained or
provided by the Company in accordance with the terms thereof. In addition, all
unvested stock options held by the Executive on the Date of Termination shall
continue to vest and become exercisable in accordance with the vesting schedule
for such stock options then in effect, and each such stock option, together with
any previously vested and unexercised stock options, shall be exercisable in
accordance with their respective terms for a period of one (1) year following
the date on which it becomes vested (or, in the case of any previously vested
and unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options; provided,
that such vesting shall discontinue immediately, and any unexercised options
shall terminate and be cancelled immediately upon a breach by the Executive of
the provisions of Section 7 hereof or the Executive's acceptance of employment
with another entity.
(c) Cause; Other than for Good Reason. If the Executive's employment is
terminated by the Company for Cause, or by the Executive for other than Good
Reason, the Company shall pay the Executive his Base Salary and accrued vacation
pay through the Date of Termination at the rate in effect at the time Notice of
Termination is given (or on the Date of Termination if no Notice of Termination
is required hereunder) plus all other amounts to which the Executive is entitled
under any plan, program, policy or practice of the Company or otherwise at the
time such payments are due and such payments shall, assuming the Company is in
compliance with the provisions of this Agreement, fully discharge the Company's
obligations hereunder.
(d) Good Reason; Other than Cause or Disability. If the Company
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Good Reason, then:
(i) within thirty (30) days after the Date of Termination, the
Company shall pay the Executive an amount equal to his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given (or the Date of Termination where no
Notice of Termination is required hereunder), together with any accrued
Incentive Compensation and other amounts to which the Executive is then
entitled under any plan, policy, practice or program of the Company at
the time such payments are due; and
(ii) in lieu of any further salary, incentive compensation or
other payments for periods subsequent to the Date of Termination, and
as a severance benefit to the Executive, the Company will continue to
pay the Executive an amount equal the installments of Base Salary at
the rate in effect at the time Notice of Termination is given (or the
Date of Termination where no Notice of Termination is required
hereunder) that would have been paid to the Executive had his
employment not been terminated for a period of one (1) year following
the Date of Termination; provided, that the Executive shall use
reasonable efforts to seek other employment following such termination,
and the amount of any payment provided for in this clause (ii) will be
reduced by any compensation the Executive earns as
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the result of employment by another employer or business during the
period the Company is obligated to make payments hereunder.
(e) Acceleration of Vesting; Sale of Shares. Unless the Company
terminates the Executive's employment for Cause, the Executive terminates his
employment for other than Good Reason or the Executive's employment is
terminated due to his death or Disability, upon (i) termination of the
Executive's employment or (ii) upon a Change of Control, all unvested stock
options held by the Executive on the Date of Termination shall immediately vest
and become exercisable; and all such stock options, together with any previously
vested and unexercised stock options, shall be exercisable by the Executive in
accordance with their respective terms for a period of one (1) year following
the Date of Termination or the date of the Change in Control, as the case may
be, or, if earlier, until the then scheduled expiration date(s) of such options.
The Company shall provide the Executive such cooperation and assistance as may
reasonably be necessary to effect cashless exercises of such stock options, as
well as the sale of any restricted Company securities beneficially owned by the
Executive at the Date of Termination.
For purposes of this Agreement, a "Change in Control" means and shall
be deemed to have occurred if: (i) any person, entity or "group", within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than (A) the Company, its
subsidiaries or any employee benefit plan established and maintained by the
Company or its subsidiaries, or (B) the Executive or any of the Executive's
affiliates, becomes the "beneficial owner" (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities entitled to vote generally in
the election of directors; (ii) the individuals who, as of the date hereof
constitute the Company's Board of Directors (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's stockholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than the election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the shareholders of
the Company approve (A) a reorganization, merger or consolidation with respect
to which persons who were the shareholders of the Company immediately prior to
such reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (B) a liquidation or dissolution of the Company,
or (C) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be enforce
able by the Executive's personal or legal representatives, executors,
administrators,
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successors, heirs, distributees, devises and legatees. If the Executive dies
while any amounts would still be payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's personal or legal representatives or, if there
be no such persons, the Executive's estate.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, the term "Company" means SportsLine USA,
Inc. and any successor to its business and/or assets as aforesaid which executes
and delivers an assumption and agreement provided for in this Section 10(c) or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law, or otherwise.
11. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Except as herein specifically provided, amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its subsidiaries at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
12. Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: SportsLine.com, Inc.
6350 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attn: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
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13. Miscellaneous.
(a) This Agreement has been approved by the Compensation Committee. No
provisions of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in a writing signed by the
Executive and such officer as may be specifically designed by the Compensation
Committee or the Board.
(b) The failure by either party hereto to insist upon compliance with
any condition or provision of this Agreement shall not be deemed a waiver of
such condition or provision or any other provision hereof.
(c) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and this Agreement
supersedes any other agreement or understanding between the Company and the
Executive relating to the Executive's employment and any compensation or
benefits in respect thereof.
(d) The Company may withhold from any accounts payable under this
Agreement all Federal, state or other taxes as legally shall be required.
(e) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Florida, without
reference to principles of conflicts of laws.
(f) The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date and year first above written.
SPORTSLINE.COM, INC.
By: /s/ Michael Levy
----------------------------------------
Title: President and Chief Executive Officer
/s/ Mark J. Mariani
-------------------------------------------
Mark J. Mariani
10
FIRST AMENDMENT TO LICENSE AND CONSULTING AGREEMENT
This First Amendment to License and Consulting Agreement (this "AMENDMENT"),
effective as of October 16, 1999 (the "AMENDMENT DATE"), is made and entered
into by and between Planned Licensing, Inc. a New York corporation and wholly
owned subsidiary of Namanco Productions, Inc. ("LICENSOR"), and SportsLine.com,
Inc., a Delaware corporation, located at 6340 N.W. 5th Way, Ft. Lauderdale,
Florida 33309 ("LICENSEE").
INTRODUCTION
Licensor and Licensee entered into a License and Consulting Agreement, executed
as of August 10th 1994 (the "AGREEMENT"). Licensor and Licensee each desires to
amend the terms of the Agreement as described in this Amendment.
For good and valuable consideration the parties hereby agree as follows:
TERMS
1. The second paragraph of the recitals in the Agreement is hereby
stricken in its entirety and in lieu thereof substituted with the
following:
"WHEREAS, Licensor operates a sports-oriented online service (the
"SPORTSLINE SERVICE") distributed via various platforms including but
not limited to on the World Wide Web portion of the Internet at
universal resource locator "cbs.sportsline.com" and other URLs owned by
or licensed to SPLN and desires to retain Licensor (i) to consult in
the development, funding, marketing and promotional activities of
Licensee and (ii) to provide the services of Namath as a performer to
advertise and promote its products, and as a spokesman for its
products; and"
2. Sub-section 1(b) of the Agreement is hereby amended by striking
"on-line sports information computer service ("SportsLine")" and in
lieu thereof substituting "the SportsLine Service".
3. Sub-section 1(e) of the Agreement is hereby stricken in its entirety
and in lieu thereof substituting with the following:
"Contract Year" shall mean a consecutive twelve (12) month period
commencing on October 16, 1999, and on each anniversary thereafter
during the term thereof."
4. Sub-section 2(a) of the Agreement is hereby amended by adding the
following sub-sections:
"(vi) Serve as a guest commentator/analyst in the on-air broadcast
of Licensee's nationally syndicated Westwood One/CBS Radio
property "The Drive" during the NFL football season (including
pre- and post-seasons) for a minimum of fifteen (15) minutes
per week with a minimum of three (3) personal in studio
appearances, for so long as Licensee continues to produce such
show or other similar programming during the Term.
(vii) Make a mutually agreed upon quantity (but in all events a
minimum of four (4)) of personal appearances per year
(schedule subject to NAMATH availability) at
greeting/autograph sessions for end users of the SportsLine
Service, sales meetings and other Endorsed Products related
functions.
(viii) Provide a reasonable amount of autographed items as requested
by Licensee and at the sole cost of Licensee. Licensee agrees
not to resell such autographed items and to limit the use of
such items to promotional purposes unless otherwise mutually
agreed by the parties."
<PAGE>
5. Section 4 of the Agreement is hereby amended by (a) striking "July 1,
1994" and in lieu thereof substituting "October 16, 1999", (b) striking
the term "Initial Term" and in lieu thereof substituting "Term", and
(c) striking the second and third sentences in their entirety. All
references in the Agreement to the terms "term of this Agreement" and
"Initial Term" are stricken and in lieu thereof substituted with the
"Term."
6. Licensor hereby waives the right to receive any and all payments
otherwise due pursuant to sub-sections (a)-(c) of Section 5 of the
Agreement subsequent to the Effective Date (it being understood that,
subsequent to the Effective Date) the royalty structure set forth below
in amended section 5 as set forth below in section 7 of this Amendment
supersedes the royalty structure set forth in original section 5 of the
Agreement. Licensor further hereby discharges all of Licensee's
obligations pursuant to sub-sections 5 (a)-(c) of the Agreement,
immediately prior to giving effect to the following amendment to
Section 5 of the Agreement, with respect to royalty payments that
otherwise would become due subsequent to the Effective Date.
7. Section 5 of the Agreement is hereby stricken in its entirety and in
lieu thereof substituted with the following:
"In full consideration for the rights, licenses and privileges herein
granted to licensee, and the mutual promises set forth herein, Licensee
agrees to:
(a) pay Licensor two hundred thousand dollars ($200,000) per
Contract Year in cash to be paid in equal quarterly
installments over the Term, commencing on January 1, 2000 and
continuing on the first day of each calendar quarter
thereafter until paid in full or, if sooner, until the
effective date of termination of this Agreement in the event
of a material breach by Licensor or Namath.
(b) grant to Licensor options to purchase up to thirty thousand
(30,000) shares of SPLN common stock (the "OPTIONS") at an
exercise price based on the closing price of SPLN common stock
on the NASDAQ National Market on the Amendment Date, and which
shall (i) vest pro-rata in arrears over the Term (i.e., 20% on
each anniversary of the Effective Date until fully vested),
provided this Agreement is in effect on the applicable vesting
date, and (ii) otherwise be subject to the terms, conditions
set forth in Licensee's Incentive Compensation Plan.
(c) Commencing on July 1, 1999, and continuing until the earlier
of fifteen (15) years thereafter or the effective date of
termination of this Agreement if earlier terminated as a
result of a material breach by Licensor or Namath, Licensor
shall be entitled to receive royalty payments ("ROYALTY
PAYMENTS") on account of paid subscriptions to the SportsLine
Service (e.g. "General Admission" and "Box Seat"
subscriptions) for end user access to fee based content on the
SportsLine Service (but expressly excluding any and all other
specific fee based content and/or services as determined in
the sole and exclusive discretion of Licensee, including,
without limitation, fee based frequency loyalty programs and
fantasy products and any non-fee based frequency loyalty
programs) solely for subscribers who enrolled in the
SportsLine Service during the period commencing on the Launch
Date and ending on June 30, 1999, at the rate of fifteen cents
($0.15) per month per paid subscriber which remains validly
enrolled in the SportsLine Service ("ROYALTY SUBSCRIBERS").
For purposes of this paragraph "Launch Date" shall mean the
date on which the SportsLine Service was generally available
to end users on a commercial basis. Royalty Payments shall be
payable on a calendar quarterly basis in arrears no later than
the end of the month following the quarter with respect to
which Royalty Payments, concurrently with the statement
required by sub-section (d) below.
(d) Licensee shall keep complete and accurate separate records of
all paid subscriptions subject to Royalty Payments, in
sufficient detail to disclose the initial enrollment date and
current status of subscribers. The said records, and all
underlying documents and other documents relating to the
calculation of Royalties, shall be open to inspection by
Licensor or its designated
2
PROPRIETARY AND CONFIDENTIAL
<PAGE>
representative at all reasonable times during business hours
up to four (4) times per Contract Year and shall be maintained
and preserved by Licensee with respect to each Contract Year
until two (2) years after the end of the applicable Contract
Year. Licensee agrees not to cause or permit any interference
with Licensor or Licensor's representative in the reasonable
performance of their duties of inspection and audit. The
exercise by Licensor in whole or in part, or at any time or
times of the right to audit records and accounts or of any
other right herein granted, the acceptance by Licensor of any
statement or statements or the receipt and deposit by Licensor
of any payment tendered by or on behalf of Licensee shall be
without prejudice to any rights or remedies of Licensor and
shall not stop or prevent Licensor from thereafter disputing
the accuracy of any such statement or payment. This clause (d)
shall survive the expiration or earlier termination of this
Agreement.
(e) No later than the end of the month following each calendar
quarter, Licensee shall transmit to Licensor a complete and
accurate statement certified to be accurate by an officer of
Licensee, covering the immediately preceding calendar quarter.
Such report shall set forth the number of paid subscriptions
subject to Royalty Payments in effect during the preceding
quarter, and the applicable royalty pertaining thereto. In the
event that any inconsistencies or mistakes are discovered in
such statements or payments, they shall immediately be
rectified and the appropriate payment or deduction from future
payments shall be made. Upon demand by Licensor, Licensee
shall at Licensor's expense (such expense to be deducted from
royalties payable to Licensor hereunder), but no more than
once in any twelve (12) month period, furnish to Licensor a
detailed statement by an independent certified public
accountant computing amounts due to Licensor hereunder as of
the date of Licensor's demand. If the certified audit
discloses that royalties were understated by more than ten
percent (10%) per Contract Year, then Licensee shall pay for
such audit. This clause (e) shall survive the expiration or
earlier termination of this Agreement.
(f) If Licensee shall fail to make any payment or deliver any of
the required statements referred to above, or to give access
to the premises and/or records pursuant to the provisions
hereof to Licensor's authorized representatives for the
purposes permitted hereunder, same shall be and Event of
Default hereunder. This clause (f) shall survive the
expiration or earlier termination of this Agreement.
8. Section 7 is hereby amended by adding the following at the end of the
paragraph:
"Notwithstanding the foregoing, Licensor shall not be employed by, act
as consultant to, or provide any services to or for any SPLN
Competitor. For purposes of this Agreement, "SPLN Competitor" shall
mean shall mean any Internet, or other sports online services of:
ESPN/ABC Sports/Walt Disney Company, Fox/Sky/Times, CNN/SI, Sports
Illustrated, CNN/HN Sports, The Sporting News/Times Mirror Corp., NBC
Sports, MSNBC, CNBC, MSG, Total Sports, Athlete Direct/Pro Sports
Xchange/Broadband Sports, Quokka, STATS, Inc., Pangolin, The Mirror
Group; any Internet or Web based fantasy game service (e.g., Sandbox
Entertainment); and any online retailer (whether or not exclusively
online) of sports-related merchandise selling substantially the same
general line of merchandise or sports-related products as SPLN
(including, but not limited to, ProTeam.com, Venator Group/FootLocker,
Amazon.com, Nike.com, The Sports Authority, Fogdog/Sports Site and
Copeland's Sports/Shopsports.com, Gear.com, Global Sports Interactive
etc. (or any of their respective affiliates)."
9. Section 17 is hereby amended by adding the following sub-section 17
(f):
Licensor acknowledges and agrees that damages related to a breach of
this Agreement by Licensor will be difficult to ascertain with any
degree of certainty. Therefore, notwithstanding any other rights
Licensee may have with respect to Licensee's termination of this
Agreement pursuant to this Section 17, in the event Licensee terminates
this Agreement, Licensor shall forfeit all unvested options and
immediately pay to licensee liquidated damages in the amount of one
hundred thousand dollars ($100,000.00) as liquidated
3
PROPRIETARY AND CONFIDENTIAL
<PAGE>
damages, and the parties agree that such amount is based on a
reasonable estimate of such damages as a result of non-performance.
10. Section 24 is hereby stricken in its entirety and in lieu thereof
substituted with the following:
All notices or other communications hereunder shall be in writing and
shall be deemed to be given or made when received (or upon refusal of
delivery) by overnight courier, U.S. mail, registered or certified,
first class, postage prepaid, or confirmed facsimile (with a copy via
one of the aforementioned forms of delivery promptly thereafter) to the
following address or addresses or such other address or addresses as
either party may designate in writing to the other in accordance with
this paragraph:
<TABLE>
<S> <C> <C> <C>
If to Licensee: SportsLine.com, Inc. With a copy to: SportsLine.com, Inc.
6340 NW 5th Way 6340 NW 5th Way
Ft. Lauderdale, Florida 33309 Ft. Lauderdale, Florida 33309
Attn: President Attn: VP, Legal & Business Affairs
Facsimile: (954) 351-9175 Facsimile: (954) 351-9175
If to Licensor: Planned Licensing, Inc. Carl R. Sloan, Esq.
c/o James C. Walsh, Esq. Penzer and Sloan
7 Audubon Place 342 Madison Avenue
New Orleans, Louisiana 70118 New York, New York 10173
</TABLE>
11. This Amendment does not, and shall not be construed to, modify any
term or condition of the Agreement other than those specific terms and
conditions expressly referenced in this Amendment. Except as herein
provided, the Agreement shall remain unchanged and in full force and
effect. In the event of any inconsistency or discrepancy between the
Agreement and this Amendment, the terms and conditions set forth in
this Amendment shall control. Capitalized terms in this Amendment, not
otherwise defined herein, shall have the meanings ascribed to them in
the Agreement. This Amendment may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
Amendment Date.
PLANNED LICENSING, INC. SPORTSLINE.COM, INC.
By:/S/ James Walsh By: /s/ Michael Levy
----------------------------------------- ----------------
Print Name: James C. Walsh Print Name: Michael Levy
Title: President Title: President
/s/ James C. Walsh
- -------------------------------------
Name: James C. Walsh, Individually
/s/ Joseph W. Namath
- -------------------------------------
Name: Joseph W. Namath, Individually
4
PROPRIETARY AND CONFIDENTIAL
<TABLE>
<CAPTION>
Exhibit 21.1
Subsidiaries as of December 31, 1999
------------------------------------
Name Jurisdiction of Incorporation Percent Ownership
---- ----------------------------- -----------------
<S> <C> <C>
Golfweb California 100%
Sports.com United Kingdom 54.61%
Commissioner.com, Inc. Delaware 100%
International Golf Outlet, Inc. Texas 100%
Golf Club Trader, Inc. Texas 100%
Tennis Direct.com, Inc. Delaware 100%
</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference of our report dated January 24, 2000 on the
consolidated financial statements of SportsLine.com, Inc. and subsidiaries into
the Company's previously filed registration statements on Form S-3 (Registration
Nos. 333-62685 and 333-78921) and Form S-8 (Registration Nos. 333-46021,
333-46023, 333-46029 and 333-57821).
Arthur Andersen LLP
Fort Lauderdale, Florida,
March 27, 2000.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 45,968,000
<SECURITIES> 24,953,000
<RECEIVABLES> 12,298,000
<ALLOWANCES> 423,000
<INVENTORY> 0
<CURRENT-ASSETS> 116,983,000
<PP&E> 19,395,000
<DEPRECIATION> 9,044,000
<TOTAL-ASSETS> 271,461,000
<CURRENT-LIABILITIES> 19,754,000
<BONDS> 19,608,000
0
0
<COMMON> 254,000
<OTHER-SE> 333,879,000
<TOTAL-LIABILITY-AND-EQUITY> 271,461,000
<SALES> 60,278,000
<TOTAL-REVENUES> 60,278,000
<CGS> 34,078,000
<TOTAL-COSTS> 83,908,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,392,000
<INCOME-PRETAX> (53,124,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (53,124,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 36,027,000
<CHANGES> 0
<NET-INCOME> (17,097,000)
<EPS-BASIC> (0.74)
<EPS-DILUTED> (0.74)
</TABLE>
