SAN FRANCISCO--(BUSINESS WIRE)--Oct. 11, 2006--CNET Networks, Inc.
(Nasdaq:CNET) (www.cnetnetworks.com) today announced that a special
committee of its board of directors (the "Special Committee") has
reported its findings on the Company's options granting practices and
procedures to the Board of Directors.
As previously announced, on May 22, 2006 the Special Committee was
established by CNET Networks' Board of Directors to conduct an
independent investigation relating to past option grants, the timing
of such grants and related accounting matters. The Special Committee
consists of two independent members of CNET Networks' audit committee
of the Board of Directors -- Peter Currie and Betsey Nelson, chair of
the audit committee. The Special Committee was assisted in the
investigation by outside legal counsel Davis Polk & Wardwell and
accountants from Navigant LLC. The Special Committee reviewed and
analyzed more than 700,000 documents and emails, and conducted over
thirty interviews of current and former officers, directors, employees
and advisors to CNET Networks over the last four months. As previously
announced, the Special Committee and the Company continue to cooperate
with the Securities and Exchange Commission, the NASD and the United
States Attorney's Office for the Northern District of California.
"The completion of the Special Committee report represents an
important step forward for CNET Networks," said Neil Ashe, the
Company's newly elected chief executive officer. "We are committed to
ensuring that the highest standards of business conduct, financial
reporting and internal controls are maintained, and we are focused on
quickly implementing the recommendations of the Special Committee.
Under the leadership of our CFO, George Mazzotta, we look to complete
the restatement of historical financial statements related to past
stock option grants as soon as practicable."
Key findings of the Special Committee's report include:
- There were deficiencies with the process by which options were
granted at CNET, including in some instances the backdating of
option grants, during the period from the Company's IPO in
1996 through at least 2003.
- These deficiencies resulted in accounting errors, which the
Company has previously announced will result in a restatement.
- A number of executives of the Company, including the former
CFO and the recently resigned CEO, General Counsel and SVP of
Human Resources, bear varying degrees of responsibility for
these deficiencies.
- The report does not conclude that any current employees of the
Company or any recently resigned employees engaged in
intentional wrongdoing.
- Since 2003, the Company has taken steps to remedy these
deficiencies through personnel changes and improved internal
controls. The Special Committee recommended a number of
additional remedial measures.
- The recently resigned executives and the directors who
received improperly priced options have agreed voluntarily to
have these options repriced to fair market value on the
appropriate measurement date.
The Special Committee reported that it believes that the
Compensation Committee relied upon management to establish and
maintain appropriate procedures with respect to stock option grants.
The report stated that it would have been better practice if the
Compensation Committee had encouraged management to adopt more
rigorous procedures and controls during the 1996-2003 period.
In a separate press release also issued today, the Company also
announced that Shelby Bonnie, CNET's co-founder and the company's
chairman of the board and chief executive officer from 2000 to the
present, has resigned as chairman and CEO. He will remain a director.
The Company's general counsel and head of Human Resources have also
resigned.
With regard to Mr. Bonnie, Mr. Jarl Mohn, chairman of the Board of
Directors, commented, "We extend our appreciation to Shelby for his
founding role and many years of service, and for his willingness to
work with the Board and the Company in assisting with this transition.
Shelby's lasting legacy will be the innumerable positive actions he
undertook to make CNET Networks the successful industry leader it is
today."
"I apologize for the option-related problems that happened under
my leadership," said Shelby Bonnie. "I believe that the company has
come a long way since 2003 in addressing these deficiencies, but am
deeply disappointed it happened nonetheless."
The Company and its independent auditors are reviewing the
findings of the Special Committee investigation. Management continues
to expect that CNET Networks will need to restate its historical
financial statements to record non-cash charges for compensation
expense relating to past stock option grants. The Company and its
independent auditors are reviewing recent accounting guidance
published by the SEC, and have not yet determined the amount of such
charges, the resulting tax and accounting impact, or which periods may
require restatement.
(The Company issued a separate release today announcing Neil
Ashe's appointment as CEO. In addition, the Company also issued a
press release today announcing that it has modified and extended its
solicitation of consents from holders of its 0.75% Senior Convertible
Notes due 2024 and updated its third quarter and full year guidance.)
About CNET Networks, Inc.
CNET Networks, Inc. (Nasdaq: CNET, www.cnetnetworks.com) is an
interactive media company that builds brands for people and the things
they are passionate about, such as gaming, music, entertainment,
technology, business, food, and parenting. The Company's leading
brands include CNET, GameSpot, TV.com, MP3.com, Webshots, CHOW, ZDNet
and TechRepublic. Founded in 1993, CNET Networks has a strong presence
in the US, Asia and Europe.
CONTACT: CNET Networks, Inc.
Media:
Sarah Cain, 415-344-2218
Sarah.cain@cnet.com
or
Investor Relations:
Cammeron McLaughlin, 415-344-2844
cammeron.mclaughlin@cnet.com
SOURCE: CNET Networks, Inc.
