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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPORTSLINE USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7375 65-0470894
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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6340 N.W. 5TH WAY
FORT LAUDERDALE, FLORIDA 33309
(954) 351-2120
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
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MICHAEL LEVY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SPORTSLINE USA, INC.
6340 N.W. 5TH WAY
FORT LAUDERDALE, FLORIDA 33309
(954) 351-2120
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES OF COMMUNICATIONS TO:
KENNETH C. HOFFMAN, ESQ.
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
PHONE: (305) 579-0500
FAX: (305) 579-0717
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /_____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /______
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED NOTE(1) PRICE(1) REGISTRATION FEE
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5% Convertible Subordinated Notes due 2006 $150,000,000 100% $150,000,000 $41,700
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Common Stock, $.01 par value per share 2,303,250 shares (2) -- -- --
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457 of the Securities Act..
(2) Such number represents the number of shares of common stock that are
currently issuable upon conversion of the notes; pursuant to Rule 416
under the Securities Act, the Registrant is also registering such
indeterminate number of shares of common stock as may be issued from time
to time upon conversion of the notes as a result of the antidilution
protection of the notes. Pursuant to Rule 457(i), no registration fee is
required for these shares.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITY HOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 20, 1998
$150,000,000
[SportsLine USA LOGO]
5% CONVERTIBLE SUBORDINATED NOTES DUE 2006
(AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES)
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We issued $150,000,000 of notes in a private placement in March 1999.
This prospectus will be used by selling security holders to resell their notes
and the common stock issuable upon conversion of their notes.
The notes are convertible at any time prior to maturity into common
stock, at an initial conversion rate of 15.355 shares of common stock per
$1,000 principal amount of notes which is equivalent to a conversion price of
approximately $65.125 per share, subject to adjustment in certain events. Our
common stock is quoted on the Nasdaq National Market under the symbol "SPLN."
On May 19, 1999, the closing price of our common stock was $34.00 per share.
We will pay interest on the notes on April 1 and October 1 of each
year, beginning on October 1, 1999, at a rate of 5% per year. The notes will
mature on April 1, 2006 unless earlier converted or redeemed. The notes are
unsecured and are subordinated to our existing and future senior indebtedness.
As of March 31, 1999, we had no material indebtedness other than the notes.
We may redeem the notes after April 2, 2002, at the declining
redemption prices listed in this prospectus, plus accrued interest. In
addition, if a repurchase event occurs, we must offer to repurchase the notes.
We will not receive any proceeds from the sale by the selling security
holders of the notes or the common stock into which the notes are convertible.
We will pay all expenses of the registration of the notes and the common stock
other than selling commissions and fees and stock transfer taxes.
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SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE NOTES OR THE COMMON
STOCK INTO WHICH THE NOTES ARE CONVERTIBLE.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1999
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission utilizing a "shelf" registration
process. Under this shelf process, the selling security holders may sell up to
$150,000,000 aggregate principal amount of the notes or the applicable number
of shares of common stock which are issuable upon conversion of the notes. This
prospectus provides you with a general description of the notes and the common
stock into which the notes are convertible that the selling security holders
may offer. When the selling security holders sell the notes or the common
stock, we may provide, if necessary, a prospectus supplement that will contain
specific terms of that offering. The prospectus supplement may also add, update
or change information contained in this prospectus. You should read this
prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference statements about
our future that are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. This act provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from
the projected results. All statements other than statements of historical fact
we make in this prospectus or any other document incorporated by reference are
forward-looking. In some cases, you can identify these forward-looking
statements by terminology such as "believes," "expects," "may," "will,"
"should," "seeks," "approximately," "intends," "plans," "estimates," or
"anticipates" or the negative of those words or other comparable terminology.
In evaluating these statements, you should specifically consider various
factors, including the risks outlined under the caption "Risk Factors" in this
prospectus. You should pay particular attention to the cautionary statements
involving our limited operating history, the unpredictability of our future
revenues, the unpredictable and evolving nature of our business model, the
intensely competitive market for Internet services and products and the risks
associated with capacity constraints, systems development, management of
growth, acquisitions and international and domestic business expansion. These
factors may cause our actual results to differ materially and adversely from
any forward-looking statement.
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TABLE OF CONTENTS
PAGE
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About This Prospectus......................................................2
Special Note Regarding Forward-Looking Statements..........................2
Prospectus Summary.........................................................3
Risk Factors...............................................................5
Use of Proceeds...........................................................15
Ratio of Earnings to Fixed Charges........................................15
Description of Notes......................................................16
Description of Capital Stock..............................................24
United States Federal Income Tax Consequences.............................26
Selling Security Holders..................................................30
Plan of Distribution......................................................33
Legal Matters.............................................................34
Experts...................................................................34
Where You Can Find More Information.......................................35
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"SportsLine USA" is a registered service mark of SportsLine USA, Inc. The
CBS "eye device" is a registered trademark of CBS Inc. This prospectus also
includes trademarks and trade names of companies other than SportsLine USA and
CBS. All other company or product names are trademarks or registered trademarks
of their owners.
Information contained on our Web sites are not part of this prospectus.
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PROSPECTUS SUMMARY
Because this is a summary, it may not contain all information that may be
important to you. You should read this entire prospectus, including the
information incorporated by reference and the financial data and related notes,
before making an investment decision. When used in this prospectus, the terms
"we," "our" and "us" refer to SportsLine USA, Inc. and not the selling security
holders.
SPORTSLINE USA, INC.
We are a leading Internet-based sports media company that provides
branded, interactive information and programming as well as merchandise to
sports enthusiasts worldwide. cbs.sportsline.com, our flagship site on the
World Wide Web, delivers real-time, in-depth and compelling sports content and
programming that capitalizes on the Web's unique graphical and interactive
capabilities. Our other Web sites include those devoted to the following:
o sports superstars such as Joe Namath, Michael Jordan
(jordan.sportsline.com), Tiger Woods (tigerwoods.com), Shaquille
O'Neal (shaq.com) and Cal Ripken, Jr. (2131.com),
o specific sports such as golf (golfweb.com), cricket (cricinfo.org)
and soccer (soccernet.com),
o international sports coverage (sportsline.com/u/worldwide), and
o electronic odds and analysis on major sports events
(vegasinsider.com).
Our objective is to become the leading Internet-based sports media
company and to create a global sports brand. Accordingly, we focus exclusively
on sports and distinguish ourselves from other content providers by offering
innovative, timely and comprehensive sports content.
Our products and services include:
o distribution of 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 as
well as our superstar athletes,
o broadcasts of web-based real-time animated re-creations of major
sporting events,
o distribution of instant odds and picks from well-known
handicappers,
o production and distribution of entertaining, interactive and
original programming such as editorials and analyses from our
in-house staff and freelance journalists,
o production and offerings of contests, games, fantasy league
products and fan clubs, and
o sales of sports-related merchandise and memorabilia.
We also own and operate a state-of-the-art radio studio from which we
produce all-sports radio programming which is broadcast over the Internet and
on traditional radio stations in association with the SportsFan Radio Network.
We were incorporated in Delaware in February 1994. Our principal
executive offices are located at 6340 N.W. 5th Way, Fort Lauderdale, Florida
33309, and our telephone number is (954) 351-2120.
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THE OFFERING
Securities Offered........................ $150,000,000 aggregate principal amount of our 5% Convertible
Subordinated Notes due 2006 and shares of our common stock
issuable upon conversion of the notes.
Interest.................................. We will pay interest on the notes on April 1 and October 1 of
each year, commencing October 1, 1999.
Maturity.................................. April 1, 2006
Conversion................................ You may convert your notes at any time through the close of
business on the final maturity date of the notes, unless the
notes have been previously redeemed or repurchased, at an
initial conversion rate of 15.355 shares of common stock per
$1,000 principal amount of notes which is equivalent to a
conversion price of approximately $65.125 per share.
Optional Redemption....................... We may redeem the notes in whole or in part on or after April
2, 2002, at the redemption prices listed in this prospectus,
together with accrued interest.
Repurchase at Option of Holders
Upon a Repurchase Event................ If a repurchase event occurs, we will be required to offer to
repurchase the notes for cash or, at our option, shares of our
common stock at a repurchase price of 100% of the principal
amount of the notes, plus accrued interest. If we decide to
offer our common stock instead of cash, our common stock will
be valued at 95% of the average of the closing prices for the
five trading days immediately before and including the third
trading day prior to the repurchase date.
Ranking................................... Subordinate to all of our existing and future senior
indebtedness. As of March 31, 1999, we had no material senior
indebtedness. Neither we nor our subsidiaries are limited
under the indenture from incurring additional debt.
Use of Proceeds........................... We will not receive any of the proceeds from the sale of the
notes or the common stock offered in this prospectus.
Trading................................... The notes are currently traded in The Portal Market. However,
any notes sold under this prospectus will no longer trade in
the Portal Market. Our common stock is quoted on the Nasdaq
National Market under the symbol "SPLN".
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RISK FACTORS
You should carefully consider the following factors and other information
included or incorporated by reference in this prospectus before investing in
the notes or common stock.
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.
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 losses of $16.1 million during 1996, $34.2
million during 1997, $35.5 million during 1998, and $10.1 million during the
first quarter of 1999. As of March 31, 1999, we had an accumulated deficit of
$102.4 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 March 31, 1999, the minimum guaranteed payments we
were required to make under such agreements were $6,076,000. 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 $12,000,000 for the
year ended December 31, 1998 related to our agreement with CBS and will record
an additional $160,098,000 of non-cash expense over the remaining eight-year
term of our agreement with CBS. Additionally, non-cash expense under our
agreement with AOL will total $21,906,000 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.
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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
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 the notes and 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.
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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, Netscape and InfoSpace) 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 the 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.
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 Major League Baseball, 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, InfoSeek, 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.
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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.
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.
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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.
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 our
current SportsLine USA logo and a number of other marks, several of which
include the term "SportsLine USA." 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, SportsLine USA's 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.
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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,
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.
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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.
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.
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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.
OUR SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT
We utilize a significant number of computer software programs and
operating systems across our entire organization, including applications used
in operating our various Web sites, member services, e-commerce, and various
administrative and billing functions. To the extent that our software
applications contain source codes that are unable to appropriately interpret
the upcoming calendar year 2000, some level of modification, or even possible
replacement of such applications may be necessary.
We have retained a consulting firm to help assess our Year 2000
compliance. The assessment is currently being conducted in four phases, the
first two of which have been completed. During Phase One, we analyzed
facilities, applications, network, distributed computing, infrastructure, and
data in order to determine the size, scope, and complexity of our exposure to
Year 2000. During Phase Two, specific strategies required to bring exposure
areas into compliance were formulated. Additionally, during Phase Two, we began
interviewing hardware, software, market feed, and firmware vendors for Year
2000 compliance plans. The results of the first and second phases were used to
develop a compliance/renovation approach, budget, and project plan which
includes an analysis of compliance strategies, cost parameters and timelines.
During Phase Three, which is currently in process, we will complete the
renovations of software and applications, implement hardware patches, develop
project contingencies and complete final testing. Phase Four will complete the
process with the development of a contingency plan for any hardware or software
failure. Phase Four is scheduled to begin in June 1999. We expect to be
substantially Year 2000 compliant by the end of June 1999 with respect to our
mission-critical computing infrastructure, associated applications, and
strategic vendors/suppliers.
The costs we incurred during 1998 to address the Year 2000 compliance
were approximately $143,750. We estimate we will incur a maximum of $500,000 in
direct costs during 1999 to support our compliance initiatives. Although we
expect to be Year 2000 compliant on or before December 31, 1999, we cannot
assure you that we will not experience serious unanticipated negative
consequences and/or material costs caused by undetected errors or defects in
the technology used in our internal systems or by failures of our vendors and
partners to address their Year 2000 issues in a timely and effective manner.
Should miscalculations or other operational errors occur as a result of
the Year 2000 issue, we, or the parties on which we depend, may be unable to
produce reliable information or to process routine transactions. Furthermore,
in the worst case, we, or the parties on which we depend, may, for an extended
period of time, be incapable of conducting critical business activities which
include, but are not limited to, the production and delivery of our Internet
sites, invoicing customers and paying vendors, which could have a material
adverse effect on our business, prospects, financial condition and operating
results.
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 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.
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THE PRICE OF THE NOTES AND OUR COMMON STOCK IS HIGHLY VOLATILE
The trading price of the notes and our Common Stock fluctuates
significantly. For example, during the 52-week period ended March 31, 1999, the
reported closing price of our common stock on the Nasdaq National Market was as
high as $57.81 and as low as $7.69. Trading prices of the notes and 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 the notes and the common
stock, regardless of our operating performance.
THE NOTES ARE SUBORDINATED TO OUR SENIOR DEBT
The notes are unsecured and subordinated to our existing and future
senior indebtedness. In the event of our bankruptcy, liquidation or
reorganization or acceleration of the notes due to an event of default, we will
pay our obligations on the notes only after we have paid all of our senior
indebtedness in full. Our assets may not be sufficient to cover amounts due on
any of the notes. The notes also will be effectively subordinated to the
liabilities, including trade payables, of any of our subsidiaries.
As of March 31, 1999, we had no material indebtedness outstanding that
constituted senior indebtedness. Neither we nor our subsidiaries are prohibited
under the indenture from incurring additional debt. Additional debt could
prevent us from meeting our obligations on the notes. From time to time we and
our subsidiaries likely will incur additional debt, including senior
indebtedness. See "Description of Notes - Subordination of Notes."
REDEMPTION OF THE NOTES IS SUBJECT TO CERTAIN LIMITATIONS
We may not have sufficient funds to pay the repurchase price in cash on a
repurchase event. In addition, a repurchase event may result in a default under
one or more agreements governing our senior indebtedness, whether the
repurchase price is paid in common stock or cash. In this event, the
subordination provisions may prevent us from making any cash payment on the
notes, including a payment of the repurchase price, unless we first obtained
the consent of the holders of defaulted senior indebtedness or repay the senior
indebtedness in full.
The repurchase event may have the effect of delaying, deferring or
preventing a change of control or other attempt to acquire control of us. As a
result, the right may render more difficult a merger, consolidation or tender
offer, or an assumption of control by a holder of a large block of our shares
and the removal of incumbent management. The change of control repurchase
feature was a result of negotiations between us and the initial purchasers in
the initial private placement. The repurchase feature is not the result of our
knowledge of any specific effort to accumulate shares of common stock or to
obtain control of us by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by us to adopt a series of anti-takeover
provisions. We have no present intention to engage in a transaction involving a
change of control, although it is possible that we would decide to do so in the
future.
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THERE IS CURRENTLY NO PUBLIC MARKET FOR THE NOTES
The initial purchasers of the notes, though they have advised us that
they intend to make a market in the notes, are not obligated to do so and may
discontinue market making at any time without notice. Their market-making
activity will be subject to the limits imposed by the securities laws. We
cannot guarantee that the market for the notes will be maintained. The trading
price of notes will decline if there ceases to be an active trading market for
them. We do not intend to apply for listing of the notes on any securities
exchange.
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USE OF PROCEEDS
SportsLine USA will not receive any proceeds from the sale of the notes
or the common stock by the selling security holders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the amounts by which our earnings were
insufficient to cover fixed charges on a historical basis for the fiscal years
indicated, except for 1994, our initial year of operations, which began in
February 1994. Earnings consist of income before income taxes plus fixed
charges. Fixed charges consist of interest charges and the portion of rent
expense under operating leases representing interest, which is estimated to be
one-third of rent expense.
Three months ended
March 31,
------------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
Amount by which earnings were
insufficient to cover fixed charges
(in thousands)........................ $404 $6,108 $16,103 $34,177 $35,509 $9,006 $10,128
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DESCRIPTION OF NOTES
The notes were issued under an indenture dated as of March 15, 1999,
between us and State Street Bank and Trust Company, as trustee. Many of the
terms and conditions applicable to the notes are contained in the indenture.
The following summarizes some, but not all, of the provisions of the notes and
the indenture. Prospective buyers of notes should refer to the actual terms of
the notes and the indenture for the definitive terms and conditions. The
indenture and a form of the notes have been filed as exhibits to the
registration statement of which this prospectus is a part. As used in this
Description of notes, the words "we," "us," or "our" do not include any of our
subsidiaries.
GENERAL
The aggregate principal amount of the notes is limited to $150,000,000.
The notes will be issued in fully registered form and denominated in integral
multiples of $1,000. The notes will mature on April 1, 2006 unless earlier
converted, redeemed or repurchased.
The notes bear interest at an annual rate of 5%. Interest will be paid on
April 1 and October 1 of each year, commencing October 1, 1999, and upon
maturity, redemption and repurchase. The record dates for payment of interest
on the notes is March 15 and September 15. If any payment date falls on a day
that is not a business day, payment will be made on the next business day and
no additional interest will be paid. Interest will be computed the basis of a
360 day year comprised of twelve 30-day months.
We will maintain an office in the Borough of Manhattan, State of New York
where notes may be presented for registration, transfer, exchange or
conversion. Initially this will be an office or agency of the trustee. Interest
payable on the notes will generally be paid by check and mailed to the holders
of record as of the close of business on the last Business Day before the
related record date. Holders of more than $2,000,000 of notes may request that
their interest be paid by wire transfer.
We are not restricted under the indenture from entering into any
transaction or altering the nature of our business, even if the transaction or
alteration would be detrimental to the holders of the notes. For example, we
may incur substantial amounts of debt or sell our assets to an acquiror without
violating the terms of the indenture. If the transaction involves a "change of
control," a holder will have the right to require us to repurchase their notes,
in the manner described in "--Repurchase at Option of Holders Upon a Repurchase
Event." Dividends, stock splits and other distributions may result in an
adjustment to the conversion price of the notes.
Holders will not be required to pay a service charge for registration or
transfer of their notes. However, we may require you to pay any tax or other
governmental charge in connection with the transfer. We are not required to
exchange or register the transfer of:
o any notes selected for redemption for a period of 15 days prior to
redemption,
o any note or portion selected for redemption,
o any note or portion surrendered for conversion , or
o any note or portion surrendered for repurchase but not withdrawn in
connection with a repurchase event.
The notes will have no sinking fund. A sinking fund is a custodial or
similar account into which regularly scheduled deposits are made for purposes
of redeeming or repurchasing of securities.
CONVERSION
Each holder may convert its notes, in whole or in part, into our common
stock at an initial conversion rate of 15.355 shares of common stock per $1,000
principal amount of notes, which is equivalent to a conversion price of
approximately $65.125 per share. A note may be converted at any time prior to
the close of business on the final maturity date of the notes. If the notes are
called for redemption, the holder's conversion rights on the called notes will
expire at the close of business of the last business day before the redemption
date. Any note that has been presented for repurchase following a repurchase
event may only be converted if the holder delivers a notice of withdrawal prior
to the close of business on the last business day before the repurchase date.
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A holder may exercise the right to convert their notes in denominations
of integral multiples of $1,000 by delivering their notes to the office of our
conversion agent accompanied by a conversion notice in the form required by the
indenture. If the date of conversion occurs on or after a record date, but
before the next interest payment date, and we have not called the notes for
redemption, the notes to be converted and conversion notice must be accompanied
by a payment equal to the amount of the interest payable on the next interest
payment date. Instead of issuing a fractional share upon conversion, we will
pay a cash adjustment based on the closing market price of the common stock on
the last business day before the date of conversion.
A holder that presents a note for conversion will not be required to pay
any taxes or duties resulting from the issuance of our common stock, but a
holder will be required to pay any tax or duty resulting from the issuance of
common stock in the name of any person other than the holder.
The conversion price shall initially be $1,000 divided by the conversion
rate of 15.355 and shall be adjusted upon certain events including:
o our issuing common stock as a dividend or distribution on our
common stock,
o our dividing or combining our outstanding shares of common stock
into a different number of shares,
o subject to certain exceptions, our issuing rights or warrants to
all holders of our common stock to purchase common stock at less
than the current market price of the common stock,
o our making a dividend or distribution to the holders of our common
stock of capital stock or debt or assets, excluding:
o common stock distributions covered by the first bullet point,
o right or warrant distributions covered by the third bullet
point, and
o cash distributions covered by the next bullet point,
o our paying a cash dividend or distribution to all holders of our
common stock or our repurchasing any shares of our common stock
(whether by tender offer or otherwise) in a transaction in which
all holders of our common stock are invited to participate if, when
aggregated with all other dividends, distributions or repurchases
during the prior 12 calendar months for which no adjustment to the
conversion price has been made, the dividend, distribution or
repurchase exceeds 10% of the Company's market capitalization
(calculated by multiplying the current market price of its common
stock by the number of outstanding shares of common stock, on a
fully diluted basis), and
o payment on certain tender offers or exchange offers by a third
party if, as of the closing date of the offer, our board of
directors does not recommend rejection of the offer.
We will only make an adjustment in the last bullet point if the tender
offer increases the person's ownership to more than 25% of our outstanding
common stock. We won't make any adjustment in the last bullet point if the
tender offer is a merger or transaction described below under "--Consolidation,
Merger or Assumption."
If we implement a stockholders' rights plan that grants rights to the
holders of our common stock, the indenture requires that the plan also allow
the holders of notes to receive the same rights upon conversion of the notes
into common stock, on a share-for-share basis.
In the event of any reclassification or other change in our common stock,
or our consolidation, merger, or combination with or into another entity or a
sale or conveyance to another person of our property and assets as an entirety
or substantially as an entirety, that results in the holders of our common
stock becoming entitled to receive stock, other securities, cash or other
property or assets on or in exchange for their shares of common stock, the
holders will generally be entitled to convert their notes into the type of
property or assets that they would have received had the notes been converted
immediately before such event. If the holders of common stock have the right to
chose between or among alternative types of property, the holders of notes will
receive the kind and amount of property received per share by a plurality of
non-electing shares. All references in this Description of notes to "common
stock" in the context of any holder's right to convert should be construed to
mean either our common stock or the other property into which the note is
convertible.
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The holders of notes or common stock issuable upon conversion of the
notes may, in certain circumstances, be deemed to have received a distribution
or dividend subject to United States income tax as a result of an adjustment
(or the nonoccurrence of an adjustment) to the conversion price. See "Certain
Federal Income Tax Considerations."
We are permitted to reduce the conversion price of the notes for certain
periods of time, if our Board of Directors deems it advisable. Any such
reduction shall be effective for not less than 20 days. We may also reduce the
conversion price to avoid or diminish income tax to holders of our common stock
in connection with a dividend or distribution of stock or similar event. We are
required to give at least 15 days prior notice of any such reduction.
No adjustment in the conversion price will be required unless it would
result in a change in the conversion price of at least 1%. Any adjustment not
made will be taken into account in subsequent adjustments.
OPTIONAL REDEMPTION BY US
On or after April 2, 2002, we may elect to redeem all or part of the
notes. We will provide the holders at least 30 but not more than 60 days'
notice of our intent to redeem.
If we elect to redeem the notes the redemption price will be as follows,
expressed as a percentage of the principal amount of the notes to be redeemed:
Redemption
Redemption Date Price
--------------- ---------
From April 2, 2002 through March 31, 2003........................102.857%
From April 1, 2003 through March 31, 2004........................102.143
From April 1, 2004 through March 31, 2005........................101.429
From April 1, 2005 through March 31, 2006........................100.714
and 100% at April 1, 2006.
We will also pay accrued interest to, but excluding, the date of
redemption. If a redemption date occurs on an interest payment date, the
interest will be payable to the holder of record as of the record date.
In the event of a partial redemption, the trustee will select the notes
to be redeemed by lot, or in its discretion, on a pro rata basis or by any
other method that the trustee considers fair and appropriate, as long as the
method chosen is not prohibited by any exchange or automated market. Partial
redemptions of any note must be in integral multiples of $1,000. A new note
will be issued having a principal amount equal to the unredeemed principal
portion of the old note. In the event that a holder partially converts a note
that has been called for a partial redemption, the conversion shall first
reduce the portion of the note called for redemption.
In addition, we may at any time or from time to time repurchase notes in
the open market or in private transactions. We will cancel any notes that we
repurchase.
REPURCHASE AT OPTION OF HOLDERS UPON A REPURCHASE EVENT
If a repurchase event occurs, each holder will have the right to require
us to repurchase all or part of its notes on the 40th calendar day after the
date that we mail a notice of repurchase to the holders. The purchase price
will be 100% of the principal amount of the notes. We will also pay accrued
interest to, but excluding, the repurchase date. However, if a repurchase date
occurs on an interest payment date, the interest becoming due on the interest
payment date will be payable to the holder of record on the Record Date, which
will satisfy our obligation to otherwise pay interest in connection with the
repurchase.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in shares of our common stock, valued at 95% of the
average of the closing prices of our common stock for the five consecutive
trading days prior to such repurchase. We may not make payment in shares of our
common stock unless we satisfy certain conditions with respect to such payment
set forth in the indenture.
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We are required to mail a notice to each holder of record within 15
calendar days after the occurrence of a repurchase event. The notice must
describe the repurchase event, the holder's right to elect repurchase of the
notes and the repurchase date. We must deliver a copy of the notice to the
trustee and cause a copy, or a summary of the notice, to be published in a
newspaper of general circulation in the City of New York. A holder may exercise
its repurchase rights by delivering written notice to us and the trustee
indicating that the holder has elected to exercise its repurchase rights. The
notice is to be accompanied by the notes endorsed for transfer to us. The
exercise notice is to be delivered to us on or before the close of business on
the 35th calendar day after the date the repurchase notice is mailed.
A "change in control" will be deemed to have occurred when:
o any person or group is or becomes the beneficial owner of shares
representing more than 50% of our voting stock,
o our stockholders approve any plan or proposal for our liquidation,
dissolution or winding up,
o we
(A) consolidate with or merge into any other corporation or any
other corporation merges into us and our outstanding common
stock is changed or exchanged for other assets or securities
unless our stockholders immediately before the transaction own
immediately following the transaction at least 51% of the
combined voting power of the corporation resulting from the
transaction in substantially the same proportion as their
ownership of our voting stock immediately before the
transaction, or
(B) convey, transfer or lease all or substantially all of our
assets to any person, or
o any time continuing directors do not constitute a majority of our
Board of Directors.
A change in control will not be deemed to have occurred if:
o the last sale price of our common stock for any five trading days
during the ten trading days immediately before any event listed in
the bullet points above is at least equal to 105% of the conversion
price in effect on that day, or
o in the case of a merger or consolidation, all of the consideration
in such merger or consolidation constituting the change in control
consists of common stock traded on a United States national
securities exchange or quoted on the Nasdaq National Market and as
a result of the transaction the notes become convertible solely
into that common stock.
The term "continuing director" means at any date a member of our Board of
Directors:
o who was a member of our Board of Directors on March 19, 1999, or
o who was nominated or elected by at least a majority of the
directors who were continuing directors at the time of the
nomination or election or whose election to our Board of Directors
was recommended by at least a majority of the directors who were
continuing directors at the time of the nomination or election or
by the nominating committee comprised of our independent directors.
The term "repurchase event" means a change in control or a termination of
trading.
A "termination of trading" is considered to have occurred if our common
stock is neither listed for trading on a United States national securities
exchange nor approved for trading on an established automated over-the-counter
trading market in the United States.
If the phrase "all or substantially all" used in the definition of change
in control were to be interpreted, the interpretation would likely depend on
the facts and circumstances existing at such time. As a result, there may be
uncertainty as to whether or not a sale or transfer of "all or substantially
all" of our assets has occurred.
We may not have sufficient funds to pay the repurchase price in cash on a
repurchase event. In addition, a repurchase event may result in a default under
one or more agreements governing our senior indebtedness, whether the
repurchase price is paid in common stock or cash. In this event, the
subordination provisions may prevent us from making any cash payment on the
notes, including a payment of the repurchase price, unless we first obtained
the consent of the holders of defaulted senior indebtedness or repay the senior
indebtedness in full.
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The repurchase event may have the effect of delaying, deferring or
preventing a change of control or other attempt to acquire control of us. As a
result, the right may render more difficult a merger, consolidation or tender
offer, or an assumption of control by a holder of a large block of our shares
and the removal of incumbent management. The change of control repurchase
feature was a result of negotiations between us and the initial purchasers in
the initial private placement. The repurchase feature is not the result of our
knowledge of any specific effort to accumulate shares of common stock or to
obtain control of us by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by us to adopt a series of anti-takeover
provisions. We have no present intention to engage in a transaction involving a
change of control, although it is possible that we would decide to do so in the
future.
Rule 13e-4 under the Exchange Act requires the distribution of certain
information to security holders in the event of certain issuer tender offers
and may apply in the event of a repurchase. We will comply with this rule to
the extent applicable.
SUBORDINATION
All payments under the notes are subordinate to the prior payment in full
of all existing and future senior indebtedness as provided in the indenture.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization of us, payments on the notes will be subordinated
in right of payment to the prior payment in full of all senior indebtedness.
However, if the notes are accelerated following an event of default, the
holders of any senior indebtedness then outstanding will be entitled to payment
in full before the holders of the notes are entitled to receive any payment on
the notes.
In addition, we may not make any payments on the notes if:
o we fail to pay any payment on any designated senior indebtedness
beyond any grace period, or
o any other default occurs and is continuing under any designated
senior indebtedness that permits holders of the designated senior
indebtedness to accelerate the maturity of any designated senior
indebtedness and the holders of designated senior indebtedness send
the trustee and us a payment blockage notice of the default.
We may resume making payments on the notes
o in the case of a payment default, when the default is cured or
waived or ceases to exist, and
o in the case of a nonpayment default, the earlier of when the
default is cured or waived or ceases to exist or 179 days after
receipt of the payment blockage notice.
No new period of payment blockage may be commenced pursuant to a payment
blockage notice unless:
o 365 days have elapsed since our receipt of the prior payment
blockage notice, and
o all scheduled payments on the notes have been paid in full, or, if
not paid in full, neither the trustee nor any of the holders of
notes has begun proceedings to enforce the right of the holders to
receive such payments.
No default that existed on any senior indebtedness on the date of
delivery of any payment blockage notice may be the basis for a subsequent
payment blockage notice.
The term "senior indebtedness" means the principal, premium, if any, and
interest on, including bankruptcy interest, and any other payment on the
following:
o all indebtedness of SportsLine for money borrowed that is evidenced
by notes, debentures, bonds or other securities,
o all indebtedness of SportsLine due and owing with respect to
letters of credit,
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o all indebtedness or other obligations of SportsLine due and owing
with respect to interest rate and currency swap agreements, cap,
floor and collar agreements, currency spot and forward contracts
and other similar agreements and arrangements,
o all indebtedness consisting of commitment or standby fees due and
payable to lending institutions with respect to credit facilities
or letters of credit available to SportsLine,
o all obligations of SportsLine under leases required or permitted to
be capitalized under generally accepted accounting principles,
o all indebtedness or obligations of the type listed in the bullet
points above assumed by or guaranteed by SportsLine or in effect
guaranteed, directly or indirectly, by SportsLine through an
agreement to purchase, and
o any amendments or modifications of indebtedness of type listed in
the bullet points above.
Senior indebtedness shall not include:
o any debt or amendment or modification that is not senior to or is
on the same basis as the notes,
o any indebtedness to any or our subsidiaries,
o indebtedness for trade payables or the deferred purchase price of
assets or services incurred in the ordinary course of business, or
o the notes.
The term "designated senior indebtedness" means our obligations under any
senior indebtedness that expressly provides that it shall be designated senior
indebtedness.
If the trustee or any holder of notes receives any payment or
distribution of our assets of any kind on the notes in contravention of any of
the terms of the indenture, then such payment or distribution will be held by
the recipient in trust for the benefit of the holders of senior indebtedness,
and will be immediately paid or delivered to the holders of senior indebtedness
or their representative or representatives.
We are the sole obligor on the notes. If, in the future, a significant
portion of our consolidated operations is conducted through our subsidiaries,
the cash flow and our ability to service our debt may be dependent upon the
earnings of these subsidiaries and the distribution of those earnings to us.
Each subsidiary will be a separate legal entity, will not be required to
guaranty our obligations with respect to the notes and will have no obligation
to pay any amounts due on the notes or to make any funds available for payment
on the notes. In addition, the payment of dividends and the making of loans and
advances to us by our subsidiaries may be subject to statutory, contractual or
other restrictions. Our right to receive assets of any of our subsidiaries upon
its liquidation or reorganization will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors and even if
those claims do not include "senior indebtedness" of that subsidiary, and that
subsidiary's preferred stockholders.
The indenture will not prevent us from incurring additional indebtedness,
including senior indebtedness. As of March 31, 1999, we had no material
indebtedness outstanding which constituted senior indebtedness.
The subordination provisions of the indenture and the notes will not
prevent the occurrence of any default or event of default or limit the rights
of any holder of notes to pursue any other rights or remedies with respect to
the notes.
As a result of the subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceedings, holders of the notes may receive less than other creditors on a
ratable basis.
EVENTS OF DEFAULT AND REMEDIES
The following events constitute "events of default" under the indenture:
o our failure to pay the principal of, or premium, if any, on any of
the notes when due,
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o our failure to pay interest or liquidated damages on the notes when
due if such failure continues for 30 days,
o our failure to deliver shares of our common stock required to be
delivered upon conversion of a note if the failure continues for 5
days,
o our failure to perform any covenant in the indenture if such
failure continues for 60 days after notice is given by the trustee
or by the holders of not less than 25% of the notes,
o our failure following a repurchase event to repurchase any notes,
o our failure to provide timely notice of a repurchase event,
o our failure or the failure of any of our significant subsidiaries
to make any payments on any Indebtedness following any applicable
grace periods, in an amount in excess of $15,000,000 and such
amount has not been paid or discharged within 30 days after notice
is given in accordance with the indenture,
o a default by us or any of our significant subsidiaries on any
indebtedness that results in the acceleration of indebtedness in an
amount in excess of $15,000,000 and such indebtedness or such
acceleration has not been discharged for 30 days after notice is
given in accordance with the indenture, or
o certain events involving bankruptcy, insolvency or reorganization
of us or any of our significant subsidiaries.
The trustee is generally required, within 90 days after its becoming
aware of a default, to provide the registered holders of the notes written
notice of the default. Except in the case of a payment default, the trustee
will not be required to deliver a default notice if it determines in good faith
that withholding the notice is in the best interest of the holders of the
notes.
If an event of default has occurred and is continuing, the trustee, or
the holders of not less than 25% of the notes, may declare all amounts
outstanding on the notes to be immediately due and payable. If an event of
default occurs resulting from the bankruptcy, insolvency or reorganization of
us, all unpaid principal of and accrued interest on the outstanding notes would
become due and payable immediately without any declaration or other act on the
part of the trustee or holders of notes.
Holders of a majority of the notes may direct the time, method and place
of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee, subject to certain
limitations. Before proceeding to exercise any right or power under the
indenture at the direction of the holders, the trustee will be entitled to
receive from such holders reasonable security or indemnity against any costs,
expenses and liabilities that it might incur as a result. Following an event of
default for nonpayment, each holder to which such default pertains will have
the absolute right to institute suit to enforce payment of any notes held by
it.
Generally, the holders of not less than a majority of the notes may waive
any default or event of default. However, the consent of all holders will be
required to waive any default and events of default relating to:
o a failure by us to make payment on any note,
o a failure by us to convert any note into common stock, or
o a failure by us to comply with any of the provisions of the
indenture that would require the consent of affected holders to
modify.
We are required, within 120 days of the end of each fiscal year, to send
the trustee a statement of certain of our officers:
o stating whether or not to the best of their knowledge we are out of
compliance with any terms of the indenture or the notes, and
o specifying, if any of them has any such knowledge that we are out
of compliance, the nature of the default.
We are also required to deliver to the trustee a statement specifying the
nature of any default of which we are aware and any action we have taken to
cure the default.
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CONSOLIDATION, MERGER OR ASSUMPTION
We may not consolidate or merge into another person or sell, lease,
convey or transfer all or substantially all of our assets to another person
unless:
o either
(A) in the case of a merger or consolidation that does not
involve a transfer of all or substantially all of our assets,
we are the surviving entity, or
(B) the resulting corporation is a U.S. corporation and expressly
assumes all of our obligations under the notes and the
indenture,
o no default or event of default exists or would occur, and
o certain other conditions are satisfied.
MODIFICATIONS OF THE INDENTURE
With the consent of the holders of not less than a majority of the notes,
we and the trustee may modify the indenture, any supplemental indenture or the
notes. However, the following modifications require the consent of each holder:
o an extension of the maturity of any note,
o a reduction in the rate or an extension of the time or payment of
interest on any note,
o a reduction in the principal amount of any note,
o a reduction in any amount payable upon redemption or repurchase of
any note,
o any change in our obligation to repurchase any note upon a
repurchase event if adverse to any holder,
o any change that adversely affects the right of any holder to
institute suit for the payment of any note,
o any change in currency in which any note is payable,
o any adverse modification to the right to convert the notes,
o any adverse modification of the subordination provisions of the
notes, or
o any change to the percentage required to consent to modifications
and amendments.
SATISFACTION AND DISCHARGE
We may discharge our obligations under the indenture while notes remain
outstanding if:
o all notes are within one year of their scheduled maturity or the
date on which they are scheduled for redemption, and
o we have deposited with the trustee an amount sufficient to pay all
outstanding notes on their scheduled maturity or redemption date.
REGISTRATION RIGHTS OF THE HOLDERS OF THE NOTES
Under a registration rights agreement, we are generally required to keep
the shelf registration statement of which this prospectus is a part effective
until the earlier of (1) the sale of all the securities registered under this
prospectus and (2) the expiration of the holding period for the securities held
by people or entities that are not our affiliates under Rule 144(k) under the
Securities Act. We may suspend the use of this prospectus under certain
circumstances relating to pending corporate developments, public filings with
the Securities and Exchange Commission and similar events for a period not to
exceed an aggregate of 90 days in any period of 365 consecutive days. We must
pay predetermined liquidated damages (i) for the notes, at a rate per annum
equal to 0.5% of the principal amount of the notes, and (ii) for any shares of
common stock issued on conversion of the notes, at a rate per annum equal to
0.5% of the conversion price, if the prospectus is unavailable for periods in
excess of those permitted above.
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A holder who sells notes or common stock issued upon conversion of the
notes pursuant to this prospectus generally must be named as a selling holder,
deliver this prospectus to purchasers and be bound by certain provisions of the
registration rights agreement. We will pay all expenses of the shelf
registration statement, provide to each registered holder copies of such
prospectus and take certain other actions as are required to permit
unrestricted resales of the notes and the common stock.
A copy of the registration rights agreement has been filed as an exhibit
to the registration statement of which this prospectus is a part.
GOVERNING LAW
The indenture and the notes will be governed by the laws of the State of
New York without regard to conflicts of laws principles.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the trustee under the indenture, has
been appointed by us as the initial paying agent, conversion agent, registrar
and custodian with regard to the notes. An affiliate of the trustee is the
transfer agent for our common stock. We may maintain deposit accounts and
conduct other banking transactions with the trustee or its affiliates in the
ordinary course of business, and the trustee and its affiliates may from time
to time in the future provide banking and other services to us in the ordinary
course of their business.
If the trustee becomes a creditor of us, the indenture and the Trust
Indenture Act of 1939, as amended, may limit the right of the trustee to obtain
payment on or realize on security for its claims. If the trustee develops any
conflicting interest with the holders of notes or us, it must eliminate the
conflict or resign.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common
stock, $.01 par value per share, and 1,000,000 shares of preferred stock, $0.01
par value per share. The following statements are brief summaries of certain
provisions relating to our capital stock contained in our Certificate of
Incorporation and Bylaws and in the laws of Delaware.
COMMON STOCK
As of March 31, 1999, there were 22,384,266 shares of our common stock
outstanding. Holders of our common stock are entitled to one vote for each
share held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available therefor, subject to any preferential
dividend rights of outstanding preferred stock. Upon our liquidation,
dissolution or winding up, holders of our common stock are entitled to receive
ratably our net assets available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of our common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock which we may designate and
issue in the future.
PREFERRED STOCK
As of March 31, 1999, we had no shares of preferred stock outstanding.
Our Board of Directors is authorized, without further shareholder approval, to
issue from time to time up to an aggregate of 1,000,000 shares of preferred
stock in one or more series and to fix or alter the designations, preferences,
rights and any qualifications, limitations or restrictions of the shares of
each such series thereof, including the dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption (including sinking fund
provisions), redemption price or prices, liquidation preferences and the number
of shares constituting any series or designations of such series. We have no
present plans to issue any shares of preferred stock.
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REGISTRATION RIGHTS
Certain of our security holders are entitled to require us to register
under the Securities Act, up to a total of approximately 10.1 million shares of
our common stock (including 1.4 million shares of our common stock which is
issuable upon the exercise of warrants). In the event we propose to register
any of our securities under the Securities Act at any time, these security
holders, subject to certain exceptions, have the right to include their shares
in the registration. In addition, some of these security holders also have the
right, subject to certain conditions and limitations, to require us to prepare
and file a registration statement under the Securities Act with respect to
their shares. We are generally required to bear the expenses of all these
registrations, except underwriting discounts and commissions.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. Section 203 prevents certain
Delaware corporations, including those whose securities are listed on the
Nasdaq National Market, from engaging, under certain circumstances, in a
"business combination" (which includes a merger or sale of more than 10% of the
corporation's assets) with any "interested stockholder" (a stockholder who
acquired 15% or more the corporation's outstanding voting stock without the
prior approval of the corporation's board of directors) for three years
following the date that such stockholder became an "interested stockholder." A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders' amendment
approved by at least a majority of the outstanding voting shares. We have not
"opted out" of the provisions of Section 203.
In addition, certain provisions of our Certificate of Incorporation and
Bylaws may be deemed to have an anti-takeover effect and may delay, defer or
prevent a tender offer or takeover attempt that a shareholder might consider in
its best interest, including those attempts that might result in a premium over
the market price for the shares held by shareholders.
CLASSIFIED BOARD OF DIRECTORS. Our Board of Directors is divided
into three classes of directors serving staggered three-year terms. As a
result, approximately one-third of our directors will be elected each
year. These provisions, when coupled with the provision of our
Certificate of Incorporation authorizing only the Board of Directors to
fill vacant directorships or increase the size of the Board of Directors,
may deter a shareholder from removing incumbent directors and
simultaneously gaining control of the Board of Directors by filling the
vacancies created by such removal with its own nominees.
SHAREHOLDER ACTION; SPECIAL MEETING OF SHAREHOLDERS. Our Certificate
of Incorporation provides that shareholders may not take action by
written consent, but only at duly called annual or special meetings of
shareholders. Our Certificate of Incorporation further provides that
special meetings of our shareholders may be called only by the Chairman
of the Board of Directors or a majority of the Board of Directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Our Bylaws provide that shareholders seeking to bring
business before an annual meeting of shareholders, or to nominate
candidates for election as directors at an annual meeting of
shareholders, must provide timely notice in writing. To be timely, a
shareholder's notice must be delivered to or mailed and received at our
principal executive offices, not less than 120 days nor more than 150
days prior to the first anniversary of the date of our notice of annual
meeting provided with respect to the previous year's annual meeting. For
example, the date of the notice for our 1999 Annual Meeting is May 14,
1999. Accordingly, a shareholder's notice to bring business before our
2000 Annual Meeting must be received by us by January 17, 2000. Our
Bylaws also specify certain requirements for a shareholder's notice to be
in proper written form. These provisions may preclude shareholders from
bringing matters before the shareholders at an annual meeting or from
making nominations for directors at an annual meeting.
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AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares
of our common stock and preferred stock are available for future issuance
without shareholder approval. These additional shares may be utilized for
a variety of corporate purposes, including future public offerings to
raise additional capital, corporate acquisitions and employee benefit
plans. The existence of authorized but unissued and unreserved common
stock and preferred stock may enable the Board of Directors to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control by means of a proxy
contest, tender offer, merger or otherwise, and thereby protect the
continuity of our management.
Delaware law provides generally that the affirmative vote of a majority
of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or bylaws, unless a corporation's
certificate of incorporation or bylaws, as the case may be, requires a greater
percentage. Our Certificate of Incorporation requires the affirmative vote of
the holders of at least 80% of the combined voting power of the outstanding
shares of our capital stock entitled to vote for the election of directors to
amend or repeal any of the provisions of our Certificate of Incorporation
listed above. This 80% shareholder vote is also required to amend or repeal any
of the provisions of our Bylaws listed above, although these Bylaws provisions
may also be amended or repealed by a majority vote of the entire Board of
Directors. This 80% shareholder vote would be in addition to any separate class
vote that might in the future be required pursuant to the terms of any
preferred stock that might be outstanding at the time any such amendments are
submitted to stockholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Delaware law authorizes a Delaware corporation to eliminate or limit the
personal liability of a director to the corporation and its stockholders for
monetary damages for breach of certain fiduciary duties as a director. We
believe that such a provision is beneficial in attracting and retaining
qualified directors, and accordingly our Certificate includes a provision
eliminating liability for monetary damages for any breach of fiduciary duty as
a director, except as provided under Delaware law. Pursuant to Delaware law,
our directors are not insulated from liability for breach of their duty of
loyalty (requiring that, in making a business decision, directors act in good
faith and in the honest belief that the action was taken in the best interest
of the corporation), or for certain other claims. The foregoing provisions of
our Certificate may reduce the likelihood of success of derivative litigation
against directors for breaches of their fiduciary duties, even though such an
action, if successful, might otherwise have benefited us and our stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe,
Canton, Massachusetts.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
This section summarizes the material United States federal income tax
consequences of purchasing, owning, and disposing of the notes and the common
stock into which you may convert the notes. This summary is not a complete
analysis of all the potential tax consequences that you may need to consider
before investing based on your particular circumstances.
This summary is based on the Internal Revenue Code of 1986, as amended,
the applicable Treasury regulations promulgated or proposed under the Internal
Revenue Code, judicial authority and administrative rulings and practice. Any
of these may change, possibly on a retroactive basis.
This summary deals only with beneficial owners of notes and common stock
who hold the notes and common stock as "capital assets." It does not address
tax consequences under any special tax rules. Special rules may apply, for
example, to banks, tax-exempt organizations, pension funds, insurance
companies, dealers in securities or foreign currencies, persons participating
in a hedging transaction or a "straddle" or "conversion transaction," or
persons that have a "functional currency" other than the U.S. dollar. In
addition, this discussion does not address the tax consequences to non-U.S.
holders. We have not sought any ruling from the Internal Revenue Service with
respect to the statements and conclusions in this summary. We cannot guarantee
that the IRS will agree with these statements and conclusions.
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Before you invest in the notes, you should consult your own tax adviser
to determine how the United States federal income and estate tax laws apply to
your particular situation and for information about any tax consequences
arising under the laws of any state, local or foreign taxing jurisdiction or
under any applicable tax treaty.
PAYMENT OF INTEREST
You generally must include interest on a note in your income as ordinary
income at the time you receive or accrue the interest based on your method of
accounting for United States federal income tax purposes. We must pay liquidated
damages to holders of the notes in certain circumstances. According to Treasury
regulations, the possibility of liquidated damages being paid on the notes will
not affect the amount of interest income you recognize, in advance of the
payment of any liquidated damages, if there is only a remote chance as of the
date the notes were issued that you will receive liquidated damages. We believe
that the likelihood that we will pay liquidated damages is remote. Therefore, we
do not intend to treat the potential payment of liquidated damages as part of
the yield to maturity of any note. However, if we pay liquidated damages, you
would treat the payments as interest income when you receive them. Similarly, we
intend to take the position that the likelihood of a repurchase of the notes
upon a repurchase event is remote, and likewise do not intend to treat the
possibility of any premium payable on a repurchase as affecting the yield to
maturity of any note.
MARKET DISCOUNT
If you purchase a note for an amount that is less than the principal
amount of the note, the difference will be "market discount" for United States
federal income tax purposes, unless the difference is less than one-fourth
(1/4) of one percent of the principal amount of the note multiplied by the
number of complete years to maturity (after you acquire the note). Under the
rules on market discount, you will be required to treat any partial principal
payment on a note, or any gain on a sale, exchange or redemption of a note, as
ordinary income up to the amount of the market discount that has accrued as of
the time of the payment or disposition, to the extent you have not previously
included such market discount in ordinary income. In addition, you may be
required to defer, until the earlier of the maturity date of the note or the
date you dispose of the note in a taxable transaction, the deduction of part or
all of the interest expense on any debt you may incur to purchase the note or
any debt you keep outstanding to carry the note.
Any market discount on a note will accrue during the period starting on
the date you acquire the note and ending on the maturity date of the note. The
market discount will accrue ratably unless you make an election to accrue the
market discount on the note on a constant interest method. You also may elect to
include market discount in income for United States federal income tax purposes
as it accrues (on either the ratable or constant interest method). If you make
that election, the rule described above requiring the deferral of deductions for
interest expense will not apply. If you make an election to include market
discount in income currently, that election will apply to all market discount
obligations that you acquire on or after the first day of the first taxable year
to which your election applies, and the election may not be revoked without the
consent of the IRS.
AMORTIZABLE BOND PREMIUM
If you purchase a note for an amount that is more than the principal
amount of the note, the excess will be "amortizable bond premium". You may
elect to amortize the premium over the remaining term of the note on a constant
yield method. However, if you purchase the note at a time when we may redeem the
note at our option for an amount greater than the note's principal amount, the
amount of amortizable bond premium will be determined based on the earlier call
date and the call price payable on that earlier call date, if the result of that
calculation would be a smaller amortizable bond premium. If an earlier call date
is used in calculating the amount of amortizable bond premium and the note is
not called on that date, the note will be treated as maturing on that call date
and then reissued on that date for an amount equal to the call price on that
date, with the amortizable bond premium being recalculated under these rules on
that date. Amortizable bond premium, as it accrues, will reduce the amount of
interest payments on the note on which you are taxable and will reduce your
adjusted tax basis in the note.
Once you make an election to amortize bond premium on any debt
obligation, including the notes, that election will apply to all debt
obligations that you own on the first day of the taxable year to which the
election relates and to all debt obligations that you acquire after that day.
You make revoke the election only with the consent of the IRS. If you do not
elect to amortize bond premium, the amount of the premium will decrease the
amount of any gain or increase the amount of any loss you recognize on a
disposition of the note.
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SALE, EXCHANGE OR REDEMPTION OF THE NOTES
You generally will recognize gain or loss on the sale, exchange (other
than a conversion) or redemption of a note equal to the difference between (1)
the amount of cash proceeds and the fair market value of any property you
receive on the sale, exchange or redemption (except any portion that is accrued
interest income, which is taxable as ordinary income) and (2) your adjusted tax
basis in the note. Your adjusted tax basis generally will equal the cost of the
note to you, reduced by any principal payments you have received and any
amortizable bond premium you have taken into account and increased by any
market discount you have included in income. That gain or loss generally will
be capital gain or loss, except to the extent of any accrued market discount
(see "--Market Discount" above). Capital gain or loss will be long-term if you
have held the note for more than one year and will be short-term if you have
held the note for one year or less. Long-term capital gains for noncorporate
taxpayers, including individuals, are taxed at a maximum rate of 20%, and
short-term capital gains at a maximum rate of 39.6%. Corporate taxpayers pay a
maximum regular tax rate of 35% on all net capital gains and ordinary income.
CONVERSION OF THE NOTES
You generally will not recognize any income, gain or loss on conversion
of a note into common stock, except for any cash you receive instead of a
fractional share of common stock. Your tax basis in the common stock will be
the same as your adjusted tax basis in the note at the time of conversion. For
capital gains purposes, your holding period for the common stock will generally
include the holding period of the note you converted.
You should treat cash you receive instead of a fractional share of common
stock as a payment in exchange for the fractional share of common stock. This
will result in capital gain or loss (measured by the difference between the
cash you receive for the fractional share and your adjusted tax basis in the
fractional share).
DIVIDENDS ON COMMON STOCK
Generally a distribution on common stock (probably including any
liquidated damages) is treated as a dividend and taxed as ordinary income to the
extent of our current and/or accumulated earnings and profits. A distribution in
excess of earnings and profits is treated as a tax-free return of capital to the
extent of your tax basis in the common stock, on a share-by-share basis, and
then as gain from the sale or exchange of such stock.
A dividend to a corporate holder may qualify for a deduction of 70% of the
dividend received, subject to limitations in certain cases, if the holder owns
less than 20% of the voting power and value of our stock (disregarding certain
nonvoting, nonconvertible, nonparticipating preferred stock). A corporate holder
that owns 20% or more of the voting power or value of our stock (similarly
disregarding such preferred stock) generally will qualify for an 80% dividends
received deduction.
ADJUSTMENTS TO CONVERSION PRICE
The conversion price of the notes may change under certain circumstances.
In such a case, you may be treated as having received a constructive
distribution whether or not you ever exercise your conversion privilege. The
constructive distribution will be taxed as ordinary income, subject to a
possible dividends received deduction if you are a corporate holder, to the
extent of our current and/or accumulated earnings and profits, if, and to the
extent that, the adjustment in the conversion price increases your proportionate
interest in our assets or earnings and profits. Moreover, common stockholders
will generally be treated as having received a constructive distribution if
there is not a full adjustment to the conversion price of our notes to reflect a
stock dividend or other event increasing the proportionate interest of the
common stockholders in our assets or earnings and profits. In such an event, the
constructive distribution will be taxable as ordinary income (subject to a
possible dividends received deduction if you are a corporate holder) to the
extent of our current and/or accumulated earnings and profits. At this time, we
have a deficit in accumulated earnings and profits and have no current earnings
and profits.
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SALE OF COMMON STOCK
On the sale or exchange of common stock, you generally will recognize
capital gain or loss equal to the difference between (1) the amount of cash and
the fair market value of any property you receive on the sale or exchange and
(2) your adjusted tax basis in the common stock. This capital gain or loss will
be long-term if you have held the stock for more than one year and will be
short-term if you have held the stock for one year or less. Long-term capital
gains for noncorporate taxpayers, including individuals, are taxed at a maximum
rate of 20%, and short-term capital gains at a maximum rate of 39.6%. A
holder's basis and holding period in common stock received upon conversion of a
note are determined as discussed above under "Conversion of the Notes."
Corporate taxpayers pay a maximum regular tax rate of 35% on all net capital
gains and ordinary income.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, a broker or we must report to the Internal Revenue Service
payments of principal, premium and interest on a note, payments of dividends on
common stock, payments of the proceeds of the sale or exchange of a note and
payments of the proceeds of the sale or exchange of common stock. The payer or
broker must backup withhold at the rate of 31% if
o the payee fails to furnish a taxpayer identification number to the
payer or broker or establish an exemption from backup withholding,
o the IRS notifies the payer or broker that the number furnished by
the payee is incorrect,
o the payee has underreported interest, dividends or original issue
discount, or
o the payee has failed to certify under penalties of perjury that he
or she is not subject to backup withholding under the Code.
Certain holders, including all corporations, are exempt from backup
withholding. You may credit any amounts withheld under the backup withholding
rules against your United States federal income tax or receive a refund, if you
furnish the required information to the IRS.
Treasury regulations that apply to payments made after December 31, 2000
will modify current information reporting and backup withholding procedures and
requirements. These regulations provide certain presumptions regarding the
status of holders when payments to the holders cannot be reliably associated
with appropriate documentation provided to the payer. For payments made after
December 31, 2000, holders must provide certification, if applicable, that
conforms to the requirements of the regulations, subject to certain
transitional rules permitting certification in accordance with current Treasury
regulations until December 31, 2000. Because the application of these
regulations may depend on your particular circumstances, we urge you to consult
your tax adviser regarding the application of these regulations.
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31
SELLING SECURITY HOLDERS
The notes were originally issued by us and sold by the initial purchasers
in a transaction exempt from the registration requirements of the Securities
Act to persons reasonably believed by the initial purchasers to be qualified
institutional buyers or other institutional accredited investors. Selling
security holders, which term includes their transferees, pledgees or donees or
their successors, may from time to time offer and sell pursuant to this
prospectus any or all of the notes and common stock into which the notes are
convertible.
The following table sets forth information, as of May 19, 1999, with
respect to the selling security holders and the respective principal amounts of
notes and the underlying common stock beneficially owned by each selling
security holder that may be offered pursuant to this prospectus.
Principal Amount
of Notes
Beneficially Percentage of Number of Shares of Percentage of
Owned and Notes Common Stock Offered Common Stock
Name Offered Hereby Outstanding Hereby(1) Outstanding(2)
- ---- ----------------- ------------- -------------------- --------------
AAM/Zazove Institutional
Income Fund, L.P............ $3,000,000 2.0% 46,065 *
AIG/National Union Fire
Insurance................... 580,000 * 8,905 *
Alta Partners Holdings, LDC.... 6,000,000 4.0 92,130 *
Arpeggio Fund, LP.............. 300,000 * 4,606 *
Associated Electric & Gas
Insurance Services Ltd...... 400,000 * 6,142 *
Bancroft Convertible Fund, Inc. 375,000 * 5,758 *
Baystate Health Systems, Inc... 35,000 * 537 *
Calamos Convertible Hedge
Limited Partnership......... 200,000 * 3,071 *
Calamos Strategic Income Fund.. 60,000 * 921 *
Christian Science Trustees for
Gifts and Endowments........ 490,000 * 7,523 *
Declaration of Trust for the
Defined Benefit Plans of
ICI American Holdings Inc... 975,000 * 14,971 *
Declaration of Trust for the
Defined Benefit Plans of
ZENECA Holdings Inc......... 645,000 * 9,903 *
Delaware PERS.................. 700,000 * 10,748 *
Delaware State Employees'
Retirement Fund............. 1,245,000 * 19,116 *
Deutsche Bank Securities, Inc.. 16,030,000 10.7 246,140 1.1%
Donaldson, Lufkin &
Jenrette Securities Corp.... 700,000 * 10,748 *
Ellsworth Convertible
Growth and Income Fund, Inc. 375,000 * 5,758 *
First Church of Christ,
Scientist - Endowment....... 535,000 * 8,214 *
Forest Alternative Strategies
Fund II LP A5I.............. 125,000 * 1,919 *
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Principal Amount
of Notes
Beneficially Percentage of Number of Shares of Percentage of
Owned and Notes Common Stock Offered Common Stock
Name Offered Hereby Outstanding Hereby(1) Outstanding(2)
- ---- ----------------- ------------- -------------------- --------------
Forest Alternative Strategies
Fund II LP A5M.............. 60,000 * 921 *
Forest Fulcrum Fund LP......... 3,150,000 2.1 48,368 *
Forest Global Convertible Fund
Series A-5.................. 6,825,000 4.6 104,797 *
Foundation Account No. 1....... 200,000 * 3,071 *
Grace Brothers, LTD............ 750,000 * 11,516 *
Gryphon Domestic III, LLC...... 1,400,000 * 21,497 *
Hamilton Partners Limited...... 1,000,000 * 15,355 *
ICI American Holdings Trust.... 305,000 * 4,683 *
Investcorp SAM Fund Limited.... 2,400,000 1.6 36,852 *
Jackson Investment Fund LTD.... 470,000 * 7,216 *
JMG Convertible
Investments, L.P............ 1,750,000 1.2 26,871 *
Kentfield Trading Ltd.......... 6,000,000 4.0 92,130 *
LLC Account No. 1.............. 90,000 * 1,381 *
LLT Limited.................... 90,000 * 1,381 *
Massachusetts Mutual Life
Insurance Company........... 700,000 * 10,748 *
MassMutual Corporate
Investors................... 240,000 * 3,685 *
MassMutual Corporate
Value Partners Limited...... 425,000 * 6,525 *
MassMutual High Yield Partners
II LLC...................... 700,000 * 10,748 *
MassMutual Participation
Investors................... 125,000 * 1,919 *
Nalco Chemical Company......... 145,000 * 2,226 *
Peoples Benefit Life
Insurance Company........... 5,000,000 3.3 76,775 *
Rhapsody Fund, LP.............. 400,000 * 6,142 *
Saar Holdings CDO Limited...... 275,000 * 4,222 *
Southern Farm Bureau Life
Insurance - FRIC............ 870,000 * 13,358 *
Starvest Combined Portfolio.... 835,000 * 12,821 *
Starvest Managed Portfolio..... 125,000 * 1,919 *
State of Oregon Equity......... 3,470,000 2.3 53,281 *
State of Oregon/SIAF
Corporation................. 3,390,000 2.3 52,053 *
Summer Hill Global Partners
L.P. ....................... 110,000 * 1,689 *
Triton Capital Investments, LTD 10,500,000 7.0 161,227 *
Value Line Convertible Fund.... 250,000 * 3,838 *
Warburg Dillon Read LLC........ 1,050,000 * 16,122 *
Winchester Convertible Plus
Ltd......................... 210,000 * 3,224 *
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Principal Amount
of Notes
Beneficially Percentage of Number of Shares of Percentage of
Owned and Notes Common Stock Offered Common Stock
Name Offered Hereby Outstanding Hereby(1) Outstanding(2)
- ---- ----------------- ------------- -------------------- --------------
Zeneca Holdings Trust.......... 305,000 * 4,683 *
Any other holder of notes or
future transferees from any
such holder(3).............. 63,615,000 42.4 976,808 4.2
* Less than one percent.
- --------------
(1) Assumes conversion of all of the holder's notes at the initial conversion
rate of 15.355 shares of common stock per $1,000 principal amount of
notes. This initial conversion price may be adjusted under certain
circumstances. As a result, the number of shares issuable upon conversion
of the notes may increase or decrease.
(2) Calculated pursuant to Rule 13d-3(d)(i) of the Exchange Act based on
22,384,266 shares of common stock outstanding as of March 31, 1999. In
calculating the percentage for each holder, we treated as outstanding the
number of shares of common stock issuable upon conversion of all of the
applicable holder's notes. However, we did not assume the conversion of any
other holder's notes.
(3) Information about other selling security holders will be set forth in
prospectus supplements, if required.
We prepared this table based on the information supplied to us by the
selling security holders named in the table.
The selling security holders listed in the above table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their notes since the date on which the
information is presented in the above table. Information about the selling
security holders may change over time. Any changed information will be set
forth in prospectus supplements.
Because the selling security holders may offer all or some of their notes
or the underlying common stock from time to time, we can not estimate the
amount of notes or the underlying common stock that will be held by the selling
security holders upon the termination of any particular offering. Please see
"Plan of Distribution" for additional information.
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PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and the
underlying common stock offered by this prospectus. The notes and the
underlying common stock may be sold from time to time to purchasers:
o directly by the selling security holders, or
o through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions
from the selling security holders or the purchasers of the notes
and the underlying common stock.
The selling security holders and any such broker-dealers or agents who
participate in the distribution of the notes and the underlying common stock
may be deemed to be "underwriters." As a result, any profits on the sale of the
notes and the underlying common stock by selling security holders and any
discounts, commissions or concessions received by any such broker-dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. If the selling security holders were deemed to be underwriters,
the selling security holders may be subject to certain statutory liabilities
of, including, but not limited to, Sections 11, 12 and 17 of the Securities Act
and Rule 10b-5 under the Exchange Act.
If the notes and the underlying common stock are sold through
underwriters or broker-dealers, the selling security holders will be
responsible for underwriting discounts or commissions or agent's commissions.
The notes and the underlying common stock may be sold in one or more
transactions at:
o fixed prices,
o prevailing market prices at the time of sale,
o varying prices determined at the time of sale, or
o negotiated prices.
These sales may be effected in transactions:
o on any national securities exchange or quotation service on which
the notes and underlying common stock may be listed or quoted at
the time of the sale, including the Nasdaq National Market in the
case of our common stock,
o in the over-the-counter market,
o in transactions otherwise than on such exchanges or services or in
the over-the-counter market, or
o through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the notes and the underlying common stock or
otherwise, the selling security holders may enter into hedging transactions
with broker-dealers. These broker-dealers may in turn engage in short sales of
the notes and the underlying common stock in the course of hedging their
positions. The selling security holders may also sell the notes and underlying
common stock short and deliver notes and the underlying common stock to close
out short positions, or loan or pledge notes and the underlying common stock to
broker-dealers that in turn may sell the notes and the underlying common stock.
Our common stock trades on the Nasdaq National Market under the symbol
"SPLN". We do not intend to apply for listing of the notes on any securities
exchange or for quotation through Nasdaq. Accordingly, no assurance can be
given as to the development of liquidity or any trading market for the notes.
There can be no assurance that any selling security holder will sell any
or all of the notes or the underlying common stock pursuant to this prospectus.
In addition, any notes or underlying common stock covered by this prospectus
that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act
may be sold under Rule 144 or Rule 144A rather than pursuant to this
prospectus.
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35
The selling security holders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the notes and the underlying common stock by the
selling security holders and any other such person. In addition, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the notes and the underlying common stock to engage in
market-making activities with respect to the particular notes and the
underlying common stock being distributed for a period of up to five business
days prior to the commencement of such distribution. This may affect the
marketability of the notes and the underlying common stock and the ability of
any person or entity to engage in market-making activities with respect to the
notes and the underlying common stock.
Pursuant to the registration rights agreement that has been filed as an
exhibit to the registration statement of which this prospectus is a part, we
and the selling security holders will be indemnified by the other against
certain liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the notes and underlying common stock to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
LEGAL MATTERS
Greenberg Traurig, P.A., Miami, Florida will provide us with an opinion
as to legal matters in connection with the notes and the common stock offered
by this prospectus.
EXPERTS
The consolidated balance sheets of SportsLine USA, Inc. as of December
31, 1997 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, 1998 incorporated herein by reference have been
audited by Arthur Andersen LLP, independent certified public accountants, and
are incorporated herein by reference in reliance upon the authority of said
firm as experts in giving said report.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any documents we file at the Securities and Exchange Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for information on the
operation of the Public Reference Room. Our SEC filings are also available to
the public from the SEC's Website at "http://www.sec.gov."
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information we later file with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Securities and Exchange Commission under Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act until this offering is completed:
1. Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998,
2. Our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999,
3. Our Current Report on Form 8-K filed on February 25, 1999,
4. Our Current Reports on Form 8-K filed on March 19, 1999,
5. Our Proxy Statement for our 1999 Annual Meeting filed on May 17,
1999, and
6. The description of our Common Stock contained in the Registration
Statement on Form 8-A filed on November 7, 1997, under Section
12(g) of the Exchange Act.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
SportsLine USA, Inc.
6340 N.W. 5th Way
Fort Lauderdale, Florida 33309
Attention: Investor Relations
(954) 351-2120
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. The selling
security holders may not make an offer of the notes or our common stock in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.
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37
SPORTSLINE USA [LOGO]
38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that expenses payable by it in connection with the
offering described in this registration statement (other than underwriting
discounts and commissions) will be as follows:
Securities and Exchange Commission registration fee.................. $ 41,700
Nasdaq National Market listing fee................................... 17,500
Printing expenses.................................................... 20,000
Transfer Agent and Registrar Fees.................................... 15,000
Accounting fees and expenses......................................... 10,000
Legal fees and expenses.............................................. 40,000
Miscellaneous........................................................ 5,800
----------
Total........................................................... $ 150,000
==========
All amounts except the Securities and Exchange Commission registration
fee and the Nasdaq National Market additional listing fee are estimated.
The Company will pay all expenses of registration of the shares being
sold by the Selling security holders, excluding fees and expenses of counsel,
if any, to the Selling security holders, any commissions, discounts or
concessions, and transfer or other taxes, which shall be borne by the Selling
security holders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has authority under Section 145 of the Delaware General
Corporation Law to indemnify its directors and officers to the extent provided
in such statute. The Company's Amended and Restated Certificate of
Incorporation, incorporated by reference as Exhibit 3.2 to this Registration
Statement, provides that the Company shall indemnify its executive officers and
directors to the fullest extent permitted by law either now or hereafter. The
Company has also entered into an agreement with each of its directors and
certain of its officers, in the form incorporated by reference in this
Registration Statement as Exhibit 10.2, wherein it has agreed to indemnify each
of them to the fullest extent permitted by law.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought, nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification by any officer or director.
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ITEM 16. EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Incorporation (3.1) (1)
3.2 Form of Amended and Restated Bylaws (3.2) (1)
4.1 Indenture, dated as of March 15, 1999, between the Company and
State Street Bank and Trust Company, as trustee, including the form
of the 5% Convertible Subordinated Notes due 2006 attached as
Exhibit A thereto (2)
4.2 Registration Rights Agreement, dated as of March 15, 1999, for the
benefit of the holders of the 5% Convertible Subordinated Notes due
2006 (2)
5.1 Opinion of Greenberg Traurig, P.A., counsel to the Company,
regarding the legality of the 5% Convertible Subordinated Notes due
2006 and the common stock into which the 5% Convertible
Subordinated Notes due 2006 are convertible. (2)
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) (3)
10.3 1997 Incentive Compensation Plan (10.3) (3)*
10.4 Employee Stock Purchase Plan (10.4) (3)*
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)
10.10 Employment Agreement dated as of September 1, 1997, between the
Company and Kenneth W. Sanders (10.13) (3)*
10.11 Stock Option between the Company and Gerry Hogan (10.19) (4)*
10.12 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)
10.13 Employment Agreement dated as of June 15, 1998, between the Company
and Michael Levy (10.1) (6)*
10.14 Form of Letter Agreement entered into between the Company and each
of Kenneth W. Sanders, Mark J. Mariani, Andrew Sturner and Thomas
Jessiman (10.2) (6)*
10.15+ Premier Sports Information and Commerce Agreement, effective as of
October 1, 1998, by and between the Company and America Online,
Inc. (10.1) (7)
10.16 Amendment to Agreement, effective as of January 1, 1999, between
the Company and CBS Broadcasting, Inc. (99.1) (8)
12.1 Computation of Ratio of Earnings to Fixed Charges (2)
23.1 Consent of Arthur Andersen LLP (2)
23.2 Consent of Greenberg Traurig, P.A. (contained in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust
Company to act as trustee under the indenture governing the 5%
Convertible Subordinated Notes due 2006 (2)
- ------------------
(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) Filed herewith.
(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).
II-2
40
(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
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered thereby, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
II-3
41
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fort Lauderdale, State of Florida, on May 20,
1999.
SPORTSLINE USA, INC.
By: /s/ Michael Levy
------------------------------
Michael Levy, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Michael Levy and Kenneth W. Sanders his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, or any registration
statement relating to this offering to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Michael Levy President, Chief Executive Officer and May 20, 1999
- ----------------------------------------- Director (principal executive officer)
Michael Levy
/s/ Kenneth W. Sanders Chief Financial Officer May 20, 1999
- ----------------------------------------- (principal financial and accounting officer)
Kenneth W. Sanders
/s/ Thomas Cullen Director May 20, 1999
- -----------------------------------------
Thomas Cullen
/s/ Gerry Hogan Director May 20, 1999
- -----------------------------------------
Gerry Hogan
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43
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RICHARD B. HORROW Director May 20, 1999
- -----------------------------------------
Richard B. Horrow
/s/ Joseph Lacob Director May 20, 1999
- -----------------------------------------
Joseph Lacob
/s/ Sean McManus Director May 20, 1999
- -----------------------------------------
Sean McManus
/s/ Andrew Nibley Director May 20, 1999
- -----------------------------------------
Andrew Nibley
Director May , 1999
- -----------------------------------------
Fredric G. Reynolds
/s/ Michael P. Schulhof Director May 20, 1999
- -----------------------------------------
Michael P. Schulhof
/s/ James C. Walsh Director May 20, 1999
- -----------------------------------------
James C. Walsh
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44
EXHIBIT INDEX
4.1 Indenture, dated as of March 15, 1999, between the Company and State
Street Bank and Trust Company, as trustee, including the form of the 5%
Convertible Subordinated Notes due 2006 attached as Exhibit A thereto.
4.2 Registration Rights Agreement, dated as of March 15, 1999, for the
benefit of the holders of the 5% Convertible Subordinated Notes due
2006.
5.1 Opinion of Greenberg Traurig, P.A., counsel to the Company, regarding
the legality of the 5% Convertible Subordinated Notes due 2006 and the
common stock into which the 5% Convertible Subordinated Notes due 2006
are convertible.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust
Company to act as trustee under the indenture governing the 5%
Convertible Subordinated Notes due 2006