EXHIBIT 10.6
November 11, 1999
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
Chief Executive Officer
Total Sports Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: NBC Sports/Total Sports Joint Venture
Dear ▇▇. ▇▇▇▇▇▇▇:
This letter sets forth the agreement between NBC Sports, a division of
National Broadcasting Company, Inc., a Delaware corporation ("NBC Sports"), and
Total Sports Inc., a Delaware corporation ("Total Sports"), with respect to a
transaction whereby NBC Sports will receive certain equity in Total Sports in
exchange for a package of on-air promotion and marketing of Total Sports' real-
time live graphic representations of sporting events conducted in the U.S., with
such representations delivered via the Internet (specifically excluding
streaming video, audio and interactive television) ("Representational Events
Coverage"), as described in greater detail in Section 1 below. The terms and
conditions shall be as follows.
1. Promotional Commitments.
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(a) Commencing on the Closing Date (as such term is defined in
the Stock Purchase Agreement entered into by and between NBC Sports
and Total Sports on even date herewith, and attached hereto as Exhibit
A (hereinafter the "Stock Purchase Agreement")), NBC Sports will
provide $17.4 million of on-air promotion and marketing, which will
consist of any one, or any combination, of the following elements
(collectively, the "Promotion"), as chosen by NBC in its sole
discretion: in-broadcast, announcer-read promotional mentions ("Audio
Mentions"); in-broadcast graphics, including tickers; and NBC Sports
commercial inventory. Subject to Section 1(c), it is agreed that all
Promotion will be for Total Sports' Representational Events Coverage
using Total Sports' brands, including without limitation the Totalcast
brand, in each case directing users to web sites owned, co-owned or
controlled by NBC from which the Total Sports
Portions of this exhibit marked by [*] have been omitted
pursuant to a request for confidential treatment.
Letter Agreement
November 11,1999
Page 2
Representational Events Coverage will be accessible. All such Promotion
shall be subject to NBC Sports' standard terms and conditions for such
promotion, which are described in Exhibit B hereto (the "Standard Terms")
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and which are made a part of this letter agreement in their entirety;
provided, however, that in the case of a conflict between the terms of this
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letter agreement and the Standard Terms, the terms of this letter agreement
shall govern. NBC Sports will deliver the following amounts of
undiscounted Promotion during the respective calendar years:
1999 $[*] (subject to contract start date)
2000 [*]
2001 [*]
2002 [*]
2003 [*]
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Total $ 17.4 million
(b) The value of all Promotion delivered under this letter agreement
shall be calculated at [*]. Each quarter, NBC shall deliver Promotion
representing at least a minimum number of gross ratings points, as set
forth in the following table:
[Table to follow]
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
Letter Agreement
November 11,1999
Page 3
Household
1999 Gross Rating Points
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3Q
4Q (Assume 10/1/99 Start Date) [*]
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Total 1999 [*]
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2000
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1Q [*]
2Q [*]
3Q [*]
4Q [*]
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Total 2000 [*]
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2001 [*]
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1Q [*]
2Q [*]
3Q [*]
4Q [*]
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Total 2001 [*]
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2002 [*]
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1Q [*]
2Q [*]
3Q [*]
4Q [*]
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Total 2002 [*]
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2003 [*]
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1Q [*]
2Q [*]
3Q [*]
4Q [*]
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Total 2003 [*]
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Maximum Total [*]
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Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
Letter Agreement
November 11,1999
Page 4
(c) The foregoing notwithstanding, NBC Sports, in its sole discretion,
reserves the right to determine which specific Total Sports'
Representational Events Coverage will be entitled to Promotion. Without
limiting the generality of the foregoing, it is agreed that (i) NBC Sports
will not provide Promotion for any Total Sports' Representational Events
Coverage related to the Olympics and (ii) NBC Sports does not presently
intend to cover fishing events or promote Total Sports' Representational
Events Coverage related to fishing events.
2. Promotion Schedule. NBC Sports and Total Sports will periodically
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review the Promotion commitment against actual Promotion delivered and may
mutually agree to adjustments to future Promotion not less than six months in
advance. Within 10 days after the end of each month, NBC Sports will deliver to
Total Sports an estimated schedule of the Promotion that was delivered during
that month, and within 10 days after the end of each quarter, an actual,
detailed schedule of the Promotion that was delivered during that quarter.
Should NBC Sports not meet, for any reason, the quarterly allocation of
Promotion for any quarter, it will make up the shortfall no later than June 30
of the following year and, if reasonably possible, within the next quarter, on a
replacement schedule for Promotion for that quarter to be agreed upon by the
parties. If (a) the parties fail to agree upon a replacement schedule for
Promotion; (b) NBC Sports fails to provide Promotion according to the terms of
the replacement schedule; or (c) NBC Sports at any time notifies Total Sports
that NBC Sports will no longer provide Promotion hereunder, then as liquidated
damages and not a penalty, NBC Sports will be required to compensate Total
Sports for the shortfall in one of two ways, as chosen by NBC Sports in its
discretion: (i) pay the shortfall amount to Total Sports in cash or (ii) return
to Total Sports NBC Common Stock (as defined in Section 3(a)) (or in the event
Total Sports is consolidated or acquired by another entity in a merger, sale of
all or substantially all of Total Sports' assets or otherwise (an
"Acquisition"), the consideration payable with respect to such NBC Common Stock
in connection with the Acquisition, on an equitable basis) in aggregate value
(calculated using a price per share of $21.41, subject to equitable adjustment
for any stock splits, combinations, consolidations, recapitalizations,
reorganizations, reclassifications, stock distributions, stock dividends or
other similar events with respect to such NBC Common Stock) equal to the
shortfall amount. In the event that NBC Sports elects to compensate Total Sports
for a shortfall pursuant to clause (ii) of this Section 2 and (x) NBC continues
to hold any series E preferred stock or (y) NBC has acquired any additional
shares pursuant to Section 3(b) below (the "Additional Shares"), NBC Sports
shall also return to Total Sports a pro rata percentage of such series E
preferred stock and/or such Additional Shares, as the case may be (in either
case, such percentage being equal to the shortfall amount divided by $17.4
million) in the same manner as Total
Letter Agreement
November 11,1999
Page 5
Sports is compensated pursuant to clause (ii) above. The foregoing shall be
Total Sports' exclusive remedy in the event of a shortfall.
3. Equity.
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(a) Subject to the terms and conditions of this letter agreement and
as consideration for NBC Sports' commitment to deliver Promotion pursuant
hereto, on the Closing Date, Total Sports will issue, and NBC Sports will
receive, 811,423 shares of common stock of Total Sports (the "NBC Common
Stock") and 811,423 shares of series E preferred stock of Total Sports (one
share of common stock and one share of series E preferred stock shall
together be referred to as a "Unit"), at an aggregate purchase price of
$21.41 per Unit, upon the terms and conditions of, and pursuant to, the
Stock Purchase Agreement. Total Sports covenants that NBC Sports will be
made a party to the agreement between Total Sports and its stockholders
regarding certain rights relating to its capital stock (including co-sale
rights) (the "Stockholder Agreement") and the agreement between Total
Sports and its stockholders regarding registration and other rights with
respect to its capital stock (the "Investor Rights Agreement"), as those
agreements are to be amended in connection with Total Sports' Series D
Preferred Stock financing.
(b) Notwithstanding the foregoing, immediately prior to the
consummation of an initial Public Offering (as defined below) of the common
stock of Total Sports in which the price per share at which such shares of
common stock are initially sold to the public (the "IPO Price") is less
than $32.11, as adjusted for stock splits, stock dividends, reorganizations
and the like, then Total Sports will issue additional shares of common
stock to NBC Sports in an amount equal to the difference between (i) the
shares of NBC Common Stock multiplied by the quotient of (x) $32.11, as
adjusted for stock splits, stock dividends, reorganizations and the like,
divided by (y) the IPO Price, minus (ii) the shares of NBC Common Stock.
For purposes of this Section 3(b), a "Public Offering" means any offering
by Total Sports of its equity or debt securities to the public pursuant to
an effective registration statement under the Securities Act of 1933, as
then in effect, or any comparable statement under any similar federal
statute then in force.
(c) Total Sports shall only be obligated to issue shares in connection
with Total Sports's initial Public Offering pursuant to Section 3(b), and
upon such issuance Section 3(b) shall terminate and be of no further force
and effect.
Letter Agreement
November 11,1999
Page 6
4. Additional Promotion and Equity. If Total Sports secures from the
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National Basketball Association ("NBA"), in writing, rights to provide
Representational Events Coverage of NBA and WNBA regular season games (including
all necessary rights for NBC Sports to promote the coverage without infringing
on the NBA's or any third party's rights) before July 31, 2000 (the "NBA
Rights"), NBC will commit to deliver an additional $8.0 million of Promotion of
Total Sports' Representational Events Coverage of NBA/WNBA events, subject to
NBC Sports' ownership of television broadcast rights for those events and NBC
Sports' receipt of permission from the NBA (at no cost to NBC Sports) to run the
Promotion. The value of the additional Promotion will be calculated pursuant to
Section 1(b) hereof, and NBC Sports will deliver the additional Promotion in the
following amounts of undiscounted Promotion during the respective calendar
years:
2000 $ [*]
2001 [*]
2002 [*]
2003 [*]
2004 [*]
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Total $ 8.0 million
Within 60 days of Total Sports' receiving the rights from NBA described above,
NBC Sports and Total Sports shall agree on a schedule for the additional
Promotion commitment.
In return for its additional Promotion commitment described above, NBC
Sports would receive $8.0 million in additional shares of common stock of Total
Sports at a per share price equal to (a) if shares of Total Sports common stock
are not publicly traded on a nationally recognized exchange, a base price equal
to the lower of (1) $25.69, representing a 20% premium on the current valuation
of $21.41 per share, and (2) the price per share associated with Total Sports'
round of private cash financing (if applicable) of $10.0 million or more
completed most recently prior to the acquisition of
Portions of this exhibit marked by [*] have been omitted pursuant
to a request for confidential treatment.
Letter Agreement
November 11,1999
Page 7
such NBA Rights, with such price per share increased at a rate of 1% per month,
compounded monthly, with such increase commencing on the date of the closing of
the private financing, or (b) if shares of Total Sports common stock are
publicly traded on a nationally recognized exchange, the 30-day trailing average
closing price as of the date on which Total Sports obtained the NBA Rights in
writing. The shares shall be issued on, and subject to, such same terms and
conditions as set forth in sections 2 and 3 above.
Exclusivity. During the term of this letter agreement, NBC Sports will not
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provide Audio Mentions for any other current or future Representational Events
Coverage, including such coverage as may be provided by [*] etc., or their
affiliates, but this exclusivity only applies to*events for which Total Sports
has, at such time, all necessary exclusive or nonexclusive rights to provide
Representational Events Coverage. Nothing in the preceding sentence shall
preclude NBC Sports from providing Audio Mentions of events coverage other than
Representational Events Coverage, even if such events are covered by [*] etc.,
or their affiliates. During the term of this letter agreement, Total Sports will
not: (a) enter into any similar agreement with [*] or their affiliates or
successors (the "Designated Entities"), or (b) permit any of the Total Sports
web sites that may be accessed by an end user via a link from an NBC Sports
promoted web site to be branded to include the name or trademark of any
Designated Entity, or to include any links, buttons or similar features that
include a name or trademark of a Designated Entity, in either case without
permission from NBC Sports, except that Total Sports shall not be prohibited
from carrying out its book publishing venture with Sports Illustrated or from
providing a license to its baseball statistics and data to CNNSI. Nothing
contained in this letter agreement shall prevent NBC Sports or its affiliates
from making an investment in any entity that provides Representational Events
Coverage, so long as NBC Sports does not promote such coverage on the air in
violation of its obligations to Total Sports hereunder.
Portions of this exhibit marked by [*] have been omitted pursuant to
a request for confidential treatment.
Letter Agreement
November 11,1999
Page 8
6. Operations. NBC Sports will designate a liaison person to work with a
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member of the Total Sports production team to coordinate the online production
and convergence with broadcast production of sporting events. NBC Sports will
use its commercially reasonable efforts to cause Total Sports to be considered
part of the NBC Sports coverage team, including, but not limited to,
accreditation (where available), travel and hotel accommodation. Total Sports
shall be responsible for its own expenses (and those of its employees and
agents) in connection with production (phone lines, trailers, etc.), travel,
meals and lodging in connection with such live events.
7. Online Promotion. NBC Sports shall use its commercially reasonable
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efforts to assist Total Sports to secure advantageous promotion and distribution
on NBC Sports' affiliated web-site properties, including ▇▇▇▇▇.▇▇▇'s sports site
and any other dedicated NBC Sports web-site other than its Olympics sites.
8. Board of Directors. NBC Sports shall be entitled to one seat on the
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Board of Directors of Total Sports pursuant to Section 14 of the Stockholder
Agreement. NBC Sports shall have the exclusive right to remove and replace its
Board designee at any time, provided that any such replacement designee shall be
an officer of NBC Sports. NBC Sports has initially designated ▇▇▇ ▇▇▇▇▇▇▇▇ to
fill its seat on the Board of Directors of Total Sports.
9. Information. Total Sports hereby covenants to promptly notify NBC
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Sports, and to disclose to NBC Sports the nature, of any material international
strategic alliances being considered by Total Sports during the term of this
letter agreement.
10. Representations and Warranties. NBC Sports and Total Sports each
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represent and warrant that this letter agreement has been duly authorized,
executed and delivered by such party and that this letter agreement constitutes
a legal, valid and binding obligation, enforceable against such party in
accordance with its terms.
11. Confidentiality. In connection with the execution of this letter
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agreement, NBC Sports and Total Sports will issue a mutually agreeable joint
press release and any other mutually agreed upon promotional materials regarding
the relationship described in this letter agreement. Neither party shall make
any other disclosures concerning this letter agreement, the Stock Purchase
Agreement or the relationship described herein without the prior written consent
of the other party; provided, however, that NBC Sports agrees that Total Sports
may file this letter agreement with the SEC and/or describe this letter
agreement in any registration statement filed with the SEC, in each case if so
required by applicable securities laws, as long as Total Sports agrees to use
its best efforts to obtain confidential treatment of the economic and other
material terms of this
Letter Agreement
November 11,1999
Page 9
letter agreement under the securities laws and to consult with NBC Sports at all
times during the process.
12. Term and Termination. Unless NBC Sports notifies Total Sports
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pursuant to Section 2 that NBC Sports will no longer provide Promotion
hereunder, the term of this letter agreement shall be 51 months from the date of
its execution, except in the event that Total Sports secures the NBA Rights in
which event the term of this letter agreement shall be 63 months from the date
of its execution. Sections 10, 11, 13, 14 and 15 shall survive any termination.
NBC Sports shall have the right to terminate this letter agreement at any time
if during the term hereof, control of Total Sports is transferred to a
Designated Entity. For purposes of the foregoing sentence, a transfer of
control shall be deemed to occur whenever a Designated Entity (i) becomes the
beneficial owner of more than 40% of Total Sports' outstanding voting
securities, (ii) acquires all or substantially all of Total Sports' assets,
(iii) otherwise merges or consolidates with Total Sports where Total Sports is
not the surviving entity, or (iv) obtains the right to appoint a majority of the
directors to the Total Sports's board. In addition, NBC Sports shall have the
right to terminate this agreement if any of the Total Sports web sites that may
be accessed by an end user via a link from an NBC Sports promoted web site are
branded to include the name or trademark of any Designated Entity, or include
any links, buttons or similar features that include a name or trademark of a
Designated Entity (except as allowed under Section 5) in violation of this
agreement, if Total Sports fails to cure such violation within 10 business days
after NBC Sports's written notice to Total Sports of such violation.
13. Limitation of Liability. Except for damages arising out of the gross
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negligence of willful misconduct of either party hereto, no party shall be
liable to the other party of their affiliates, officers, directors, successors
or assigns for any incidental, consequential, special or punitive damages or
lost profits arising out of this letter agreement, whether liability is asserted
in contract or tort and irrespective of whether it has advised or been advised
of the possibility of any such loss or damage.
14. Miscellaneous. This letter agreement constitutes the entire agreement
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and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations, and
understandings between the parties, both oral and written relating to the
subject matter hereof. No waiver or modification of any provision of this
letter agreement shall be effective unless in writing and signed by both prices.
Any waiver by either party of any provision of this letter agreement shall not
be construed as a waiver of any other provision of this letter agreement, nor
shall such waiver operate as or be construed as a waiver of such provision
respecting any future event or circumstance. The terms of this letter agreement
shall apply to the parties hereto and any of their successors or assigns. This
Letter Agreement
November 11,1999
Page 10
letter agreement may be executed in counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
15. Governing Law and Jurisdiction. This letter agreement shall be
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governed by and construed under the laws of the State of New York applicable to
contracts fully performed in New York, without regard to New York conflicts of
law provisions. The parties hereto irrevocably consent to and submit to the
exclusive jurisdiction of the federal and state courts located in the County of
New York. The parties hereto irrevocably waive any and all rights to trial by
jury in any proceeding arising out of or relating to this letter agreement.
If you are in agreement with the above terms and conditions, please
indicate your acceptance by signing in the space provided below, and return one
original to me. This letter agreement shall be null and void if not signed
within 30 days of the date set forth above.
Very truly yours,
NBC SPORTS, A DIVISION OF NATIONAL
BROADCASTING COMPANY, INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
ACCEPTED AND AGREED:
TOTAL SPORTS INC.
________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
Chief Executive Officer